Intellectual property in a free market economy

It is estimated that the wheel was invented in circa 3,500 BC and spread rapidly across the Eastern hemisphere. Over generations, modifications have been made to the original design and today there are millions of patents in the world based on different materials, construction, etc. When this invention first came to be, anyone was able to manufacture a wheel and sell it if they had the materials and knowledge to build one. Today, patents are considered intellectual property and give the owner the legal right to prevent others from manufacturing and selling a product that follows the same specifications as the one he or she created. Granted these patents issued by the government are set to be active for a limited time and when talking about wheels, it does not matter as the market is flooded with many models by different companies. What about life-saving medicine? A laboratory that manufactures and patents a cure for a deadly disease could set the price to whatever ridiculous amount they believe it to be worth. Chemists cannot simply modify formulas to attack viruses and bacteria like wheel manufactures can just choose to use a different metal alloy and design. A laboratory that develops and patents a cure first, corners the market and becomes a monopoly in a free market economy. Intellectual property such as patents has always been considering as a policy tool to encourage innovation rather than a natural right. The question is simple; should patents exist in a free market economy?

Friedrich Hayek believed a society that prospers is one that is driven by creativity and innovation, which is only possible in a free market economy. While the purpose of Intellectual Property Rights, such patents, is to encourage the individual to be creative and innovative, it can also have destructive effects on the fields of science and technology. In his books "The fatal conceit: The errors of socialism" Hayek wrote:

"The difference between (copyrights and patents) and other kinds of property rights is this: while ownership of material goods guides the use of scarce means to their most important uses, in the case of immaterial goods such as literacy productions and technological inventions the ability to produce them is also limited. Yet once they have come into existence, they can be indefinitely multiplied and can be made scarce only by law in order to create an inducement to produce such ideas." 

 While genuine property rights enhance economic efficiency by the allocation of resources and promoting a decentralized system, patents tend to do the complete opposite. In a sense, intellectual property such as patents create forced scarcity and in cases such as scientific research, refrain progress and economic growth. In the United States, any patent filed since 1995 last twenty years. Laboratories that file for a patent first, can press legal charges against any research facility that utilizes similar formulas and methods of production and as a result eliminating competition. A free-market economy without competition that comes as a result of government involvement is not a free market economy. 

In summary, intellectual property such as patents inadvertently contributes to the unfair and unequal distribution of income and property. Even though little to no government interaction is part of a free market economy, patents have been used to exert pressure on competitors and justify the abuse of power by many companies over the years. Intellectual property does have positive effects on inducing members of society to be creative and innovative to be successful in a competitive market, but only if that specific market is designed to welcome more competition, such as that of wheel manufacturing. Unfortunately, the cure for cancer is not a wheel that can be modified in size and change the materials it is made of to not infringe any patents. In my opinion, patents as they are today, taking into consideration the legal protections give to the owner and the length of time they are issues for, have no place in a free market economy. 

Hayek, Friedrich August von., and William Warren. Bartley. The Fatal Conceit: the Errors of Socialism. Routledge, 1988.