Two ecomonists - Boldrin and Levine - have come up with a controversial idea that copyright and patent protection may actually be harmful for the innovator as well as society at large. The paper, called "Perfectly Competitive Innovation" is long dense and thought provoking. I have yet to read it fully, let alone fully digest it. However there is a commentary on it here which discusses both the paper and the responses to it, which seems to provide an excellent summary. I hope to come up with more topical thought later but in the meantime I offer this thought:

I think that most (all?) of the debate on IP - and indeed the above commentary - found misses one big thing: why innovation occurs. I'm still thinking about this but it seems obvious to me that there are two distinct forms of innovation.

The first is the innovation required to solve a perceived need. This is where cures for diseases come in, along with all sorts of other things from computer programs to wheels. For these sorts of innovative effort the Boldrin and Levine argument is fine. If I have a need of something to reduce my expenditure I will be willing to invest sufficient money to fix that need as long as it is less than the eventual reduction in expenditure (plus/minus interest rates, inflation etc etc). So, for example, if an HMO wants to cut its cost of treating a disease it will be willng to pay for the development of a drug that cures the disease quicker and faster. The 90% of computer software that is written but not sold generally falls under this umbrella. This is all classic return on investment stuff.

The second type of innovation is the creation of new markets by making something that no one has ever seen before and that doesn't solve a need. Here I think its a bit trickier, because you have to grow the market AND that takes time. Hence it may well be that you need some kind of protection because otherwise as soon as the market tornadoes you have no protection against imitators coming in and copying the product. Since they don't have to recover the fixed costs in developing the product and building the market they can sell for a lot less than you can. But it may well be that you can still sell for a premium because of branding so it is not neccessarily the case that you will see no benefit from originating the market - "The original and still the best" is quite a common slogan in all sorts of commodity based markets.

DD

I have to say that I think this USS Clueless article is somewhat simplistic, let alone biased. However despite that I do think it (and the article discussing Chirac that it starts commenting about) are right in parts.

What I disagree with is the imperialistic nostalgia bits. I don't think nostalgia has anything to do with it, especially given that in the grand scheme of things the Imperial powers were the UK, Austria and Spain not France or Germany. The reality is its all about power and influence today.

What is also missed is that Socialism is a popular idea. The fact that it doesn't work is irrelevant as far as the average man in the street is concerned. It has seemed to work for most of 50 years - because the rebuilding of the global economy after WWII drove massive growth rates, unfortunately it has too many short comings to work in places and times where populations and economies are not growing hand over fist.

The aims of socialism and the welfare state are laudable, but they come with two deadly side effects. The first is that they remove the incentive to do something and the second is that they require a large government bureaucracy to administer them. These two side effects mean that countries that implement a socialistic wellfare state system will eventually end up in deep doo-doo because the productive part of the economy becomes overwhelmed by the "drones". There is a great story by Rudyard Kipling called "The mother hive" that should be read by anyone who likes socialism.

However I do think that we are indeed seeing the evolution of a new Europe and I do think we need to worry about how it turns out. What really scares me is that we will see a socialist superstate show up. I know that eentually it will collapse under its own contradictions, but its collapse could be vrey unpleasant. Indeed it is arguable that one reason why the EU is so keen to enlarge is that it will stave off this collapse, rather as dying comapies merge to create bigger dying companies.

The other problem I see in Europe is a growing cynicism with the government. Effectively people are beginning to no longer trust their politicians and no longer believe that voting will provide a change. This is extremely worrying as it has the potential to lead to demagogues and tyrants. I do not think this can be fixed by outside assistance. It needs Europeans to fix it.

DD