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Against Monopoly

defending the right to innovate

Monopoly corrupts. Absolute monopoly corrupts absolutely.





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Does the decline in total factor productivity explain the drop in innovation?

In a long post, Mike Masnick calls attention to an e-book by Alex Tabarrok which focuses on the decline in total factor productivity as a measure of the drop in innovation link here. This has occurred despite the huge increase in the number of patents. He concludes that the patent system is broken and suggests some fixes like a mix of patents, some short-term and easy to get and others, long-term and less likely to be granted. Read and ponder.

And then think about the political and economic power of those who oppose such reforms.


Comments

I wondered about TFP, because I had heard that TFP was increasing. Apparently, it depends on who is looking at TFP.

An economist looked at TFP several different ways, and he discovered, to his apparent surprise, that TFP in durable goods has not only increased, but increased significantly. On the other hand, TFP of non-durable goods (food, clothing, gasoline, and similar goods), has stagnated significantly.

http://economistsview.typepad.com/economistsview/2011/04/about-that-tfp-stagnation.html

Why is the difference important? Because patents are most commonly filed and granted on durable goods, and non-durable goods have significantly fewer patents filed, and in some cases, virtually no patents filed. If patents were a drag on TFP, one would expect durable goods to see the biggest impact because these are patent-intensive industries. Instead, the patent-intensive industries had the greater TFP growth, and the industries least affected by patents has seen TFP stagnate.

So, if our patent system was "broken," TFP of durable goods should have dropped. Conversely, since the TFP of durable goods, according to the article at the link, has grown significantly, the implication is that the patent system is not broken.

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