Tyler Cowen discusses his book The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick and Will (Eventually) Feel Better. Andrew Coyne (National Post) presents a rebuttal and the pair discuss Cowen’s thesis focusing on issues of productivity, innovation and government policy (moderated by Wendy Dobson).
December 1, 2012
Tyler Cowen and Andrew Coyne on The Great Stagnation
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November 26, 2012
End software patents
Marginal Revolution writer and George Mason economics professor Alex Tabarrok argues for an end to software patents.
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November 17, 2012
“3D printing will be bigger than the web”
While I’m not quite willing to go as far as Chris Anderson (quoted above), I do think 3D printing is going to be a fantastic development in our very-near future:
Chris Anderson has exited one of the top jobs in publishing — Editor-in-Chief of Wired magazine — to pursue the life of an entrepreneur, making a big bet that 3D printers represent a massive new phase of the industrial revolution.
He spoke at a Wired “Culturazzi” event, at the Marriott Union Square and to sign copies of his latest book: Makers: The New Industrial Revolution.
Mr Anderson is always an excellent speaker and his talk covered the beginnings of the Industrial Revolution, which he picked out as the invention of the Spinning Jenny in 1764 — a hand powered machine for spinning yarn.
I’d have pinned the start of the Industrial Revolution to the invention of the steam engine and its ability to power large numbers of machines thus enabling the first factories — which represented aggregated labor energy. Scale makes factories viable.
But I can see why Mr Anderson would favor the Spinning Jenny as it was a high-tech machine that was kept in a home — just as 3D printers are home based, completing a neat cycle of history.
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November 15, 2012
I, Pencil: The Movie
A film from the Competitive Enterprise Institute, adapted from the 1958 essay by Leonard E. Read. For more about I, Pencil, visit www.ipencilmovie.org
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November 14, 2012
The “manufacturing fetish”
John Kay talks about the widespread belief that only manufacturing is “real” in terms of what a national economy produces:
Manufacturing fetishism — the idea that manufacturing is the central economic activity and everything else is somehow subordinate — is deeply ingrained in human thinking. The perception that only tangible objects represent real wealth and only physical labour real work was probably formed in the days when economic activity was the constant search for food, fuel and shelter.
A particularly silly expression of manufacturing fetishism can be heard from the many business people who equate wealth creation with private sector production. They applaud the activities of making the pills you pop and processing the popcorn you eat in the interval. The doctors who prescribe the pills, the scientists who establish that the pills work, the actors who draw you to the performance and the writers whose works they bring to life; these are all somehow parasitic on the pill grinders and corn poppers.
When you look at the value chain of manufactured goods we consume today, you quickly appreciate how small a proportion of the value of output is represented by the processes of manufacturing and assembly. Most of what you pay reflects the style of the suit, the design of the iPhone, the precision of the assembly of the aircraft engine, the painstaking pharmaceutical research, the quality assurance that tells you products really are what they claim to be.
Physical labour incorporated in manufactured goods is a cheap commodity in a globalised world. But the skills and capabilities that turn that labour into products of extraordinary complexity and sophistication are not. The iPhone is a manufactured product, but its value to the user is as a crystallisation of services.
[. . .]
Most unskilled jobs in developed countries are necessarily in personal services. Workers in China can assemble your iPhone but they cannot serve you lunch, collect your refuse or bathe your grandmother. Anyone who thinks these are not “real jobs” does not understand the labour they involve. There is a subtle gender issue here: work that has historically mostly been undertaken by women at home — like care and cooking — struggles to be regarded as “real work”.
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November 4, 2012
Rethinking software patents
Software patents are becoming a clear and present danger to innovation:
The basic problem being that there are so many patents, covering so many things, that the system is in danger of eating itself like Ourobouros.
When Dan Ravicher of the Public Patent Foundation studied one large program (Linux, which is the kernel of the GNU/Linux operating system) in 2004, he found 283 U.S. patents that appeared to cover computing ideas implemented in the source code of that program. That same year, it was estimated that Linux was .25 percent of the whole GNU/Linux system. Multiplying 300 by 400 we get the order-of-magnitude estimate that the system as a whole was threatened by around 100,000 patents.
If half of those patents were eliminated as “bad quality” — i.e., mistakes of the patent system — it would not really change things. Whether 100,000 patents or 50,000, it’s the same disaster. This is why it’s a mistake to limit our criticism of software patents to just “patent trolls” or ”bad quality” patents. In this sense Apple, which isn’t a “troll” by the usual definition, is the most dangerous patent aggressor today. I don’t know whether Apple’s patents are “good quality,” but the better the patent’s “quality,” the more dangerous its threat.
