State of Innovation

Patents and Innovation Economics

Libertarians vs Classical Liberals on Patents and Inventors

The libertarian crowd has been at the forefront of the anti-patent crusade.  It is important to understand that libertarians are not consistent with classical liberals, such as the founding fathers and Locke.  I have been looking for a way to illustrate this.  Then I ran across a Wall Street Journal article by Matt Ridley, a darling of the libertarian crowd, which illustrated the differences perfectly. The article ostensibly was about government funding of science. I am sympathetic to the thrust of the article, however, in the second paragraph he states:

“Suppose Thomas Edison had died of an electric shock before thinking up the light bulb. Would history have been radically different? Of course not. No fewer than 23 people deserve the credit for inventing some version of the incandescent bulb before Edison, according to a history of the invention written by Robert Friedel, Paul Israel and Bernard Finn.”

This struck me as a very odd paragraph in an article on government funding of science. Edison was not funded by the government. Mr. Ridley and the people he cites may have never worked in fundamental research or with inventors. This may result in a misunderstanding of the differences between various inventions that lay people group together, which is the case with the paper cited in the article.

mostpowerfulideaRidley’s sole argument about Edison rests on the idea that other people were working on the problem. Thousands of people have tried to solve Fermat’s last theorem since 1637. Does that mean Andrew Wiles proof in 1994 was inevitable? Alternatively, only Edwin Armstrong worked on and invented FM (frequency modulation). Does that mean FM was not inevitable?

The article does stop there however, it goes on to denigrate the work of almost every great inventor and scientist since the Enlightenment, concluding with the statement:

“Simultaneous discovery and invention mean that both patents and Nobel Prizes are fundamentally unfair things. And indeed, it is rare for a Nobel Prize not to leave in its wake a train of bitterly disappointed individuals with very good cause to be bitterly disappointed.”

Ridley is not just attacking government funding of science, he is contending that discoveries and inventions are equally likely, given a range of researchers. If you take the statement above literally, it means that everyone working in technology and science are robots.

However, Ridley provides no evidence for his position and ignores the large variations in the rate of science advancement and inventions in both time and geography. This is not surprising, as Mr. Ridley did the same thing in his book The Rational Optimist, where he claims that most inventions were never patented, however a simple fact check showed that every invention he mentions is the subject of numerous patents.

The excellent book, The Most Powerful Idea in the World by William Rosen, shows that the Industrial Revolution, which was really an explosion in new inventions, was the result of property rights for inventions, i.e., patents, as does my book Source of Economic Growth.

One of the differences between classical liberals and libertarians is that classical liberalism celebrates great people, particularly those who used reason in the areas of science and technology. The Enlightenment was about celebrating the power of reason and rejecting faith and determinism. Thomas Jefferson said the two of the greatest people in the history of the world were Isaac Newton and John Locke.

Perhaps Ridley’s position is not shared by most libertarians. Yet, a recent panel discussion on Reason TV, part of the libertarian magazine Reason, shows Ridley’s position is widely shared. One panelist compared patents to slavery and taxi medallions. Another panelist made Ridley’s point that most inventions were never patented. But, if you eliminated everything in your house that was subject to a patent or made by a process that was once patented, your house would not exist. Most people will quickly understand that all the electronics would be gone, but so would the refrigerator, the electrical power, and even the glass in your windows was subject to patents extending back to Venice.

It would be easy to brand such an anti-intellectual property as arising from jealousy or self-aggrandizement, however, I think that would be a mistake. These libertarians are pushing a version of F. A. Hayek’s cultural evolution. Hayek’s ideas on cultural evolution are based on the impotence of reason. Hayek argues, that the demand for rational, conscious (“political”) control of the concrete particulars of social life is based upon a misunderstanding of the process of cultural evolution and on a hubristic and dangerous overestimation of the capacity of the conscious reasoning intellect.”[1]

Ridley is just applying Hayek’s ideas on cultural evolution to science and technology. He is not the only one; the libertarian/Austrian economist Peter Lewin from University of Texas at Dallas, sadly my alma mater, makes a similar point. He emphasizes that most technical knowledge is tacit knowledge which is something we know but cannot prove or of which we are not conscious. In other places Lewin discusses “social knowledge” which appears to be tacit knowledge we hold collectively. Both Lewin and Hayek are fans of David Hume, who said causation does not exist (or cannot be proved) and induction is invalid or could not be proven valid. For many libertarians the anti-induction, anti-reason David Hume, is a hero.

