Tuesday, February 5, 2013

Doctors of Voodoo (Economics) Debate the Which Came First Question

Which came first?

The trickled-down chicken pot pie (a great "innovation" for its time), or
the technology-incubating tooth fairy egg? (Which first?) And did patents help in any of it? Did patents send the right kind of message to them who do the inventing?
Inquiring economists (don't) want to know:
Read it here: ...

The Fed's Case Against Patents

(a PDF position paper ... click to read)

Huff Post short story take on the Fed's
Kill-all-Patents Paper

The paper ... argues that the patent system is damaging public health by raising the cost of prescription drugs, while failing to generate a plethora of innovative new treatments for life-saving diseases.

Hoping to improve patent quality, Boldrin and Levine say, is a lost cause.
"Why use band-aids to staunch a major wound?" Boldrin and Levine wrote. "Economists fought for decades -- ultimately with considerable success -- to reduce restrictions on international trade. A similar approach, albeit less slow, should be adopted to phase out patents [altogether]."

More details out of the Kill-all-Patents Paper
... an analytic look
Fed Fanta-thought #1.1:

"The market for software and hardware may be viewed as a ... special case. Generally the fixed cost of producing [already-invented] software [(as opposed to "developing" it)] is low ... This, however, pales in comparison to the cost of developing new medicines [(as opposed to "producing" them)]– which is estimated to have a present value of closer to 1 billion USD – the same way it does in front of that for developing [as opposed to "producing"] a new model of automobile ... "

((The Steppy smells a rotting fish here: Observe that the above paragraph compares apples with grapefruits. "Developing" and "producing" (mass producing) are not one and the same thing. Sneaky fellas them are at the Fed. Hee hee ha. Click Read More to see more analysis.))

Fed Fanta-thought #1.2:
"[We]understand patents in practice –... Typically [when the technology tooth fairy arrives and] a new, hence innovative, industry begins with a competitive burst of entries through which very many innovators try hard to get their products to market. In these early stages, there are many firms bringing different versions of the new product to the market –just think at the American auto industry in the early twentieth century or the software industry in the 1980s and 1990s"

((The Steppy smells a rotting rodent here: Observe that the above paragraph assumes inventions and innovations 'just happen'. Why it's as easy as and as inevitable as the Fed creating money out of thin air. Those Fed fellas assume everybody's job is just as finger snapping easy as is theirs. Want another Trillion dollars? Snap. Here it is. Want the Next Techno Great Thing? Snap. Here it is. Now how hard was that? --no clue of how much hard work goes into each incremental advance.))

PAGE 2, : On monopolies
Fed Fanta-thought #1.3:
"There is little doubt that providing a monopoly as a reward for innovation increases the incentive to innovate. There is equally little doubt that granting a monopoly for any reason has the many ill consequences we associate with monopoly power – the most important and overlooked of which is the strong incentive of a government granted monopolist to engage in further political rent-seeking ..."

((The Steppy smells an egged economist here: You would think that an "economist" of all people would know what the heck a "monopoly" is and would understand that the grant of a patent does not create a "monopoly", especially for inventions where there is no pre-existing market. You can't monopolize that which ain't there. Sheesh.))

PAGE 11, : On monopolies
Fed Fanta-thought #1.4:
"[Re patent and them] Being not a “property” right but rather a “monopoly” right, patent possessors will automatically leverage whatever initial rents their monopoly provides them with in order to increase their monopoly power until all potential rents are extracted and, probably, dissipated by the associated lobbying and transaction costs. ..."

((The Steppy smells a 'shroom smoking economist here: A granted patent is merely a right to exclude others from use of the invention for a limited term of years. It is not a right to do or monopolize in anything. Besides, courts no longer grant automatic injunctions. You would think that an "economist", of all people, would know that and understand. They don't. Picked their story and stickin' with it. Ughh.))

PAGES 12-13, : On monopolies
Fed Fanta-thought #1.5:
"Let us start with the patent office and a case study: the infamous “one-click” patent #5960411 issued to Amazon in September 1999. According to 35 U.S.C. 103, ... [blah, blah] ... The idea of taking a single action to accomplish a goal is hardly innovative, and applying the idea of taking a single action to making a purchase is obvious to anybody who has ever used a soft-drink machine, let alone someone with skill in the art of – say – marketing. It will hardly come as a surprise to marketers of any generation that it is a good idea to make it as easy and simple as possible to make a purchase. Let us think then logically – even as people not having ordinary skill in computer programming – how this might be accomplished over the internet. ..."

Patents are not granted for "ideas". Remember "PoopBeGone" from that Ben Stiller movie, "Envy"? In that movie, comedian Jack Black plays a dreamer who comes up with an "idea": When your dog poops on the sidewalk, pull out a can of "PoopBeGone", spray it, and poof; the poop is magically gone. No more fuss and muss in having to pick up after your dog. What a great "IDEA"!

Upon hearing the "idea", Ben Stiller's character proclaims that matter can neither be created or destroyed (in the manner his friend envisions for "PoopBeGone" (actually called VaPooRize in the movie). The joke in the fictional movie is that Jack Black finds a crazed chemist who magically makes the "idea" a reality and Jack becomes a Gazzillioniare while Ben stews in Envy.

That however is a "movie".

Just like Star Trek is a "movie".

The reality is that Ben is right. Matter (i.e. dog poop) cannot magically be teleported (just like in Star Trek) into another dimension by push of button. One cannot get a patent for such physics violating "ideas".

When Boldrin and Levine speak, you should instinctively press your own "PoopBeGone" disposal button.

Fed Fanta-thought #1.6: ((to be analyzed later ... manyanna ))

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