Stiglitz on “Intellectual Property”

The issue of Intellectual Property (IP) in science and innovation is not a trivial one. The argument for it: without the subsequent benefit of monopoly pricing, firms would not invest in development of new and socially beneficial products.  The argument against it: restricting others from using and improving technology that should be in the public domain, stifles innovation and development of new products.

Not only is it hard to tackle, it is also a very important issue: Novartis recently tried (but failed) to block the manufacturing of a generic drug in India that helps treat cancer patients. This is the legal system that we have set up: gigantic pharmaceutical companies seek to block the use of life saving drugs in order to enforce their monopoly rights. Hardly an unimportant event.

Jonas Salk’s polio vaccine on the front page

Joseph Stiglitz, winner of a Nobel Memorial Prize in Economic Sciences, has a position  largely against the advantages of strong IP laws. He uses as example the recent case of a company (Myriad Genetics) who claimed IP on human genes. This is an extreme example, but his observations are to be understood as widely applicable. He claims that:

 some of the most iniquitous aspects of inequality creation within our economic system are a result of “rent-seeking”: profits, and inequality, generated by manipulating social or political conditions to get a larger share of the economic pie, rather than increasing the size of that pie. And the most iniquitous aspect of this wealth appropriation arises when the wealth that goes to the top comes at the expense of the bottom.

That is, IP seeks to guarantee profits, at the expense of freezing development and making sure there is no competition. He explains that in this case:

Genetic researchers have argued that the patent actually prevented the development of better tests, and so interfered with the advancement of science. All knowledge is based on prior knowledge, and by making prior knowledge less available, innovation is impeded.

Against the argument that IP is required to foster development Stiglitz notes what should be obvious:

Most of the key innovations — from the basic ideas underlying the computer, to transistors, to lasers, to the discovery of DNA — were not motivated by pecuniary gain. They were motivated by the quest for knowledge.

And he suggests alternatives to the current system:

 But the patent system is only one way, and often not the best way, of providing these resources. Government-financed research, foundations, and the prize system (which offers a prize to whoever makes a discovery, and then makes the knowledge widely available, using the power of the market to reap the benefits) are alternatives, with major advantages, and without the inequality-increasing disadvantages of the current intellectual property rights system.

So that’s the economist Joseph Stiglitz on the problem of patents and IP. On the broader issue, you can decide what to think about the legal system that was crafted and who does it most benefit. But in the meantime, the immortal words of Jonas Salk and his example, are hard to dismiss. 



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