Classical liberals know that causation exists, that Induction as a methodology, is not only valid, but the source of all knowledge. The most important value to a classical liberal is Reason. They understand that there is no such thing as social knowledge or knowledge of which we are not conscious. Classical liberals understand each person’s mind functions independently and therefore they celebrate great inventors and scientists. They know that without these great people, it is entirely possible that we would still be living in the Dark Ages. One only need look at North Korea, Cuba, or the Middle East to understand that technological progress is not inevitable and is not the result of some determinist spontaneous order.

What is interesting if you look closely at the arguments of Ridley, Hayek, and Lewin is that they are collectivist at an epistemological or cultural level. Their argument against a centralized government appears to be that it distorts this collectivist acquisition of knowledge.

Classical liberals and libertarians both appear to support free markets or capitalism. Beyond this they diverge, especially for the modern beltway libertarians. Classical liberals base their support of capitalism in reason and natural rights, which are discovered by reason. Libertarians base their arguments for free markets based on collective acquisition of knowledge that is disrupted by government interference.

Libertarians often align themselves with Ayn Rand, and claim her as one of their own, however, their ideas are incompatible with Rand’s. Rand herself was highly critical of the creed of Libertarianism, calling them “hippies of the Right.” If Matt Ridley had written Atlas Shrugged, the economy would have hummed along based on spontaneous order and John Galt would not be a genius inventor.





[1], Hayek on the Role of Reason in Human Affairs, Linda C. Raeder, Palm Beach Atlantic University

December 1, 2015 Posted by | -Philosophy, News, Patents | , , , | 5 Comments

Response to The Economist on Patents

Marshall Phelps wrote an excellent response in Forbes to an anti-patent editorial by The Economist.  The article is entitled Do Patents Really Promote Innovation? A Response To The Economist.  He provides overwhelming evidence that patents are the driver of new technologies.  I and others have shown that the reason the industrial revolution occurred when and where it did was because of the introduction of the first practical patent systems, i.e., property rights for inventions.  The article also points out that the most inventive countries are those with the strongest patent systems and these countries also have the greatest technology dispersion.  The article also points out that the patent system encourages the dissemination of information about technologies, which has been shown empirically and logically.  It is time the anti-patent crowd admit that their position is a matter of faith, not econgrowth.smalllogic an evidence.

I have one beef with the article when it says you cannot prove that patents lead to more inventions and you cannot prove a free market (with patents) leads to economic growth.  Both of these have been shown empirically and the causal connection is clear.  Property rights ensure that the creator benefits from their creation.  People have to work to live and when the product of their work is stolen from them, they cannot be as productive.  For more see my book Source of Economic Growth and my talk at Atlas Summit 2015.

September 18, 2015 Posted by | -Economics, Innovation, News, Patents | , , | Leave a comment

Source of Economic Growth: The talk and the Book

Dale B. Halling’s new book Source of Economic Growth is now available.  This book examines the two most important questions in economics: 1) What is the source of real per capita economic growth, and 2) What caused the industrial revolution? The industrial revolution is important, because it is the first time any large group of people escape subsistence living (Malthusian Trap) and their incomes start to grow. By examining these econgrowth.smallquestions, the book devises a science of economics that is consistent with natural rights, the founding of the United States, and is tied to the biological reality of life.

Mr. Halling gave a related talk at Atlas Summit 2015 entitled The Source of Economic Growth.  No school of economic thought is consistent with Objectivism, which is why Ayn Rand, in the very first sentences of “Capitalism: The Unknown Ideal”, said “This book is not a treatise on economics. It is a collection of essays on the moral aspects of capitalism.” Patent attorney and novelist Dale Halling proposes a science of economics that is consistent with Rand’s philosophy. The path to that understanding of economics results from examining the source of real per capita increases in wealth, which puts man’s mind at the center of economics. No other school of economics puts emphasis on man’s mind, which is one reason why Rand had a tenuous relationship with even free market economists.

September 1, 2015 Posted by | -Economics, -Philosophy, News | , , , , | Leave a comment

Dale B. Halling Invited to Debate at Freedom Fest

I have been invited to a debate at Freedom Fest 2015.  The topic of the debate is “Competition in Business: Good or Bad?”  I will be taking the competition is for loser side of the debate.

