The Bowman v. Monsanto Decision: A Note on Economic Process

Alin Voicu-Comendant

What (and where) is an economic process? What does that mean for “self-replicating technologies?”

The logic for patenting stems from an economic argument about the inventor (patentee) being worthy of its hire, as it were. For analytical purposes, since this is a legal treatment of an economic situation it has to have an economic analysis to support it. Economically, the discussion involves production, distribution and consumption. Analytically, the discussion will involve a definition of the economic process that can treat, analytically, the situation of “self-replicating technologies” and, as it turns out, any economic activity.

First, as economic activity occurs within the seamless reality—there is no obvious answer to where it begins and where it ends so one has to make some “heroic assumptions” about where to “cut” into the seamless fabric of reality—where does it begin and where does it end, for our purposes—short of an infinite regress. This is not limited to economics but to all analytic exercises, including the Supreme Court discussion in Bowman vs. Monsanto, where Justice Kagan writes that “reproducing a patented article no doubt ‘uses’ it after a fashion. But…we have always drawn the boundaries of the exhaustion doctrine to exclude that activity…” [1, emphasis added]. Second, it deals with change, an issue at the core of the Bowman vs. Monsanto suit, and which calls for the description of an economic process—how does the seed a farmer buys get used, how does end up into gross product, etc. Third, as alluded already, economic analysis is driven by a purpose—the economic conclusions are driven by it. Again, the Supreme Court decision in this case itself makes use of the concept of purpose to arrive at the conclusion that Bowman could not prevail in his argument with Monsanto because “the commodity soybeans he purchased (from a grain elevator) were intended not for planting, but for consumption.”[2, emphasis added]

The discussion below will follow the lines of that “economist’s economist”, as Nobelist Paul Samuelson saw him,[3] Nicholas Georgescu-Roegen (henceforth, NG-R), of Harvard and, later, Vanderbilt, as the issue of “self-replicating technologies” has been touched upon in his work at several junctures.[4] The idea hinges upon the knotty notion of sameness that puzzled thinkers from times immemorial. In the context of an economic process (further defined below), such as the one Bowman and Monsanto engage in, the very concept of sameness will provide the key to reasoning about “self-reproducing technologies.” As this concept is dialectical, in the sense of being distinct from other concepts but not discretely distinct, i.e., having a qualitative penumbra of meaning in which it overlaps with its contrary, analysis, with it logical and arithmomorphic[5] apparatus in which all concepts are crisp and true or false[6], will obviously have to be applied appropriately.[7]

Dealing with Change in a seamless reality inevitably brings forth the insurmountable analytical difficulty of dealing with Being and Becoming. These are qualitative aspects of the economic activity which, like sameness, do not lend themselves well to analysis. Analysis cannot describe that “Being is Becoming,” as it would trespass into the domain of dialectics. Science, and economics as science falls in here as well, will have to manage dealing with both Being and Becoming and adopt “a vulgar strain of philosophy”[8] and in so doing, keep them separate as two distinct categories of thought—only in this way can economic analysis be carried out. Again, this is a result of our “striving to get in the closest possible mental contact with actuality”[9] and is imposed by the very way the qualitatively changing world is.

So the first step of analysis in the “self-replicating technology” domain, as in any economic problem, will have to be the definition of the logical (arithmomorphic) entities appropriate for performing analysis. These follow NG-R’s analytical description of the economic process: it has a beginning and and end (based on those heroic, reality fabric cutting assumptions), it has items that cross the boundary of the process and enter or exit it analytically transformed (flows), namely products, and parts that enter the process and exit it without being analytically transformed (funds).

Following NG-R’s notion of a process [10], the analysis is structured as follows: Monsanto provides the patented seed to a farmer: this is an output for Monsanto and an input for the farmer. The economic process of interest starts with the farmer buying the seed and ends with his generating a gross output also consisting of seed. Gross output, which is the implied concept Monsanto uses in its contracts, is analytically idle as it mixes both quantitative and qualitative aspects of reality, something we established above is analytically inappropriate. This may make sales and profit administrative life easier for Monsanto but one  cannot mix analytical apples with dialectical oranges if one expects to get paid—and Bowman v. Monsanto is an effect of such inappropriate mixing.

