Economics, Pethokoukis, U.S. Economy

Nobel-winning economist: Patent and copyright laws are hurting US innovation and economic growth

Tesla CEO Elon Musk wrote in a recent blog post that his electric car company “will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.”  And he went on:

Technology leadership is not defined by patents, which history has repeatedly shown to be small protection indeed against a determined competitor, but rather by the ability of a company to attract and motivate the world’s most talented engineers. We believe that applying the open source philosophy to our patents will strengthen rather than diminish Tesla’s position in this regard.

Look, America’s founders were smart guys. They understood innovators needed to earn a return for their efforts and be protected temporarily from imitation. But copyright and patent law has evolved into cronyist protection of the revenue streams of powerful incumbent companies. And that protection, a type of regulation, hampers innovation and entrepreneurship. Indeed, patent and copyright law have become a key manifestation of the long-term corporatist turn of the US economy that works against startups, economic dynamism, and creative destruction. (I deep-dive into this in my “Room to Grow” chapter.)

More insight comes from Nobel Prize-winning economist Edmund Phelps in his book “Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge, and Change.” Phelps:

But now the economy is clogged with patents. In the high-tech industries, there is such a dark thicket of patents in force that a creator of a new method might well require as many lawyers as engineers to proceed … Copyright has only recently seen controversy. … The passage by Congress in 1998 of the Sonny Bono Act lengthening copyright protection by 20 years — to author’s life plus 70 years — prevents wider use of Walt Disney’s creations and prevent wider use of performances copyrighted by the record companies. The length of the copyright term may be be deterring new innovation that would have had to draw on products at Disney and EMI. Members of Congress have a private interest in lengthening copyright and patent protections since they can expect to share in the big gains of the few without paying for the small costs borne by the rest of society.

Follow James Pethokoukis on Twitter at @JimPethokoukisand AEIdeas at @AEIdeas.

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