Thursday, October 18, 2018

Monday, October 15, 2018

The Case Against Patents

Paper

The case against patents can be summarized briefly: there is no empirical evidence that they serve to increase innovation and productivity, unless the latter is identified with the number of patents awarded – which, as evidence shows, has no correlation with measured productivity. This is at the root of the “patent puzzle”: in spite of the enormous increase in the number of patents and in the strength of their legal protection we have neither seen a dramatic acceleration in the rate of technological progress nor a major increase in the levels of R&D expenditure [..]

A closer look at the historical and international evidence suggests that while weak patent systems may mildly increase innovation with limited side-effects, strong patent systems retard innovation with many negative side-effects. Both theoretically and empirically, the political economy of government operated patent systems indicates that weak legislation will generally evolve into a strong protection and that the political demand for stronger patent protection comes from old and stagnant industries and firms, not from new and innovative ones. Hence the best solution is to abolish patents entirely through strong constitutional measures and to find other legislative instruments, less open to lobbying and rent-seeking, to foster innovation whenever there is clear evidence that laissez-faire under-supplies it [...]

A second widely cited benefit of patent systems – although not so much in the economics literature – is the notion that patents are a substitute for socially costly trade secrecy and improve communication about ideas. From a theoretical point of view the notion that patents are a substitute for trade secrecy fails even in the simplest model. If a secret can be kept for N years and a patent lasts M years then an innovator will patent exactly when N <= M. Hence, only those things will be patented for which the secret would have emerged before the patent expired, while those for which the secret can be kept will not be patented. [..] It is also the case that modern “disclosure” in patents is negligible – it is essentially impossible to build a functioning device or software program from a modern patent application [..]

The related idea that patents somehow improve communication about ideas – a notion key to the “public-private” partnership between governments and private research organization in which the government funds the research and then gives the private organization a monopoly over anything developed in the course of research – is backed neither by theory or evidence. It is impossible to study the history of innovation without recognizing that inventors and innovators exchange ideas as a matter of course and that secrecy occurs, in those cases in which it occurs, only in the final stages of an innovation process, when some ambitious inventors hope to corner the market for a functioning device by patenting it. A good case in point is that of the Wright brothers, who made a modest improvement in existing flight technology which they kept secret until they could lock it down on patents, then used their patents both to monopolize the U.S. market and to prevent innovation for nearly 20 years [..] The role that Marconi and his patent played in the development of the radio is altogether similar [..]

The conventional view starts with competitive equilibrium and observes that welfare losses from small price variations are quadratic as a function of the price, hence grow very slowly as the price increases. In the case of full monopoly – as is the case with patents – we are not interested in small price deviations from competition but rather we are interested in pricing near the top of the profit function. Witness for example the fact that patented pharmaceutical products often sell for hundreds of times the marginal cost of production as some astonishing pricing differences between the US and the European markets show. Here social loss increases nearly linearly with prices, while the deviation of profits from the maximum are quadratic. Hence small price increases have a only a small effect on profits – although still worthwhile from the perspective of the monopolist – with substantial social loss. It is impossible to observe the behavior of modern IP monopolists without recalling this theoretical prediction. Most of the copyright wars revolve around measure to prevent piracy, empirically a relatively minor factor as far as profits of media corporations are concerned [..] In the case of patents, and particularly pharmaceutical patents, the situation is even more severe [..T]he empirical study of the Quinolones family of drugs [..] measures the economic consequences to India of the introduction of pharmaceutical patents for this family of drugs and concludes that the consequence to third world India will be nearly 300 million USD in welfare losses [..]

Patenting has exploded over the last decades. [..]. In less than thirty years, the flow of patents roughly quadrupled. By contrast, neither innovation nor R&D expenditure have exhibited any particular upwards trend, not to speak of factor productivity [..]

One could argue that purely defensive patenting is pretty harmless – after all it costs only about $40,000 to file a successful patent application, and doing it on a large scale may make it cheaper. However the acquisition of large patent portfolios by incumbents creates huge barriers to entry. [..]

There is little dispute among economists that a well-designed patent system would serve to encourage innovation [..] but, again, there is little dispute among economists that the patent system as it exists is broken. ... As we will document in the next section, in our view the evidence is instead clear that the patent system taken as a whole does not play an important role in spurring innovation [..].

If a well-designed patent system would serve the intended purpose, why recommend abolishing it? Why not, instead, reform it? To answer the question we need to investigate the political economy of patents: why has the political system resulted in the patent system we have? Our argument is that it cannot be otherwise: the “optimal” patent system that a benevolent dictator would design and implement is not of this world and it is pointless to advocate it as, by doing so, one only offers an intellectual fig-leaf to the patent system we actually have, which is horribly broken. [..]