February 7, 2015 Posted by | News | , , | Leave a comment

Inventing to Nowhere: The Movie

This documentary explains how the United States is destroying its Patent System that has been the engine on which America’s technological and economic leadership has been built.  The movie can be seen in a number of cities on December 15.


Invention is as old as human existence, and no country has promoted and thrived on invention more than the United States thanks to its patent system. But is American invention at risk?

Framed around the story of two first-time inventors, Inventing to Nowhere explores the stakes in policy fights over the American innovation economy, with interviews of legendary inventor Dean Kamen, historians, members of Congress and other key players in the effort to keep the country innovating.

For more than 200 years, the U.S. patent system has helped protect and grow ideas. This reverence for intellectual property rights has been a driving force in making the United States an economic superpower. But as the patent-law debate becomes more influenced by special interests, the future of inventors and entrepreneurs is in jeopardy.

December 12, 2014 Posted by | News | , | Leave a comment

USPTO’s Secret Program to Deny Politically Inconvenient Patents

According to Alyssa Bereznak of Yahoo Tech, in an article entitled The U.S. Government Has a Secret System for Stalling Patents, the United States Patent Office has a secret program called the Sensitive Application Warning System (SAWS) designed to delay and deep six certain politically sensitive patent applications.  The Patent Office only admitted to the program after a FOIA request.  The program goes back to at least 2006 and therefore includes the actions and knowledge of both Jon Dudas and David Kappos.  Both men should be brought up on Capitol Hill for investigations.  Did Kappos favor IBM patent applications or delay IBM’s competitors?  Did Jon Dudas, who is not a patent attorney and is not legally or factually competent to be a patent attorney, provide favors to enhance his post public life position?  If they were aware of this program, and it is hard to believe they were not, their pensions from the PTO should be revoked and they should be disbarred at a minimum.

I have actually had examiners tell me that they were not going to allow a patent application because they did not want to see the patent end up on the front page of the New York Times.  I am not sure where that is in the statute, but it is illegal and unconstitutional.  According to the article applications can end up in this purgatory for astonishing number of vague reasons including the application is “broad” or has “pioneering scope,” “seemingly frivolous or silly subject matter,” or those “dealing with inventions, which, if issued, would potentially generate unwanted media coverage (i.e., news, blogs, forums).”

I wrote a novel with my wife entitled Pendulum of Justice, where a plot device was abuse of this kind by the Director of the USPTO.  Turns out fact is stranger than fiction.

December 5, 2014 Posted by | News, Patents | , , | Leave a comment

Yale Law Professor’s Attack on Patents: A Comedy, Farce and Tragedy All Rolled into One

An article on Cato Unbound entitled, “What’s the Best Way to Fix the Patent System’s Problems?” by law professor Christina Mulligan, argues for two different solutions of what she perceives are problems with software patents.  One solution advocated by Eli Dourado is to eliminate all software patents (See CATO and Mercatus Center: Another Flawed Study on Patents).  The other solution, advocated by John F. Duffy, is a more rigorous application of the obviousness standard.  Ms. Mulligan comes down on the side of Eli Dourado’s solution of eliminating patents on software.

What is amazing is that Ms Mulligan never even addresses the inherent contradiction that if you are going to eliminate patents of software you have to eliminate all patents on electronics.  Of course this may be because Ms. Mulligan does not have a technological background, she is not a patent attorney nor is she legally or factually competent to be a patent attorney.  Software is a way of wiring an electronic circuit.  Any invention implemented in software executed on a computer can be implemented in hardware (i.e., an electronic circuit) as any competent electrical engineer knows.  In fact, this is exactly what happens when software is executed, it is converted into a series of voltage levels that open and close switches in a general purpose electronic circuit called a computer to create a specific electronic circuit.

Ms. Mulligan quotes the clearly incorrect statement that:

Many software patents are merely mathematical formulas or abstract ideas and should not be considered patentable subject matter because they remove too much “raw” material from the public domain.

This statement confuses two separate points.  One point is that many software patents are merely mathematical formulas or abstract ideas.  The second point is that software patents remove too much raw material from the public domain.  The idea that any software patent is a mathematical formula is complete and obvious nonsense to anyone who has worked with computers.  While it is true that software often uses mathematical formulas, so do electronic circuits, radar, rockets,  mechanical systems, chemical processes, in fact almost every area of technology.

