Undercover Economist: Tricks of the Trade

Undercover Economist: Tricks of the trade

By Tim Harford Published: October 13 2007 01:22 | Last updated: October 13 2007 01:22

In the late 1870s, a magician named Buatier De Kolta was mesmerising audiences in Paris by producing big bunches of paper flowers from an empty roll of paper. Nobody knew how the trick was achieved, until a gust of wind blew one of the flowers on to the floor in front of the stage. A magician in the audience seized it and ran out – De Kolta’s trick was soon being performed by many of his rivals.

The story is told by Jacob Loshin, a recent graduate from Yale Law School, in a working paper on how magicians protect their tricks. Such outright thefts would be hard to imagine today because magicians have developed a professional code of conduct to defend their most valuable property: their ideas.

The research bears – albeit obliquely – on an issue that is only going to become more important: intellectual property in a world where more and more of the wealth that is created takes the form of ideas rather than objects. Intellectual property law does not protect magicians’ tricks very well, and it does not help much in high fashion or in haute cuisine either – all areas that Loshin describes as a “negative space” for intellectual property.

For the fashion industry, a lack of intellectual property protection may not be a problem: the trickle-down of high-end fashion helps create obsolescence and the demand for more high-end fashion. But chefs and conjurors need a little help protecting their ideas. Lacking legal shelter, they resort to professional norms.

Loshin describes the magicians’ norms, which encourage the selective sharing of techniques, limit copying and credit the re-discoverer of a long-dormant technique with the same rights as the trick’s inventor. The economists Emmanuelle Fauchart and Eric von Hippel report very similar norms for the sharing of recipes among French chefs.

In both cases, the norms are enforced through social pressure that can be very powerful. Loshin describes the case of one company that manufactured tricks that were regarded in the eyes of the profession – although not the law – as proprietary. Magic journals would not accept the company’s ads, professional magicians shunned its offerings, and bankruptcy soon followed.

These techniques work because the fraternity of magicians – and chefs – is close-knit. Aspiring chefs work long apprenticeships and rely on word of mouth for their next job. Magic journals are not available at newsagents, and even Prince Charles had to perform an examination before being accepted as a member of The Magic Circle. A magician who steals from another, or reveals secrets not widely known by non-magicians, will not be entrusted with new ideas or recommended by other magicians. These informal sanctions work well for both chefs and magicians. But they are not perfect. Magicians, in particular, face another problem that the chefs do not. If a chef’s recipe is revealed to the world, that does not detract from his reputation, and only other professional chefs are likely to be able to use the information. But if a magician’s trick is revealed, his reputation suffers; in fact, a little bit of the mystery is taken away from the entire profession.

In one notorious example, a series of 1990s television shows with the self-explanatory title, Breaking the Magician’s Code, won big audiences by revealing the secrets behind classic illusions. One magician complained that the shows were “peeing in everybody’s cornflakes”. But the magicians’ social sanctions were powerless to prevent television executives from exposing their secrets, and legal challenges to the programme did not succeed.

Loshin’s work is a reminder of how idiosyncratic intellectual property rights can be. Idiosyncrasy is not easy for economists to deal with, but if we want to understand the intangible economy of ideas, it’s a trick we shall have to master.