Unpleasant Facts

The only way to solve problems is to be willing to think about them first

Patents no longer measure innovation

A lot of studies have used patents as a proxy for innovation. In a lot of ways that makes sense, because the basic idea of patents is to give the inventor intellectual property for an invention.

However, patents are no longer a measure of advanced technology. When Google tried to buy Nortel's patent portfolio for pi billion dollars it wasn't interested in the new ideas. They wanted weapons to use against Apple in a legal patent war. Apple isn't going directly after Google, but is indirectly attacking them by suing Android based mobile phone manufacturers such as HTC.

Unfortunately for Google, those patents were won by a coalition of Apple, EMC, Ericsson, Microsoft, Research In Motion and Sony which spent over $4.5 billion dollars on them. In the 1990's, Microsoft was the top tech company and its competitors used anti-trust laws because they weren't able to compete against them in the market place. Today, Google is the top tech company* and its competitors are using intellectual property laws to contain its growth. 

Microsoft become much more involved with D.C. after it had to deal with anti-trust issues. If Google decides to put some of that pi-billion towards stepping up its lobbying spending then maybe it can help reform a broken system while protecting itself from businesses who are abusing the patent system because they are being beaten in the marketplace. 

Regardless of what happens, now that the role of patents have changed people should stop pointing to increasing patent issuance as evidence of innovation.  It is evidence that more roadblocks are being put up against innovation. Economists looking to do studies should think about alternative metrics. Tyler Cowen likes to use studies about how the first invention (patent - there is difference, now more than ever) is happening at older ages and it means that the low hanging technological fruit has been picked. But it doesn't mean that it is harder for young people to think up new ideas, it is more likely that it means that patent generation has become a more bureaucratic aspect of business which is undertaken by older non-inventors. 

*Apple may have over 160 billion dollars more market cap than Google, but they are still running scared. 

Where the bias is in the innovation debate

Robin Hansen made a point (in a debate on AI) that people who are thinking about the progress of innovation should take to heart.

"The literature on economic, technical, and other innovation says most value comes from many small innovations – more useful and wider scope innovations are rarer, and usually require many small supporting innovations."

People who are skeptical that there has been much innovation recently should realize that in many cases they are missing real improvements not because they aren't happening, but because they are occurring in small amounts over many different areas. Sure, they don't have flying cars*, but different processes are being optimized by engineers everyday.  There are people who blindly trust that society will keep innovating, and in some areas the institutions that typically drive innovation might be sufficiently broken that this blind trust is incorrect. However, those who believe that people will keep figuring out ways to make their lives better are more right than wrong.

*Incidentally, many of the people who use "Where are the flying cars that we imagined we'd have in the future?" as a rhetorical point about innovation in our society would also be quick to dismiss flying cars as a true technological innovation if they were actually common. After all, as the rhetoric goes, they aren't a new technology, just a combination of two existing technologies that have been around for a long time.

Important Links

1. Seth Roberts on healthcare stagnation. Life expectancy dropped by 0.1 years in the US from 2007 to 2008, and no one seems to care. This is less of a statistical fluke than people would like to think and therefore it is more important. This is especially important because demographic trends mean that healthcare spending is going to increase regardless of the spending's actual impact. HT: MR

2. An interesting perspective on Greece's economy. The discrepancy where civil workers are paid much more than private sector workers is very damaging to an economy in the long run. HT: Fistful of Euros. 

3.  The jobs picture is unlikely to return to the previous peak if the current expansion is the average 59 months. This isn't even accounting for the increasing population. The employment to population ratio is not quite returning to the levels it was at before women entered the workforce en masse, but it is getting close.

4. Perhaps just as important: Using the right bike seat. I've been told that being able to grip the seat with the thighs while going down bumpy hills is important, but the potential side effects of the normal bike seat are a large price to pay.