It’s near impossible to develop new software when there are so many such patents out there. Further, even if you tried to get clearance (or signed up to licenses and so on) to use them it would be near impossible.And we do need to recall what the purpose of a patent system is. No, it isn’t to provide and income to those who create inventions. That’s only the proximate aim: the ultimate aim is to maximise the amount of invention and innovation.
The economics of patents accepts that there is a tradeoff here. Yes, we’d like people who come up with useful new things to make money. Because that incentivises people to work on coming up with interesting new things to all our benefit. However, we also want people to be able to create derivative innovations and inventions. If our protection of the original inventors is too strong then we limit this. What we want is a system that hits the sweet spot, of encouraging the maximum amount of both, original and derivative. The problem of course being that to encourage one we weaken the incentives to do the other, either way around.
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November 1, 2012
The development of personal computing
At The Register, Tony Smith charts twenty significant items that lead to modern personal computers:
Personal computing. Personal. Computing. We take both aspects so completely for granted these days, it’s almost impossible to think of a time when computing wasn’t personal — or when there was no electronic or mechanical computing.
To get from there to here, we’ve gone from a time when ‘computers’ were people able to do perform complex calculations themselves, through mechanical systems intended to do the work for them and then to powered machines able to automate the process. These led to systems that could be programmed to perform not only mathematical tasks but to store and retrieve other forms of data, taking us right up to desktop devices for a one-on-one interaction with computing power.
Since then, that power has been compressed into smaller, more convenient packages: laptops, tablets and smartphones.
What a trip. In memory of the many people who have help us along, here then are some of the key stages of that journey, represented by the 20 objects that, to us, most embody the steps that brought us to where we are today.
It’s not a comprehensive list — and feel free to comment with the devices you think we should have included — but here are the first ten of our 20 items, from the early days up to the end of the 1970s. Part two will bring us from the 1980s to the present day.
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October 21, 2012
Inducing take-off, Fireball XL5 style
The Economist looks at a back-of-the-envelope proposal from engineers at Airbus that adapts aircraft carrier technology to civil use:
Mindful that many passengers are already nervous about the whole process of getting a plane airborne, the engineers prefer to call their proposal “Eco-climb”. But the idea is straight out of “Fireball”. The aircraft to be launched would sit on a platform that ran along a track where the runway would otherwise be. The platform would accelerate to take-off speed, at which point the plane would lift into the air powered by its own engines.
[. . .]
Altogether, according to Airbus’s back-of-the-envelope calculations, Eco-climb would reduce fuel consumption by 3% on a typical 900km (560-mile) flight, even with existing aircraft designs. But it would also allow for the design of lighter aircraft, with smaller engines, which would cut fuel consumption, noise and emissions further.
Nor is the idea complete fantasy. General Atomics, an American military contractor, has already built and tested a linear-induction-motor-based system of this sort at an airbase at Lakehurst, New Jersey. The General Atomics system is now being scaled up to be fitted on a new generation of aircraft carriers for the American navy.
October 20, 2012
Instead of electric cars, how about nitrogen-powered cars?
The Economist looks at the performance of electric cars, fuel-cell cars, and nitrogen-powered cars:
As long as its storage container is well insulated, liquid air can be kept at atmospheric pressure for long periods. But on exposure to room temperature, it will instantly boil and revert back to its gaseous state. In the process, it expands 700-fold — providing the wherewithal to operate a piston engine or a turbine.
Liquid nitrogen does an even better job. Being considerably denser than liquid air, it can store more energy per unit volume, allowing cars to travel further on a tankful of the stuff. Weight for weight, liquid nitrogen packs much the same energy as the lithium-ion batteries used in laptops, mobile phones and electric cars. In terms of performance and range, then, a nitrogen vehicle is similar to an electric vehicle rather than a conventional one.
The big difference is that a liquid-nitrogen car is likely to be considerably cheaper to build than an electric vehicle. For one thing, its engine does not have to cope with high temperatures — and could therefore be fabricated out of cheap alloys or even plastics.
For another, because it needs no bulky traction batteries, it would be lighter and cheaper still than an electric vehicle. At present, lithium-ion battery packs for electric vehicles cost between $500 and $600 a kilowatt-hour. The Nissan Leaf has 24 kilowatt-hours of capacity. At around $13,200, the batteries account for more than a third of the car’s $35,200 basic price. A nitrogen car with comparable range and performance could therefore sell for little more than half the price of an electric car.
