Tuesday, January 10, 2006

Patents, Technology, and Economic Growth

Among the sources of economic growth, improvements in technology have the most dramatic effects. Advances in technology provide new and better ideas about using our resources. In short, improvements in technology allow us to get more of the things we like (goods, services, leisure time) given fixed, or even fewer, resources.

Economists (including the founder of Aplia, Paul Romer) and policy makers devote a lot of thought to developing technology policies. Economists generally agree on a couple of broad policy goals:

1. Government should promote education. A better educated population tends to come up with more bright ideas and universities tend to extend and deepen the basic knowledge that leads to better ideas in the first place.

2. Government should protect intellectual property, providing innovators with patents that reward them for developing better ideas -- an incentive to innovate.

This article from the Economist (Bayh-Dole Act), considers some of the difficulties of implementing successful technology policies. Patents provide an incentive for innovation, but as the article points out, the scramble to obtain patents and their consequent rewards may actually slow the spread of new ideas and basic knowledge. That is, excessively strict intellectual property laws (Goal 2) might actually hamper the spread of basic knowledge (Goal 1). Read the article to see why.

1. How does the Bayh-Dole Act foster innovation? According to the article, how many firms have the Act's patent protections helped to create? List some of the innovations resulting from the Act.

2. Like many government policies, the Bayh-Dole Act generates unintended consequences. In what ways does the Act deter or delay scientific research?

3. The Act attempts to exempt "non-commercial" research from patent restrictions. In what ways does the Bayh-Dole Act blur the line between the commercial and non-commercial scientific research conducted at universities?

4. Would non-exclusive licensing of patented ideas (rather than exclusive licensing) lead to more rapid dissemination of ideas and knowledge?

By Brandon Fuller


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