Now we need to provide some support for that initial empirical statement: if there is to be any rationale for patent systems, with all their ancillary costs, it must be that they actually do manage to increase innovation and productivity. What is the evidence? How can we say so definitively that there is no evidence that patents have the desired effect? [..]

Except for two of the possible specifications (see below) there is, in general, no statistically significant correlation between measures of productivity (both labor and TFP) and patenting activity (both number and citations). This is a more surprising result than one would expect on the basis of purely theoretical considerations. In fact, one would expect patents to be at least a decent predictor of productivity growth across sectors, certainly for the last couple of decades during which their use was extended to more and more sectors. This finding leads us to conjecture that the use of patents either as a defensive or as a rent seeking tool [..]

---

I was able to replicate the regression [geek] with fixed effects, accounting for year and industry [/geek] between TFP and number of patents per year - see code, data ref is also there. TFP is total factor productivity  [geek] the portion of output not explained by the amount of inputs used in production, so its level is determined by how efficiently and intensely the inputs are utilized in production [/geek].

Indeed as the paper says the relationship is weak as to be non-existent.

Sunday, October 14, 2018

Q&A - 14/10

Paul Romer

This thought experiment suggests why a decision to engage in trade may be important even for a country that has a large population, such as China or India. If access to a large number of workers or consumers were all that mattered, having a large population would be a good substitute for trade with other nations. The model here suggests that what is important for growth is integration not into an economy with a large number of people but rather into one with a large amount of human capital. Many of the details of trade between different economies of this kind remain to be worked out, but since growth seems to be correlated with the degree of integration into worldwide markets but not closely related to population size or density, the results from this model seem promising.

Mmm

Yes, having access to lots of consumers is not primarily important. But, according to findings of Werner and Hidalgo, integration into "large amount of human capital" should not happen across the border, human capital, or as Hidalgo calls it, "people with tacit knowledge who can put their knowledge into productive use" need to be present within a country's border. Because differentiated products can only be produced with such people collaborating closely.

Then, simply becoming a link in a large supply chain does not turn a country into a productive, creative powerhouse. Sell if you can, buy if you must - but diverse capabilities that can make up a plane, a car must exist in the same country. Per Werner simply getting FDI does not bring knowledge, nor productivity into a country either. Actually I always thought this line of reasoning was a particular kind of stupid, and it turns out it probably originated from Romer.

Comment

But Romer is a 2018 Nobel Prize winner!

No

The prize is called Riksbank [Swedish central bank] prize in economic sciences in honour of Alfred Nobel. It was abbreviated to Nobel Prize later. Alfred Nobel was a chemist, engineer, inventor, who liked blowing shit up (he invented the dynamite). There is no way he would have authorized giving money to economics which wasn't even considered a proper science then. Some would argue of course, it still isn't one now.

Article

In the context of rising emissions, this makes a [hydrogen powered] plane like Element One — designed to create zero-emissions — absolutely transformative. The aircraft would use ultra-light hydrogen fuel cells (stored either as a gas or liquid) to tackle the industry-wide challenge of battery density not matching traditional fuel density (in other words the weight of batteries needed to power aircraft could be overwhelming).

Right

Battery based electric plane (with battery enough for hours of flight) would require battery so big it'd have trouble taking off.

Question

But I heard battery based electric plane mentioned in Iron Man 2!

Yes

That was the E. Musk cameo wasn't it.. Fine. And I saw an Atari ad in 80s Bladerunner. Was Atari the future...?

It's just a movie.

Question

How about that Khabib / McGregor fight?

It was fine

The debacle in the end is not out-of-the-ordinary. Similar altercations happened before - nothing special there.

But these fights are too slow. I would put a limit to grappling, with the cage and limitless grappling the matches gravitate away from real-life scenario, it becomes just a sport. Also Khabib is a good athlete, but word is he got to title without facing off w too many top dogs. I watched one of his earlier fights (with Tibau, competent fighter), he could not do a single take-down - little weird for a hot-shot wrester. In the end he won by points, which surprised many. I think "they" (the man behind the scenes) let the kid through because he looks more hip - he has a "thing" with the hat, backstory, the bear etc..

It's a show, and shows need marketing. NBA needed to expand in China all of a sudden Yao is playing in NBA. Did US run out of good basketball players? No. If someone from your country is playing in the league you'd be more willing to watch it.

Comment

Immigrants are more productive than natives, as measured by number of patents

That assumes patents are good measure of innovation

The paper here says otherwise. Wright Brothers made a small improvement to existing flight tech and patented. Fo da money.. (blocking further innovation in the field for another 20 years the paper also says). Immigrants might be "hungrier", hence more patents because the need for $$$. That doesnt mean they are more innovative than natives.

Picking talent who can already innovate, or accepting students into programs / grants that crank out innovators is different. Looking at broad population, incentives one cannot make the OP's comment categorically.

