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Posts Tagged ‘per capita income’


Singapore and the US Divergent Patent Policies

While the US continues to weaken its patent laws, Singapore is taking a different path.  Singapore has just announced that it is developing a plan to be an Intellectual Property Hub, according to Channelnewsasia.com.  They believe that intellectual property is a key part of the global economy and they want their country to be primed to take advantage of this trend.  According to the article:

 With well-developed legal and financial systems and a workforce comfortable with science and technology, Singapore is poised to ride on this trend. Still, the country has a small domestic market, but Singapore can get around this by becoming Asia’s IP Hub.

 A spokesman for this initiative stated:

 Mr Shanmugam said: “The committee will recommend strategies to develop Singapore as a marketplace of choice to transact IP, and attract international firms and professionals who provide IP transactional services. For example, licensing and brokerage. The committee will also incentivise the creation, management and exploitation of IP in Singapore.”

While Singapore is trying to encourage IP transactions our government and intellectuals are trying to kill them by disparaging inventors as trolls.  The article also explains that Singapore will grow its court system in tandem with the growth of it intellectual property.  They are focusing on training judges who are experts in patents.  In the US we cannot even fully fund the Patent Office and now there is an effort to sideline the ITC, which is one of the few courts with real patent expertise.

Singapore’s emphasis on technology and intellectual property has faulted it past the United States in per capita income.  Singapore ranks third in the world with a per capita income of $59,936, while the US lags with a per capita income of $48,147.  Singapore’s per capita income keeps growing, because they are focused on the only thing that makes people wealthier – increases in our level of technology.  In the United States we have a President and his economic advisors telling us that we will get wealthier by consuming more, or by transferring more wealth from productive people to people on welfare, or by giving free money to the largest Wall Street Banks and large corporations.  If the US does not wake up it is likely that Singapore will have double the per capita income of the US by 2020 (see chart).

 
Blaming Greenspan and the Free Market

The Financial Crisis Inquiry Commission, being members of congress, are trying their best to pin the financial crisis on anyone but Congress.  It appears the favorite whipping boys are Alan Greenspan and unfettered capitalism.  Congress conveniently forgets that between Fannie, Freddie, FHA loans, Veterans Housing Administration, and the Community Reinvestment Act we don’t have unfettered capitalism.  Not to mention to the Federal Depository Insurance Corporation, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the National Credit Union Association, the Board of Governors of the Federal Reserve, the Department of Housing and Urban Development, the Federal Financial Institutions Examination Council, the Financial Crimes Enforcement Network, and state banking regulatory agencies.  The only way someone can call that unfettered capitalism is to propagate The Big Lie: that the US is a bastion of unfettered capitalism, which causes all our problems.  

As Alan Greenspan pointed out:

 the surge in demand was the heavy purchases of subprime securities by Fannie Mae and Freddie Mac, the major U.S. Government Sponsored Enterprises (GSE). Pressed by the Department of Housing and Urban Development and the Congress to expand “affordable housing commitments,” they chose to meet them by investing heavily in subprime securities. The firms accounted for an estimated 40% of all subprime mortgage securities (almost all adjustable rate), newly purchased, and retained on investors’ balance sheets during 2003 and 2004. That was an estimated five times their share of newly purchased and retained in 2002, implying that a significant proportion of the increased demand for subprime mortgage backed securities during the years 2003-2004 was effectively politically mandated, and hence driven by highly inelastic demand.

As Greenspan points out Congress had no interest in reining in the subprime mortgage party or the securitization of these mortgages (CMO).  In addition, Greenspan did warn about both the problems with Fannie and Freddie.  In 2002, he expressed concerns to the FOMC, noting that “…our extraordinary housing boom…financed by very large increases in mortgage debt – cannot continue indefinitely.” It did continue for longer than he would have forecast at the time, and it did so despite the extensive two-year -long tightening of monetary policy that began in mid-2004.  See Greenspan’s complete analysis at http://fcic.gov/hearings/pdfs/2010-0407-Greenspan.pdf.  

