Patent Protection: too much of a good thing?

Over at the Becker-Posner Blog, Judge Posner’s recent blog post argues that the U.S. patent system may act to hinder innovation:

When patent protection provides an inventor with more insulation from competition than he needed to have an adequate incentive to make the invention, the result is to increase market prices above efficient levels, causing distortions in the allocation of resources; to engender wasteful patent races.

In essence, Judge Posner is applying a cost-benefit analysis to the system’s justifications. Other defenses of the patent system focus only on the benefit: namely that the patent system is effectively a subsidy on innovation, and when you subsidize something, you get more of it. But the insight here is that subsidies impose costs, too. And where those costs can plausibly be viewed as dwarfing the benefit of the subsidy, the subsidy may not have a net benefit.

Judge Posner’s post stops short of calling for abolishing patents (favoring reform instead). Others, including some academics like economists Michele Boldrin and David K. Levine, argue that patents should be abolished entirely. Boldrin and Levin’s paper The Case Against Patents, available at SSRN, asserts that abolitionism the best route.

Posted on October 8, 2012, in Patent and tagged . Bookmark the permalink. Comments Off on Patent Protection: too much of a good thing?.

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