Ms. Mulligan does not define what she means by an abstract idea.  In one sense every invention in the history of the world is an abstraction.  Inventions define a class of things.  For instance the invention of the incandescent light bulb is not a specific incandescent light bulb, but the class of these objects.  The only logical definition of an abstract idea is “a thought or conception that is separate from concrete existence or not applied to the practical”.  Every invention that meets the requirements of 35 USC 112 first paragraph is not an Abstract Idea, since this section requires that the invention be described in a manner so one skilled in the art can practice the invention.  Something that can be built and used (practiced) is concrete and applied, therefore it is not an abstract idea.  Clearly software patents are not abstract ideas because they are concrete and applied to a problem of life.  If they did not solve a problem of life, then no one would care, because no one would want to practice their invention.

The second point is that they remove too much raw material from the public domain.  This is a bald statement without any support.  In fact, patents do not remove any material from the public domain.  They secure the property rights of an inventor to their invention that did not exist before they created the invention.  To suggest that this removes anything from the public domain would make even the most strident Marxist blush.

Ms. Mulligan attempts to use Ayn Rand in support of her position.

Even Ayn Rand sidestepped suggesting a length for intellectual property terms, stating that if intellectual property “were held in perpetuity . . . it would lead, not to the earned reward of achievement, but to the unearned support of parasitism.

Of course she forgets to mention that Rand stated “Patents and copyrights are the legal implementation of the base of all property rights: a man’s right to the product of his mind.”[1]  You can see from this statement that it is very unlikely that Ayn Rand would have supported Ms. Mulligan’s position.

More importantly, all property rights are term limited.  A dead person cannot own property.  Property is a legal (moral) relationship between a person and something.  Once the person is dead they cannot have a legal relationship to something on this Earth that would be a contradiction.  There is only a question of what happens to property relationship when someone dies.  But no property rights go on forever.

Ms. Mulligan also ignores the obvious Constitutional problems with a law prohibiting patents on software or any other group of inventions.  Article 1, section 8, clause 8 requires that the right of inventors to their inventions be secured.  There is no basis under the Constitution to discriminate between securing the rights of inventors for chemical inventions, but not to software inventions for instance.  Ms. Mulligan may argue that the preamble to article 1, section 8, clause.8[2] is a limit on patents, but this is a clear misinterpretation of a preamble under legal construction.  Preambles are never considered limiting in law.  In addition, if the founders intended such a limitation then they would have said Congress can take whatever steps they believe will promote the sciences and useful arts.

Ms. Mulligan’s arguments do not stand up to scrutiny.  Part of the problem may be that Ms. Mulligan is not a patent attorney.  But some of the problems are so outrageous, especially for someone who is a Yale Law professor that the only conclusion is that she has a political agenda.

The United States of America created the strongest patent system in the world.  Most of the greatest inventors in the history of the world, Edison, Tesla, Bell, etc. lived and worked in the United States.  In less than 100 years, they created the most technologically sophisticated country ever.  Almost every modern product you use today was subject to a patent or a patented processes at some point.  Your cell phone is the subject of hundreds of patents.  The same is true of your computer, the Internet, the power system, the medicines your take, the car your drive, even your glass windows (Venice patent system), even cement.  For Ms. Mulligan to suggest that patents on software or anything else inhibit the progress of technological is an extraordinary claim and requires extraordinary evidence.[3]  Ms. Mulligan has failed to provide even a scintilla of evidence and logic for her position.

[1] Rand, Ayn, Capitalism: The Unknown Ideal, Signet, New York, 1967, p. 130.

[2] “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries”

[3] Thomas Paine.

November 20, 2014 Posted by | -Philosophy, News, Patents | , , , , | 6 Comments

Competition is for Losers

This statement is from a Peter Thiel interview.  Peter Thiel is a founder of Paypal, investor in Facebook and many other technology startups.  Mr. Thiel is talking about entrepreneurs and businesses and that you want to create a unique company and dominate your market space.  I have just finished a manuscript for a non-fiction book that makes this point from an economy wide point of view.  Wealth is not created by manufacturing undifferentiated, me-too products, it is created by new technologies.  There is no contradiction between what is good for the economy and what is good for an entrepreneur, despite the statement of economists on perfect competition.

One of Peter Thiel’s interview questions is tell me something you know to be true that no one else knows is true?  How would you answer that question?

My answer is that the source of real per capita growth is inventions and patents, property rights in inventions, are the key to stimulating people to invent, resulting in the Industrial Revolution and our present standard of living.

November 6, 2014 Posted by | -Economics, Innovation, News, Videos | , | Leave a comment


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