From October 2016 to March 2017 the team is joined by Guest Kats Rosie Burbidge and Eibhlin Vardy, and by InternKats Verónica Rodríguez Arguijo, Tian Lu and Hayleigh Bosher.

Friday, 15 April 2016

Innocuous Innovation - The Rise of the Maintainers

Combine the Global Financial Crisis, Occupy Wall Street, and now the Panama Papers, and there is a revolution at foot in economic thought.  In the last decade, we have seen the failure of macroeconomic models, un-precedented government policy to stimulate the economy, and a tax system which supports the widening gap between rich and poor.  The failings of economic theory laid bare.  The next puppy up for drowning might be innovation.

"Entire societies have come to talk about innovation as if it were an inherently desirable value, like love, fraternity, courage, beauty, dignity, or responsibility. Innovation-speak worships at the altar of change, but it rarely asks who benefits, to what end?" Lee Vinsel Andrew Russell
Something is in the air.  If the winds blows away from innovation, then the privileged position of IP in public discourse could be compromised.  As I'm constantly banging on, economists and governments view IP as a means to stimulate innovation.  The core argument in favour of innovation is better.  It takes a few steps to get from innovation to better.  The current argument is that better is a higher standard of living, which comes from economic growth, which is spurred by productivity, and the best way to increase productivity is through innovation.

What's wrong with this picture?
There are a number of problems with this logic.  First, is better really a higher standard of living? Not necessarily.  We quickly adjust to higher standards of living. They may provide a temporary increase in happiness, but once the buzz is over, we return to our baseline happiness. Have a think about your computer.  In the 80's, I was happy to spend 15 minutes booting up a Commodore 64 with cartridges so I could play Space Invaders.  Now I'm annoyed if my laptop takes more than 30 seconds to wake up. Even in health care, our expectations rise with standards.

Second, economic growth may not be the best measurement of higher living standards. If more doesn't make us happy, then why focus on more? The past decades of rapid technological innovation have been accompanied by a rise in inequality. The tech industry, a hotbed of innovation, is anything but diverse and is disproportionately benefitting the privileged few.   Other economic growth consequences include increased pollution, diseases of affluence (e.g. obesity) and longer working hours.  Standard measures of growth don't capture these.

How to grow economies
Third, there is an interesting discussion starting in productivity, which roughly measures economic efficiency. Austerity measures, in which governments reduce their spending in response to poor economic performance, are popular at the moment. (Never mind that the most influential economic paper which set out the case for austerity turned out to have a fatal spreadsheet error uncovered by a student.) These measures don't seem to be working and governments are quick to blame productivity. Economist Geoff Tily recently raised this point and suggests that we shouldn't be focusing on productivity, which is on the supply side of the economy, but on demand. Austerity has reduced demand and productivity is merely the scapegoat for lack of growth.  But if productivity, which improves with innovation, isn't the problem behind economic growth, does the whole argument fall apart?

A fourth attack is the idea that it's not innovation, but maintenance that is key to the economy. Vinsel and Russell argue that innovation has become a meaningless buzzword and that instead, we should focus on work performed by maintainers.  It's not innovation that keeps the wheels turning, but, "how the human-built world is maintained and sustained—so often by unnamed, unseen, and underpaid labor."  The focus on technology and innovation, which increases inequality and has questionable growth impacts, ignores that the real work is more mundane maintenance. They argue for more balanced social and policy approaches that recognises this.

What this means for IP
Collectively, these arguments chip away at our innovation obsession.  If it becomes accepted that productivity is not the problem, and/or if policy focuses more on maintenance, then innovation will no longer be at the forefront of economics and policy.  The basis of IP as policy has been innovation and its economic impacts.  Losing this core argument would compromise IP's cherished position in public discourse in developed economies. A loss of popularity, and IP becomes a economic, legal and political backwater. [Merpel has been reading her tea leaves, which have not picked up this vibe.]

A second impact could be that we need to rethink our justifications for IP.  For economics, innovation may only be part of the IP puzzle.  This is already a discussion in trade marks (and here) and TK, where innovation and growth arguments are not a good fit. Further economic justification could be found in concepts of utility, or even, gasp, fairness. For the legal discipline, which has maintained a healthy scepticism towards economic and innovation theories of IP, perhaps this is less disturbing.