Specifically, the gross output of the farmer’s economic process involves the seed as both a flow (together with water, Roundup, fertilizer, waste, etc.) and a fund (together with Ricardian land, labor, capital/tools, etc.). Following an NG-R example, if 1 bag of purchased seed yields 1 bag of seed for further planting and 10 bags of seed for sale/consumption,[11] the former is a fund—physical distinction notwithstanding: we are looking for economic distinction and, in this case, there is none. True, the seed undergoes a qualitative change during the economic process—which is the case in any economic process—but quality is in the domain of dialectics, not analytics. For analysis, arithmomorphic concepts are required in order to apply (scientific) logic—this calls for the fund-bag to be the same at the end of the economic process as the bag that started it all!

For purposes of analysis, this is similar to hammers used in the hammer factory to make hammers—some output hammers will be used in the hammer-making procedure while some will be sold for consumption. Again, analytically distinct hammers—fund and flow ones. “According to all classifications ever proposed in economics, the fist hammer is classified as capital (fixed or constant), not as output, whereas the reverse is true for the second hammer. The physical identity of the two hammers is no reason against recognizing their distinct roles in the productive process. Nor is the lack of physical continous identity of the [soybean] a reason against treating it as a fund in our analysis.”[12] The analytical indentity must cover identity of substance as well, not only identity of object.[13] The latter is much easier to understand intuitively but just as easy as the former operationally and contractually, as will be outlined below. The very way the seed is referred to, i.e., as “self-replicating”, is thus misleading, economically at least.

In light of NG-R’s analytical description of a (partial) economic process, the production part of the discussion is complete: the bag of soybean seed that a farmer purchases from Monsanto is analytically the same at one collected at the time of harvest. However, the distributive element that Monsanto employs is keyed onto the gross output of the process and contracts out of existence, thorough its terms and conditions, the economic analytical fact that the output bag is identical to the input one. Specifically, this eliminates a strictly necessary fund from the analysis of the farmer’s production process by restricting use of its bag of soybean during one, and only one, season.[14] Monsanto may be entitled to its reward for its innovation and the farmer for his work, but the argument does not rest upon the exhaustion of the patent. As Justice Kagan keenly alludes to, the point is rather in the purpose of the two components of the crop gross output and the decision would still be against Bowman in the context set out above since used consumption seed for production—this is seed mis-use vis-à-vis the contract terms rather than patent exhaustibility.

However, other distributive methods do exist, some with much longer pedigrees. Economically speaking, the farmer can make a profit only from the seed he sells, i.e., seed for consumption as it were, according to contract terminology. As a consultant in strategy and operations, I can provide further insight if necessary. The main point, however, is that there are distribution, and consequently contractual, alternatives that make more economic sense.

 

  1. Supreme Court of the United States, Bowman v. Monsanto Co. et al., Decided 13 May 2013, p. 8
  2. Bowman v. Monsanto, p. 8
  3. Paul Samuelson, “Foreword” to Nicholas Georgescu-Roegen, Analytical Economics: Issues and Problems, Harvard University Press, 1965, p. vii
  4. See, among others, Nicholas Georgescu-Roegen, The Entropy Law and the Economic Process, Harvard University Press, 1999, 1971, p. 225ff; “Process in Farming versus Process in Manufacturing: A Problem of Balanced Development”, 1965, in Energy and Economic Myths, Pergamon Press, 1976;“Analysis versus Dialectics in Economics”, in “Ensaios Economicos, Homagem a Octavio Gouvea de Buthoes”, APEC, Rio de Janeiro, 1972
  5. NG-R, The Entropy Law…, p. 14: “logic can handle only a very restricted class of concepts, to which I shall refer as arithmomorphic for the good reason that every one of them is as discretely distinct as a single number [ριθμός, is] in relation to the infinity of all other [numbers].”
  6. Plato, Republic, VI 510-511
  7. Most important concepts are dialectical in this sense, e.g., “democracy,” “freedom,” “justice,” “capitalism,” etc.
  8. NG-R, “Analysis versus Dialectics…”, p. 254
  9. Ibid., p. 252
  10. NG-R, “Process Analysis and the Neo-Classical Theory of Production”, American Journal of Agricultural Economics, Vol. 54, No. 2 (May, 1972), pp. 281-285
  11. This follows NG-R’s example in “Process in Farming…”, p. 84ff
  12. NG-R, “Process in Farming…”, p. 84
  13. NG-R, The Entropy Law…, p. 225
  14. Bowman v. Monsanto, p. 2
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