Yeah exactly. When innovation costs are high relative to imitation costs, we know that the positive externality of invention (the value created by the invention that is not captured by the inventor) is highest. So we would want stronger patents or bigger prizes. Stronger patents have counterproductive second order effects though, so even though the inventor is getting more, everyone else gets less.
Very nice post. I've been thinking about the whole patents restrict the spread of ideas thing since you pointed it out this weekend. Once you see the insensibility of it you can't unsee it
What do you think of the argument here, which you link to: https://theeconreview.com/2018/03/13/the-tabarrok-curve-a-call-for-patent-reform-in-the-us/
"[Patent] theory says we need patents when innovation costs are high relative to imitation costs."
You make the argument that patents negate the benefits of said innovation, and thus don't effectively compensate for their costs, right?
Yeah exactly. When innovation costs are high relative to imitation costs, we know that the positive externality of invention (the value created by the invention that is not captured by the inventor) is highest. So we would want stronger patents or bigger prizes. Stronger patents have counterproductive second order effects though, so even though the inventor is getting more, everyone else gets less.
Very nice post. I've been thinking about the whole patents restrict the spread of ideas thing since you pointed it out this weekend. Once you see the insensibility of it you can't unsee it