Your Katonomist is not entirely swayed by these arguments, but she is sympathetic to some of these points.  She senses the beginnings of a (perhaps long overdue) change in economic thought.  At the very minimum, this emerging critique of innovation and productivity should encourage our IP community to critically re-visit our core beliefs.

A Kat pat to the anonymous economist who pointed me to Tily's productivity article.

Interested readers may enjoy the below video from Professor John Reenen at the LSE, who also researches IP (e.g. patents & home bias and patents and firm performance). Filmed in 2013, he explains how innovation, human capital and infrastructure should be the focus of growth policies.


Doers said...

Economies should be pushed from tertiary, to quaternary, to quinary, developing and utilising ever more complex technologies, investment streams and trying to enhance all quality of life indicators. Innovation is important in all of this, but is not everything. High tech will cause increased inequality as it makes the boundaries between have's and have not's even stronger. That must be recognised and dealt with. Making our societies more civilised and more inclusive is much harder than innovation, but more necessary. 'Maintainers' are probably the people who take responsibility, work in difficult situations and disproportionately contribute to society, and so what they do should be recognised.

Meldrew said...

High tech increases inequality until the tech is commoditised, then it just increases quality.

Nicola Searle said...

I think where we are heading is a rising consciousness that the innovation story is a incomplete one. We need a more comprehensive narrative.

Mariia said...

Though-provoking post. However, isn't it too simplified to say that all kinds of IP is about productivity and innovation? Aren't trademarks, which from economists point of view are there in order to lower search costs and fix information asymmetries, supposed to be focused more on maintenance rather than productivity?

dogg said...

This article links the drop in innovation with the rise of concentration in markets:

There are some nuances, but basically he says that a few big players may not need to innovate.

THE US anon said...


Thanks for the article, but even before I read it, I would amend your post and state that the big players are perfectly willing to play both sides of the patent game - but would prefer to avoid disruptive innovations and would LOVE to compete on those factors that are already in their benefit: size and established presence.

This is but one part of a two pronged philosophical attack on patents (called Attack from the Right).

Nicola Searle said...

Thanks dogg, for the link - my brain started screaming when I saw "patents as a proxy for innovation." However, the rest of the article does provide interesting comments. Decreased competition between firms, decreased incentives to innovate - not something that is typically discussed in IP. I like it. And the point that the its increased capital utilisation.

And THE US anon - I wouldn't classify the critical analysis of IP as an attack on patents. Our assumptions should be open to critique.

Mariia - indeed!

THE US anon said...

Respectfully Nicole, such IS an attack on patents.

Playing "nice" with how you describe it does not change what is happening.

At all.

One can easily apply a "critical analysis of IP" and NOT engage in an attack of the basic (and well proven) value of IP.

Your comment of "my brain started screaming when I saw 'patents as a proxy for innovation.'" says more than you think it might.

And for the record, the other prong of the attack on patents is from the Left (as in, from academia).

THE US anon said...

"comprehensive narrative" is just a buzzword for the battle of the mind - it is NOT an objectively driven item, but is rather very much a subjective and philosophically driven item.

Awhile back this blog had a story on that language battleground. That story would be worth re-posting (along with its comments).

dogg said...

I am not sure whether I understood your remark correctly, but I was just trying to summarize the main idea of the article.

The article only tries make the point that in an oligopoly, players don't need (many) patents, because they prosper without innovation and without competition.

I do not see an attack on patents here.

THE US anon said...


Not here in your posts, but see Christensen and disruptive innovation.

Those that are established (players) "do not need (many) patents" - and rest assured, do not WANT new players with patents to upset their game.

Why do you think Google spends so much time and money in the US government?

Nicola Searle said...

I've been meaning to do a post for some time on why patents are a poor indication of innovation (I've mentioned it before but not really gone into detail.) It's not an anti-patent bias, it's a pro-good data approach.

As for lobbying and patent strategies...

dogg said...

I think that this article fits in the discussion:

Innovation does not happen out of nothing, there needs to be some fertile environment and some money...

A question for Ip economists:
Is there a chart of IP filings vs yearly GDP growth? Would such a chart make any sense? (I am not an economist)

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