A third advantage is that liquid nitrogen is a by-product of the industrial process for making liquid oxygen. Because there is four times as much nitrogen as oxygen in air, there is inevitably a glut of the stuff — so much so, liquid nitrogen sells in America for a tenth of the price of milk.
October 11, 2012
50th anniversary of the Light Emitting Diode (sort of)
Tony Smith at The Register:
The Light Emitting Diode (LED) is 50 years old. Well, kind of…
It’s certainly 50 years since Nick Holonyak, working at GEC’s Syracuse, New York facility, developed what is considered the first LED capable of generating visible light. Holonyak’s LED was also the first to be in form ready for commercial usage. He wrote up his work and sent it off to Applied Physics Letters on 17 October 1962. The journal published the work in December 1962 under the headline ‘Coherent (visible) Light Emission from GaAs xPx Junctions’.
However, Holonyak’s work followed that of Gary Pittman and Robert Baird who, in 1961, observed the emission of infrared light by Gallium Arsenide — the GaAs in Holonyak’s headline — and, on the back of it, applied for and gained a patent — US number 3,025,589 — for the infrared LED.
[. . .]
Follow the literature back and you end up in Britain in February 1907, with the work of Marconi assistant Henry Round, who first observed the emission of light from a crystal of silicon carbide when a current was applied to it, a phenomenon called electroluminescence. In that sense, the LED is more than 100 years old. Round, however, never wrote a report on his findings.
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October 8, 2012
Legal weapons of mass destruction
Software patents: two words that probably should not go together at all.
Mr. Phillips and Vlingo are among the thousands of executives and companies caught in a software patent system that federal judges, economists, policy makers and technology executives say is so flawed that it often stymies innovation.
Alongside the impressive technological advances of the last two decades, they argue, a pall has descended: the marketplace for new ideas has been corrupted by software patents used as destructive weapons.
[. . .]
Patents are vitally important to protecting intellectual property. Plenty of creativity occurs within the technology industry, and without patents, executives say they could never justify spending fortunes on new products. And academics say that some aspects of the patent system, like protections for pharmaceuticals, often function smoothly.
However, many people argue that the nation’s patent rules, intended for a mechanical world, are inadequate in today’s digital marketplace. Unlike patents for new drug formulas, patents on software often effectively grant ownership of concepts, rather than tangible creations. Today, the patent office routinely approves patents that describe vague algorithms or business methods, like a software system for calculating online prices, without patent examiners demanding specifics about how those calculations occur or how the software operates.
As a result, some patents are so broad that they allow patent holders to claim sweeping ownership of seemingly unrelated products built by others. Often, companies are sued for violating patents they never knew existed or never dreamed might apply to their creations, at a cost shouldered by consumers in the form of higher prices and fewer choices.
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October 2, 2012
Making a case to abolish the patent system
At Techdirt, Mike Masnick summarizes a recent study of the benefits and drawbacks of the current patent system:
Over at The Atlantic, Jordan Weissmann has a great article covering the latest paper from economists Michele Boldrin and David Levine […], which argues why it might make sense to abolish the patent system entirely, even while admitting that patents may have some benefits in some cases. You can read the full paper here (pdf) where it makes “the case against patents.” While this may sound similar to Boldrin and Levine’s earlier works, this one goes further, and is definitely worth the read. In effect, they argue that not only do patents rarely help innovation, but, even worse, the existence of patents (even where they help) will only lead to the system being expanded to where they do more harm than good:
The initial eruption of small and large innovations leading to the creation of a new industry — from chemicals to cars, from radio and TV to personal computers and investment banking — is seldom, if ever, born out of patent protection and is, instead, the fruits of highly competitive-cooperative environments. It is only after the initial stages of explosive innovation and rampant growth end that mature industries turn toward the legal protection of patents, usually because their internal grow potential diminishes and the industry structure become concentrated.
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.
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September 30, 2012
Innovative idea? Better get congressional approval before you go to market
Radley Balko linked to this story on Twitter, nominating it for the most “incredibly dumb IP story of the day“. Hard not to agree, possibly even upping that nomination to “of the month” or possibly even “of the year”. Techdirt‘s Mike Masnick has the details:
One of the reasons why we live in such an innovative society is that we’ve (for the most part) enabled a permissionless innovation society — one in which innovators no longer have to go through gatekeepers in order to bring innovation to market. This is a hugely valuable thing, and it’s why we get concerned about laws that further extend permission culture. However, according to the former Register of Copyrights, Ralph Oman, under copyright law, any new technology should have to apply to Congress for approval and a review to make sure they don’t upset the apple cart of copyright, before they’re allowed to exist. I’m not joking. Mr. Oman, who was the Register of Copyright from 1985 to 1993 and was heavily involved in a variety of copyright issues, has filed an amicus brief in the Aereo case (pdf).
