Fix the knowledge economy, not patents (re The Economist 1851 and 2015)

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The Economist 2015-08-05 features two mostly excellent articles:

  • Time to fix patents (subtitle: “Ideas fuel the economy. Today’s patent systems are a rotten way of rewarding them”)
  • A question of utility (subtitle: “Patents are protected by governments because they are held to promote innovation. But there is plenty of evidence that they do not”)

I especially enjoy the second starting with the 19th century, in what is usually an ahistorical debate:

THE Great Exhibition, staged in London in 1851, was intended to show off the inventive genius of Victorian Britain. In doing so it sparked a hardfought debate on intellectual property. On one side were public figures horrified at the thought of inviting the whole world to see the nation’s best ideas, only to have most of it go straight home and copy them. They called for the patent system to be made cheaper and easier to navigate, and for the rights it conferred to be more forcefully upheld. These demands, though, were met with a backlash. Supported by economic liberals who had successfully fought for the repeal of the protectionist Corn Laws a few years earlier, this side of the debate argued that free trade and competition were good for the economy; that patents were a restraint on both; and that therefore patents should be not reformed, but done away with.

The Economist, founded by opponents of the Corn Laws, was an enthusiastic promoter of this abolitionist movement. A leader in our July 26th issue that year thundered that the granting of patents “excites fraud, stimulates men to run after schemes that may enable them to levy a tax on the public, begets disputes and quarrels betwixt inventors, provokes endless lawsuits [and] bestows rewards on the wrong persons.” In perhaps our first reference to what are now called “patent trolls”, we fretted that “Comprehensive patents are taken out by some parties, for the purpose of stopping inventions, or appropriating the fruits of the inventions of others.”

Arguing that patents “rarely give security to really good inventions” and fail at their job of encouraging innovation by rewarding inventors for their efforts, we backed the abolitionists in a debate over patent reforms then in Parliament. Our knockout argument: most of the wonders of the modern age, from mule-spinning to railways, steamships to gas lamps, seemed to have emerged without the help of patents. If the Industrial Revolution didn’t need them, why have them at all?

The debate raged on for years and through several changes of government. In 1883, though, Parliament decided that instead of killing patents, it would improve them.

Over the remainder of the century economists and others today called social scientists largely and tragically abandoned the field, leaving knowledge policy to lawyers and rentier industries.

Sadly today’s periodical agrees with the 1883 Parliament:

Today’s patent regime operates in the name of progress. Instead, it sets innovation back. Time to fix it.

Various fixes and a recommendation for more research are mentioned in the two articles. Of course abolition is not politically feasible at this time, or as one of the articles puts it, “would face an onslaught from the intellectual-property lobby.” But that’s no reason to grant freedom restricting regimes any legitimacy at all, as The Economist does with “abolition raises problems in terms of the ethics of property rights”.

The most significant flaw of the two articles is implicit acceptance of innovation as the top goal of knowledge policy. Yes, it is bad that patents have costs and have not been shown to increase innovation. But worse, they increase inequality and conflict. Property is the wrong institution for knowledge, period. The best reforms, commons-favoring ones, reorient the knowledge economy away from property, decrease the profits of and constituency for property, and further increase policy imagination for freedom.

Patents are not an institution that can be “fixed”; only mitigated and eventually abolished. Progress (freedom, equality, security, as well as innovation) requires fixing the knowledge economy, which produces and is produced by our institutions of knowledge regulation.

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One paragraph from The Econonmist’s 1851 editorial that largely captures both its rights and consequences arguments:

The privileges are prohibitions on other men; and the history of inventions accordingly teems with accounts of trifling improvements patented, that have put a stop, for a long period, to other similar and much greater improvements. It teems, also, with accounts of improvements carried into effect the instant some patents had expired. The privileges have stilled more inventions than they have promoted, and have caused more brilliant schemes to be put aside than the want of them could ever have induced men to conceal. Every patent is a prohibition against improvements in a particular direction, except by the patentee, for a certain number of years; and, however beneficial that may be to him who receives the privilege, the community can be no more benefited by it than by the Pope prohibiting the Catholic public from reading Mr Vericour’s book. If it secure to one inventor pecuniary advantages, it imposes mental restrictions on others. On all inventors it is especially a prohibition to exercise their faculties; and in proportion as they are more unanimous than one, it is an impediment to the general advancement, with which it is the duty of the Legislature not to interfere, and which the claimers of privileges pretend at least to have at heart.

Concluding sentence:

We disclaim all hostility to inventors—we wish them to be encouraged and rewarded by the public; but we think they ought to find their rewards, like other men, in the common markets of the world, not in privileges which are wrongs to the community from which they derive most of their knowledge.

I’m interested in substantive comments on The Economist articles above (or anything else I post). I’ve noticed two so far, without looking.

Derek Lowe in The Problem With Patents notes that the articles along with many others note that drug patents are often held to be working better than in other fields, even by patent opponents; also that increasing regulatory costs increase the case for drug patents. Those are why I’m particularly interested in taking down drugs as a signal case for IP and ways of decoupling safety and efficacy regulation from patents. Lowe also notes differences between drug research and development and questions potential savings figures from Dean Baker, which I’ve mentioned before. I suspect Baker has responded to similar critique before; pointers and assessments wanted. Finally Lowe says that the article’s alternative to patents is prizes, which would have to be large and are another incentive that would have problems of their own but are worth exploring. I agree that prizes are interesting but don’t think the alternative to patents should hinge only on prizes; there are many levers (extremely incomplete list, doesn’t even mention prizes yet) to improve medicine in ways either orthogonal to or in conflict with patents, and consistent with Mertonian norms.

Gene Quinn in What ‘The Economist’ Doesn’t Get About Patents calls the articles “bizarre, rambling, and intellectually dishonest” and argues that “patent system in England provided the predicate for the Industrial Revolution”, that innovation costs a lot more today and “without funds to innovate innovation doesn’t happen…patents are a critically important driver of investment”, and that patents are correlated with other measures of innovation as well has high income. Though my biases go in the opposite direction, I appreciate Quinn’s attempt to rebut the sweep of the articles’ arguments. I would love to read a neutral literature review on patents and the industrial revolution. Unsurprisingly given my bias I’ve mostly read that patents held things up; I will follow up on Quinn’s pro- citation soon. There’s no doubt that today’s innovation ecosystem, at least for drugs, is highly enmeshed with patents; that’s one of the reasons I’m more eager to, as the title of this post says “fix the knowledge economy”, than to “fix patents” – a huge patent-allergic innovation ecosystem will provide the predicate for patent abolition. Correlation and causation of innovation and intellectual property is of course also an important topic – as is the inclusion of other impacts of knowledge regulation such as freedom, equality, and security.