Wednesday, February 6, 2013

Patently Negative

Two Washington University Professors Michele Boldrin and David Levine, who are also Research Fellows at the Federal Reserve Bank of Saint Louis, have published their latest critique of the patent system.  Their lead article in the Journal of Economic Perspectives (Volume 27, Number 1, Winter 2013, pages 3-22) is entitled "The Case Against Patents."  Here is an excerpt summarizing their argument:
The case against patents can be summarized briefly:  there is no empirical evidence that they serve to increase innovation and productivity, unless productivity is identifified with the number of patents awarded—which, as evidence shows, has no correlation with measured productivity.  This disconnect is at the root of what is called the “patent puzzle”: in spite of the enormous increase in the number of patents and in the strength of their legal protection, the US economy has seen neither a dramatic acceleration in the rate of technological progress nor a major increase in the levels of research and development expenditure.
Both theory and evidence suggest that while patents can have a partial equilibrium effect of improving incentives to invent, the general equilibrium effect on innovation can be negative.  The historical and international evidence suggests that while weak patent systems may mildly increase innovation with limited side effects, strong patent systems retard innovation with many negative side effects.  More generally, the initial eruption of innovations leading to the creation of a new industry—from chemicals to cars, from radio and television to personal computers and investment banking—is seldom, if ever, born out of patent protection and is instead the fruit of a competitive environment.
In their 2008 book, "Against Intellectual Monopoly," Boldrin and Levine argued that both patents and copyrights impose substantial negative effects on society, although trademarks might be more benign.

Professor Bill Tomlinson and I have also studied the patent system using a participatory computer simulation system called The Patent Game.  We have published our experimental results thus far in three articles:  (1) Patents and the Regress of Useful Arts, (2) Patent Expertise and the Regress of Useful Arts, and (3) Property Rules, Liability Rules, and Patent Law:  One Experimental View from the Cathedral.  In 2010, I was invited to present our results in a Google TechTalk at Google headquarters in Mountain View, California.

Abraham Lincoln might disagree with "The Case Against Patents."  His view of the patent system was positively sublime:
In the world's history certain inventions and discoveries occurred of peculiar value, on account of their great efficiency in facilitating all other inventions and discoveries. Of these were the art of writing and of printing, the discovery of America, and the introduction of patent laws. [Emphasis added]
It is nothing short of remarkable, in 2013, we still appear to know very little about the costs and benefits of patents, a system of incentives that has been in use to encourage innovation for more than 500 years - and whose use has been increasing rapidly all around the world.