What happens when you give out lots of property rights, but nobody exactly knows what those rights cover? Yes, that might describe software/business-method patents and the result is costly litigation, disputes and a net disincentive for innovation.
But that also describes recent markets in collateralized debt obligations and credit default swaps. And with these markets, as anyone who has read a newspaper (some people still do that) during the last month knows, the result is a bit more ominous. My former venture capital investor and all-around Wise Man, Ben Rosen, sums up the current financial crisis in three words: “Nobody Knows Anything.”
Property rights have the potential to be strong institutions promoting economic growth. But, as these examples show, if the rights are not well-designed and well-implemented, they can be perverted from this goal. Brian Kahin draws the parallel between the financial/real-estate “bubble” with the still-expanding “bubble” in patents. As Brian suggests, combine that bubble with a Ponzi scheme (Intellectual Ventures) and you might have a real perversion.