Nobel Prize Winning Economist Says Non-US Countries Have Unique Opportunity To Reform Intellectual Property

from the go-for-it dept

For well over a decade, we've noted that Nobel Prize-winning economist Joe Stiglitz has been one of the many, many economists who are skeptical of the benefits of our current patent system, noting that it appears to do a lot more harm than good, both to the process of innovation and (importantly) to the wider distribution of the gains from innovation. He's been particularly critical of pharmaceutical patents over the years. And, it appears that he may sense a somewhat unique opportunity to actually get countries around the world to actually rethink traditional patent and copyright regimes -- in part because the US, under the Trump administration, is pulling back from various international agreements and fora.

Earlier this year, along with Dean Baker and Arjun Jayadev, Stigliz authored an interesting paper about ways to rethink innovation, intellectual property and development. I don't necessarily agree with everything in the paper, but I do agree with much of it -- especially the presentation of the problems of today's systems.

Today’s global intellectual property regimes have been strongly affected by the historical evolution of IPR in the United States and in the advanced industrialised countries over the last century. Certainly, the adoption of the World Trade Organization’s Trade Related Intellectual Property System (TRIPS) reflects the understanding of the management of intellectual and knowledge advancement that prevailed in the last quarter of the previous century and the structure of economic power at that moment.

Perhaps somewhat ironically the world has coalesced on a set of institutions to manage knowledge advancement just as advanced industrialised economies have begun to run up against the severe impediments that this system entails - a system that they thought had been designed by and for themselves. Nowadays, it is widely recognised that the management of innovation in countries like the US has been sub-optimal and led to a situation that is increasingly litigious and plagued by conflicts. In fields such as information technology, a whole set of weak patents and an epidemic of over-patenting has made subsequent innovation difficult and has eroded some of the gains from knowledge creation (see Bessen and Meurer, 2008 among others). Moreover, in some areas, such as in pharmaceuticals, ever-stronger IP protections has not necessarily led to an increase in the discovery of new chemical entities (see Dosi and Stiglitz, 2014). Rather, the demands and needs of different industries become more opposed, leading to serious concerns for policy makers. There is a shrinking of the knowledge commons as even publicly funded and promoted innovation is privatised, thereby reducing both equity and efficiency. There is no agreement on what exactly ought to be done, but it is certainly recognised that the current system is not satisfactory for developed countries.

As you can tell from that snippet from the intro, there's a lot of concern about how US-driven "harmonization" of (mainly) patent rights has done more harm than good -- especially in believing in a one-size-fits-all approach. However, the paper notes that it's difficult to move away from the older setup, since so many countries were pressured into joining TRIPS (and some other international trade agreements).

The whole paper is worth reading (and it's embedded below, based on the Creative Commons license on the paper -- though, oddly, they never designate which CC license is actually being used, but I believe our posting here would be covered by all CC licenses). But beyond the paper, it appears that Stiglitz is sensing an unfortunate, if unique, opportunity to actually make other countries consider moving away from the old patent regimes: The administration of Donald Trump. Again, while the core concepts of intellectual property maximalism didn't necessarily originate with the United States (and in some areas, we've actually been laggards), there's no denying that over the last few decades, the US has mainly been the strongest supporter of putting such rules into all sorts of international trade agreements (or using those agreements to expand patent and copyright laws even beyond what we currently have in the US).

However, with a President who is extremely skeptical of international trade agreements (even if for the wrong reasons), Stiglitz has decided that it's a potential opportunity. His recent comments in South Africa make that clear. After criticizing Trump, he went on to note the opportunity:

He said developing countries must use the Trump administration as an opportunity to realise that the US hasn’t played the global leadership role it claims to have and take the initiative to negotiate new systems of globalisation, such as reforming intellectual property laws that benefit large corporates at the expense of social welfare.

Speaking out in South Africa is timely, since the country is considering a new patent law that would increase access to drugs that have been cost-prohibitive due to patents.

Stiglitz... welcomed South Africa’s draft changes and urged the country to continue working on the paper. “Any intellectual property regime has to get a balance on innovation on the one hand and dissemination on the other,” he said.

“You should be very concerned about anything that impedes competition,” said Stiglitz, warning South Africa and other developing countries of assisting corporations like big pharmaceutical companies to establish monopolies that don’t benefit local health systems or economic growth.

Stiglitz disputed claims that stringent intellectual property laws are necessary for innovation.

“There’s a whole history of using intellectual property law to try to squelch innovation,” he said.

While I hope I'm wrong, I'm skeptical that most countries will be willing to embrace a total rethink of intellectual property systems and the problems they cause for innovation -- but it will be worth paying attention to see if other countries do start pushing back on these outdated regimes.

Filed Under: arjun jayadev, dean baker, joe stiglitz, patents, pharmaceuticals, south africa

Has Our Economy Become Dependant On Bubbles?

from the that-wouldn't-be-good dept

I've said in the past that economic bubbles aren't necessarily a bad thing for the overall economy. Afterall, a bubble (at least one in a productive area, such as technology) tends to get a lot of money thrown at some problems, allowing a variety of innovation to take place very rapidly -- effectively throwing a lot of ideas at a wall to see what sticks. The fallout from a bubble popping often harms investors who bet on the wrong players in the bubble, but the fundamental benefit to society is often positive: a lot of infrastructure gets built very, very fast, and the strongest survives (and often buys up leftovers for pennies on the dollar).

However, there are others sides to the story as well. Joel West points to a recent interview of economists Martin Feldstein and Joe Stiglitz, where Stiglitz worries that we've built an economy based on bubbles:

Joseph Stiglitz: We had the tech bubble, followed by the housing bubble. But once we fix the recent mess, what will replace these bubbles as the engine for the economy?

Feldstein: What will replace the consumer spending bubble?

(Both men): We run the risk of the economy becoming depend on constant stimulus to replace these bubbles.

Stiglitz: I worry that after two years of stimulus, that the economy won't be going on its own, and then what will we do?

Along those same lines, economist Hal Varian has written, in the Wall Street Journal, a very straightforward and clear explanation of why the economy is stuck in neutral right now. Basically, (and, yes, I'm significantly paraphrasing), there's no new bubble to invest in, so (as Stiglitz implies above), everyone's looking for the government stimulus package to basically act as an artificial bubble until such time as a new bubble rises out of the mess. And, for that to happen in a productive way, any sort of "stimulus" needs to create incentives for others to invest in productive, growth-producing parts of the economy, rather than just throwing cash at pork barrel spending projects. This is a pretty fine line to walk (especially since it's politicians who are working out the details, and they love pork barrel spending).

And, to make matters even scarier, economist David Henderson points out that recent research from economists Christina and David Romer (it's worth noting that Christina Romer is Obama's choice to chair the Council of Economic Advisers) suggests that gov't fiscal policy in an attempt to modify business cycles doesn't work. In other words, things are going to be pretty messy in the economy for a while, unless we can come up with a productive and useful bubble quickly. Anyone have any suggestions?

Filed Under: bubbles, christina romer, economy, hal varian, joe stiglitz