Feb 3, 2012

Patents as zero sum games

The new paper "Recent research on the economics of patents," by Bronwyn H. Hall and Dietmar Harhoff, concludes:
  • [First, a] small subsector of industry, mostly pharmaceuticals, does find them very useful and even essential as an incentive. 
  • Second, although they are not important for innovation incentives in general, if your competitors have them, you need them too, which effectively means they are a zero sum game for the economy as a whole but necessary for each individual firm (Gambardella and Hall 2006). 
  • Third, although patents may not add much to social welfare (and are therefore not visibly effective in aggregate studies), they are capable of generating large private returns in many instances, which means that a number of economic actors have an interest in them, creating demands for more research.

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