Greenspan then points out that there “was a pronounced fall from 2000 to 2005 in both global real long-term interest rates and nominal long-term rates, which indicated that global saving intentions, of necessity, had chronically exceeded global intentions to invest.  Yet the ex post global saving – investment rate in 2007, overall, was only modestly higher than in 1999, suggesting that the uptrend in the saving intentions of developing economies tempered declining investment intentions in the developed world.  This statement is the most interesting and important statement in all of Greenspan’s testimony.  Why had and has the developed world reduced its rate of investment?  Why has investment not grown since 1999?

Has the rate of investment in the developed world stagnated because we have run out of businesses and ideas?  No, since 2000 we have passed a number of laws and regulations that are killing innovation in the US. The incredible innovation of the 90s was based on technology start-up companies built on intellectual capital, financial capital, and human capital. All three of the pillars have been under attack since 2000. Our patent laws have been weakened reducing the value of intellectual capital. Sarbanes Oxley has made it impossible to go public reducing financial capital for start-ups and the FASB rules on stock options have made it harder to attract human capital to start-ups. If we want to create jobs, we need to have laws that encourage entrepreneurial start-ups. 

These issues are discussed in more detail in my book The Rise and Fall of the American Entrepreneur: How Little Known Laws and Regulations are Killing Innovationhttp://www.amazon.com/Decline-Fall-American-Entrepreneur-Regulations/dp/1439261369/ref=sr_1_1?ie=UTF8&s=books&qid=1262911287&sr=8-1

 

 This post is the Introduction to my book, which should be available on Amazon.com in December of 2009.

This book started as a project based on my observations.  I deal with technology start-up entrepreneurs everyday as a patent attorney.  I noticed a difference between the sort of projects my clients were undertaking since the technology downturn of 2000-2001 and the 90s.  Clients, in the 90s, would come into my office with plans to build businesses that were disruptive or revolutionary.  The technologies underlying these companies held the potential to completely redefine a market.  Some of these of these ideas would increase the available bandwidth by 10x for minimal costs or allow data searches that were 10-100x faster than existing technologies.  It was extremely exciting talking with these entrepreneurs.  Their energy was infectious and the potential implications of their work was mesmerizing.  The technology downturn of 2000-2001 forced a reevaluation of these aggressive business plans.  I expected that after a couple years of the technology market taking a breath, I would again be working with companies trying to change the world. 

 

The Obama administration has released a white paper outlining a strategy to encourage innovation and thereby stimulate the economy, entitled “A Strategy for American Innovation: Driving Towards Sustainable Growth and Quality Jobs. ”  According to President Obama, “The United States led the world’s economies in the 20th century because we led the world in innovation.”  The first step in solving a problem is identifying the cause and the Obama administration has nailed it on the head.

 

Conservation Law of Innovation:

All innovations are combinations of existing/known elements.

Conservation of matter (and energy) means that you cannot create something from nothing.  As a result, all innovations must be a combination of existing or known elements.

Causality Law of Innovation:

Invention precedes production, production precedes consumption and discovery precedes invention.

 
Is Innovation the Key to Growing the U.S. Economy?

Traditional Explanation of Economic Growth

What causes economic growth?  One of the common explanations is consumer spending.  As a headline on Minnesota Public Radio’s website in October 30, 2008 stated “Consumer Spending Accounts for Two-Thirds of U.S. Economy.”  If consumer spending is such a big part of the economy, then all that is necessary to stimulate economic growth is to get consumers spending more.  The other one-third of the U.S. economy is government spending, so perhaps by having the government spend more money we can stimulate the economy.  The theory of spending causing economic growth is commonly associated with Keynesian economics. 

 

This podcast explains that the U.S. economy revolved around the housing market and easy credit in the last decade and that the U.S. failed to innovate.  Innovation is the key to economic growth and the only mechanism for increasing per capita income.  The podcast discusses the new field of “innovation economics.”  Traditional economics gives lip service innovation, but has not studied its causes and effects.

 

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