Wednesday, December 28, 2011

Patents: good, bad, or indifferent?

Tabarrok on Innovation | EconTalk | Library of Economics and Liberty:

Ok, so this is probably economics, but it was so interesting I could not pass up sharing it.  And be careful to jumping to conclusions.  He points out that the one area where he believes it works is in pharmaceuticals.  His conclusions?  Create patents of differing times periods (some 3 years, some 20 years, etc).
"Alex Tabarrok argues that innovation in the United States is being held back by patent law, the legal system, and immigration policies. He then suggests how these might be improved to create a better climate for innovation that would lead to higher productivity and a higher standard of living."

It is a podcast and Ted Talk. Here is a look-in via the transcript from the podcast from George Mason:
"The argument for patents is that imitation is a lot cheaper than innovation. So that, if a firm innovates, creates something new, and another firm can come along, imitate that product, eat away all the profit, and the first firm can't recover its research and development costs. And then they wouldn't have any incentive to do them and you won't get much innovation in the first place. Exactly right. Now, there's lots of arguments against. One of the first arguments against is just to ask: Are patents necessary?.....in 1930, we created in the Plant Patent Act, we could patent roses. So, did patenting of roses lead to more roses, more beautiful roses? Because people could capture the benefits without fear of being copied? Exactly. Did it lead to a flowering? No, it did not. We didn't see any big increase in rose innovation. In fact, we might have seen a little bit of a decrease. Moreover, even today, most new roses are not patented. Most inventions, most innovations are not patented. And I think people are a little bit surprised about this. With a few exceptions--chemicals, pharmaceuticals--being really the two biggest important exceptions. In some fields we don't even all patents, like fashion. Highly innovative, no patents at all. But in most fields, most innovations are not patented at all. You mention an example I've been thinking about recently, which is sports. Somebody innovates a new formation in football. It can't be patented. But coaches spend hours looking for a small edge."

Here is the Ted Talk:










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