Published on the Blog of the Luswig von Mises Institute, by Art Carden, May 25, 2009.
In a rush to stimulate the economy, the Obama administration is touting various “visionary” plans to make the American economy more progressive, more innovative, and more forward-looking by subsidizing politically-motivated projects like “green” technology. These hands-on policies will be ineffective. Recent research suggests that a much more effective way to accomplish the same goals would be to eliminate intellectual monopoly and to reduce the regulatory burdens on innovators.
According to conventional wisdom in economics, temporary monopoly rights – patents – are necessary to give people incentives to come up with newer, better ideas. After all, if people who came up with new ideas could see those new ideas copied without cost by competitors, why bother spending the time and energy? Hence, we have patents.
But the conventional wisdom is wrong. In their 2008 book Against Intellectual Monopoly, economists Michele Boldrin and David Levine dropped a bombshell that will, I hope, overturn the consensus about rights to ideas. Using carefully developed theory and a host of real-world examples, they show how patents actually reduce, rather than encourage, innovation. Innovators like steam engine pioneer James Watt, devoted enormous amounts of time and energy to defending monopoly rights rather than to creating new value. Innovation and growth proceeded apace once the patents expired. In Boldrin and Levine’s opinion, this delayed the onset of modern economic growth.
As these authors argue, intellectual monopoly is an unnecessary evil. Further, it is a relic of medieval and early-modern mercantilist regulations whereby kings and nobles granted efficiency-reducing monopoly privileges to favored constituents. Eliminating intellectual monopoly would reduce the incomes of the intellectual monopolists, but it would unleash new creative energies throughout the economy …
… White House Chief-of-Staff Rahm Emanuel suggested that the Administration should not waste the opportunities presented by the present economic and political crisis. Right now, the administration has the opportunity to make a bold move that will stimulate the economy for generations to come. By eliminating intellectual monopoly and by liberalizing markets, we can encourage further innovation and greater prosperity. (full text).
My comment: we should be able to find another reward system for inventors than blocking in this way further use of an idea.
The Google Web-search with keyword patents.