Ammonia

How do we transport hydrogen? Usually pressurized tanks are used as a solution. For a cheaper alternative researchers are looking at "hydrogen carriers", substances which contain H2, but can be carried efficiently.

Among these products ammonia stands out. Ammonia is advantageous in transportation and storage because it has large hydrogen content per unit volume, and is easily liquefiable (8.46 atm at 20°C). So existing liquid transportation methods can carry it. The formula is for ammonia NH3, hydrogen H2. Two H's as we see are in NH3.

There is already a huge infrastructure for producing ammonia. It is produced about 150 million tons per year. Ammonia is used in cleaning products, known for its sharp smell and ability to clean any kind of grease. In movies, if dude passed out, someone brings a cloth to his nose, he smell it, and wakes right the f--k up. That's ammonia.

Clean production methods: Folks at George Washington University came up with an approach that uses air and water as a source of H2 . Air is made up of 78% N2 . In their process the bubble of wet air is passed through a mixture of tiny particles of iron oxide and molten NaOH and KOH. When electricity is applied H2 is extracted from water and allows H2O and air to interact directly to form NH3. 

How to use ammonia as fuel: either convert it to hydrogen as needed and use H2 fuel cells for power. Some are also looking at ammonia fuel cells to use NH3 directly in the FC. No carbon emissions in either case.

Exciting possibilities.

Saturday, October 6, 2018

Wax On

Link

[R]esearch reported in the nature journal Scientific Reports has discovered that the storage of hydrogen in, and rapid evolution from, paraffin wax could be the solution.

The research team, cited as Gonzalez-Cortes, S. et al., has developed highly selective catalysts with the assistance of microwave irradiation, which can extract hydrogen from hydrocarbons instantly through a non-oxidative dehydrogenation process.

The wax material is safe, efficient and could facilitate its application in a HFCV. Most Importantly, hydrogen storage materials made of wax can be manufactured through completely sustainable processes utilising biomass or other renewable feedstocks.

Link

Researchers at the universities of Oxford, Cambridge and Cardiff in the UK, and the [..] Saudi Arabia have shown that benign, readily-available heavy alkane hydrocarbon wax is capable of rapidly releasing large amounts of hydrogen—sufficient to meet the 7 wt% target set by the US DOE—through microwave-assisted catalytic decomposition.

This discovery, reported in an open-access paper in Scientific Reports, offers a new material and system for safe and efficient hydrogen storage and could facilitate its application in a hydrogen fuel cell vehicle. Hydrocarbon wax is the major product of the low temperature Fischer-Tropsch synthesis process from syngas and is currently thermally “cracked” to produce various fuels.

--

Also see Reuters. The material mentioned there, alane, is aluminum hydride (AlH3) providing another storage method. Interesting new developments in this space.

Thursday, October 4, 2018

Element One

"The world's first regional passenger plane powered by hydrogen-electric power is set to take to the skies as early as 2025, paving the way for a new generation of zero-emissions air travel.  Designed to fly up to four passengers for distances between 500km to 5,000km, the Element One is described as a quiet, ultra-light, zero carbon aircraft "several orders of magnitude better" than battery-electric aircrafts".

I love the name. Probably comes from the fact that H is the first element in the periodic table. Hydrogen on an aircraft is actually not that far-fetched. NASA used it as a rocket fuel for decades.

"At the commissioning of the 50th public refuelling station [in Potsdam Germany] H2 MOBLITY partners Linde and TOTAL celebrated [the event]".

Go Krauts.

"Tesla Supercharging stations [..] take about 20 minutes to charge to 50%, 40 minutes to charge to 80%, and 75 minutes to 100%"

Too slow. Hyundai Nexo, or Toyota Mirai, or Nikola will refuel under 5 minutes.

"No one has test-driven a hydrogen car for as long a distance as we have. From the South Korean capital city of Seoul to southeastern port city of Ulsan, we drove Hyundai Motors' Nexo for over 400 kilometers on a single charge".

Looks like a comfortable ride.

Jeremy Clarkson: "I'm baffled by the car industry's apparent reluctance to think more seriously about hydrogen as a replacement for petrol and diesel, H is the most abundant element in the universe, so we wouldn't run out of it for about a billion years, and it's clean too. A car powered by [HFC] produces nothing from its tailpipe but water [..] The motor industry would stop fiddling about with its pointless batteries and its hybrid-drive systems and get on the only road where there is actually a future for personal mobility. The hydrogen road.”

Clarkson was the host of the popular car show Top Gear.

Other developments: Researchers from the School of Engineering in Temasek Polytechnic (TP) have invented the world’s smallest and lightest HFC in Singapore. Japan's PM Abe wrote a piece for FT, and talked about Japan's non-fossil fuel future. Nikola CEO complained that "California Air Resources Board gave a grant of $41,000,000 to big oil and diesel truck manufacturers [shady]". 

CSIRO