[. . .]
But he goes much further than that in his argument, even to the point of claiming that with the 1976 Copyright Act, Congress specifically intended new technologies to first apply to Congress for permission, before releasing new products on the market that might upset existing business models:
Whenever possible, when the law is ambiguous or silent on the issue at bar, the courts should let those who want to market new technologies carry the burden of persuasion that a new exception to the broad rights enacted by Congress should be established. That is especially so if that technology poses grave dangers to the exclusive rights that Congress has given copyright owners. Commercial exploiters of new technologies should be required to convince Congress to sanction a new delivery system and/or exempt it from copyright liability. That is what Congress intended.
This is, to put it mildly, crazy talk. He is arguing that anything even remotely disruptive and innovative, must first go through the ridiculous process of convincing Congress that it should be allowed, rather than relying on what the law says and letting the courts sort out any issues. In other words, in cases of disruptive innovation, assume that new technologies are illegal until proven otherwise. That’s a recipe for killing innovation.
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September 7, 2012
Jesse Kline: Consumers the biggest losers in Apple-Samsung battle
In the National Post, Jesse Kline points out that the grubby legal dispute between Apple and Samsung may end up hurting the consumer much more than either of the combatants:
Software is unique because it is covered under both copyright and patent law. Computer software is written in a human-readable language, called source code, that is then translated by the computer into something the machine can understand. Much like writing a book, or newspaper article, source code is automatically covered under copyright law.
But no one is alleging that Samsung copied Apple’s code. What Samsung was sued for was achieving the same outcome as Apple, even though it was done in a different way. In this literary world, this would be akin to someone being sued for violating the copyright on Harry Potter, just because they wrote their own story about a boy wizard.
Intellectual property laws are supposed to encourage innovation by allowing companies and individuals to profit off works that may have cost a significant amount of money to develop. Apple says it was undercut in price because its competitor simply copied its design. In actual fact, Android was cheaper to produce because it is based on the open source Linux operating system, which saved money compared to Apple proprietary system.
For its part, Samsung accuses Apple of resorting “to litigation over market competition in an effort to limit consumer choice.” It’s one thing for the legal system to protect new inventions and original works, but this is quite clearly a case of a company engaging in anti-competitive behaviour.
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September 4, 2012
TANSTAAFL is not the whole story
At The Freeman, Sandy Ikeda points out that the handy little saying “There ain’t no such thing as a free lunch” is not enough to explain modern prosperity::
Economics teaches us the importance of TANSTAAFL and capital investment. Again, the trouble is they are not the whole truth.
As I’ve written before, however, there is such a thing as a free lunch, and I don’t want to repeat that argument in its entirety. The basic idea is that what Israel M. Kirzner calls “the driving force of the market” is entrepreneurship. Entrepreneurship goes beyond working within a budget — it’s the discovery of novel opportunities that increase the wealth and raises the budgets of everyone in society, much as the late Steve Jobs or Thomas Edison or Madam C.J. Walker (probably the first African-American millionaire) did. Yes, those innovators needed saving and capital investment by someone — most innovators were debtors at first — but note: Those savings could have been and were invested in less productive investments before these guys came along.
As McCloskey, as well as Rosenberg and Birdzell, have argued, it isn’t saving, capital investment per se, and certainly not colonialism, income inequality, capitalist exploitation, or even hard work that is responsible for the tremendous rise in economic development, especially since 1800.
It is innovation.
And, McCloskey adds, it is crucially the ideas and words that we use to think and talk about the people who innovate — the chance takers, the rebels, the individualists, the game changers — and that reflect a respect for and acceptance of the very concept of progress. Innovation blasts the doors off budget constraints and swamps current rates of savings.
[. . .]
Indeed, innovation is perhaps what enables the market economy to stay ahead of, for the time being at least, the interventionist shackles that increasingly hamper it. You want to regulate landline telephones? I’ll invent the mobile phone! You make mail delivery a legal monopoly? I’ll invent email! You want to impose fixed-rail transport on our cities? I’ll invent the driverless car!
McCloskey’s book has shown up a few times on the blog.
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