Kansas Progress Institute

Ad Astra Per Aspera ~ To the Stars Through Difficulties

Different View on Trade Secrets

Posted on August 31, 2016

By David Burress

Libertarian ideology depends on the claim that markets are self-regulating. Here is a tiny counterexample.


One of my daily peeves is shampoo bottles. Some time ago, their squeeze bottles had small holes that provided good control over quantity dispensed. Then the entire industry shifted to larger holes making the quantity harder to control. In consequence the industry undoubtedly sold more shampoo and made more profit.


However there were three negative externalities (as we say in the trade):
1. It cost consumers more money.
2. It made consumers like me annoyed.
3. It wasted natural resources.

Now admittedly the waste is tiny. But let’s suppose I spend $10/year on the cheapest available shampoo (I’m an economist, remember), and suppose large holes cause 5% additional waste. Then that is $.50 a year lost to me, suggesting maybe $200,000,000.00 a year lost to all American consumers, and maybe even a billion dollars a year world wide, representing resources that could have been used for something we actually need. 

Now multiply by hundreds or thousands of consumer items, each manufactured by a profit-seeking industry looking for an edge over consumers. After a while these tiny annoyances add up to real money.
But hey, that’s the best of all possible worlds–as seen by the Koch brothers.
So turn it around. Would the world be a better place if we regulated the size of shampoo bottle holes? Maybe not. Regulation comes with its own costs. If we are micromanaging bottle holes then we will be micromanaging a lot other things.

Still, what I would like to see is a completely different view of trade secrets. Imagine a world where large companies were subject to a FOIA process, just like the government. Then we could put in an FOIA request to get the basis for it when they increased the size of shampoo bottle holes. And then we’d find out they knew they were trying to skin the public, and we could embarrass them into quitting, or threaten a boycott.
But that would violate trade secret rights.

Now trade secrets are a form of intellectual property right, which is supposed to encourage innovation. But there are alternative ways to do that, such as patents and copyrights.
Increasing, private companies surveill us and know everything about us (you’d be amazed what information you can buy about individuals from commercial vendors) while the major corporations are opaque. They hide behind their secrets.

It’s time to turn the tables. Let us have access to information on how they plan to take advantage of us.
But that would require a new form of regulation. Can’t have that in a corporate-controlled world.

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