It’s another hot summer day and nothing cools the heat like a large cone of ice cream. Due to our relatively free economy, I have the choice between many different sellers, brands, and types of the frozen treat. A relatively new concept is one where ice cream shops mix your choice of ice cream and toppings on a super-cooled stone slab before placing the mix in a cone. Someone, somewhere, conceived of this recipe and sought investors to bring it to market. Based on patent theory, no one would have invested time and money on this new idea unless he was assured protection by a government-issued, government-enforced patent. Don’t tell that to the entrepreneurs and investors who have brought similar, and successful, ideas to stores near you. I can go to either a local Cold Stone Creamery or a Marble Slab Creamery when I finally succumb to the heat later this afternoon. Ok, one does use a granite slab while the other uses marble, but their concepts are close enough that, supposedly, the opportunity for any return on investment ends once competitors begin opening stores down the street.
Based on patent theory, gone is the ability to earn back the capital invested in order to bring this idea to market. Any hope for a return on investment and profit disappears, and the entrepreneur is simply left with his managerial income. This is due to other entrepreneurs seeking profit by entering the stone slab ice cream market and driving profit out of the financial picture. The uncertainty of a return on investment due to competitors quickly adopting a new idea stops development of that idea, thus hampering the market. Or, so the patent theory goes.
As the market continually shows, patent theory is false. Pure competition works in the ice cream market, so it will certainly work in all markets. It does not matter whether the idea is a new drug or a new way to serve ice cream, the market does not need patents to function efficiently. Rothbard was right, patents are not needed in any market, whether pharmaceutical or ice cream.
Lucky for me, and my sweet tooth, patent theory is false and I get to face the cool decision of which slab to use as the base of my next ice cream cone. Granite or marble, which will it be?
