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Report
IER Lawrence Klein Lecture: the case against intellectual monopoly
In the modern theory of growth, monopoly plays a crucial role both as a cause and an effect of innovation. Innovative firms, it is argued, would have insufficient incentive to innovate should the prospect of monopoly power not be present. This theme of monopoly runs throughout the theory of growth, international trade, and industrial organization. We argue that monopoly is neither needed for, nor a necessary consequence of, innovation. In particular, intellectual property is not necessary for, and may hurt more than help, innovation and growth. We argue that, as a practical matter, it is more ...
Report
Fertility and Social Security
The data show that an increase in government provided old-age pensions is strongly correlated with a reduction in fertility. What type of model is consistent with this finding? We explore this question using two models of fertility: one by Barro and Becker (1989), and one inspired by Caldwell (1978, 1982) and developed by Boldrin and Jones (2002). In Barro and Becker's model parents have children because they perceive their children's lives as a continuation of their own. In Boldrin and Jones' framework parents procreate because children care about their parents' utility, and thus provide ...
Working Paper
What happened to the US stock market? Accounting for the last 50 years
The extreme volatility of stock market values has been the subject of a large body of literature. Previous research focused on the short run because of a widespread belief that, in the long run, the market reverts to well understood fundamentals. Our work suggests this belief should be questioned as well. First, we show actual dividends cannot account for the secular trends of stock market values. We then consider a more comprehensive measure of capital income. This measure displays large secular fluctuations that roughly coincide with changes in stock market trends. Under perfect foresight, ...
Report
Perfectly competitive innovation
We construct a competitive model of innovation and growth under constant returns to scale. Previous models of growth under constant returns cannot model technological innovation. Current models of endogenous innovation rely on the interplay between increasing returns and monopolistic markets. In fact, established wisdom claims monopoly power to be instrumental for innovation and sees the nonrivalrous nature of ideas as a natural conduit to increasing returns. The results here challenge the positive description of previous models and the normative conclusion that monopoly through copyright and ...
Working Paper
The case against patents
The case against patents can be summarized briefly: there is no empirical evidence that they serve to increase innovation and productivity. There is strong evidence, instead, that patents have many negative consequences.
Report
Rent-seeking and innovation
Innovations and their adoption are the keys to growth and development. Innovations are less socially useful, but more profitable for the innovator, when they are adopted slowly and the innovator remains a monopolist. For this reason, rent-seeking, both public and private, plays an important role in determining the social usefulness of innovations. This paper examines the political economy of intellectual property, analyzing the trade-off between private and public rent-seeking. While it is true in principle that public rent-seeking may be a substitute for private rent-seeking, it is not true ...
Report
The economics of ideas and intellectual property
Innovation and the adoption of new ideas are fundamental to economic progress. Here we examine the underlying economics of the market for ideas. From a positive perspective, we examine how such markets function with and without government intervention. From a normative perspective, we examine the pitfalls of existing institutions, and how they might be improved. We highlight recent research by ourselves and others challenging the notion that government awards of monopoly through patents and copyright are ?the way? to provide appropriate incentives for innovation.
Journal Article
Reconstructing the Great Recession
This article uses dynamic equilibrium input-output models to evaluate the contribution of the construction sector to the Great Recession and the expansion preceeding it. Through production interlinkages and demand complementarities, shifts in housing demand can propagate to other economic sectors and generate a large and sustained aggregate cycle.
Report
Factor saving innovation
We study a simple model of factor saving technological innovation in a concave framework. Capital can be used either to reproduce itself or, at additional cost, to produce a higher quality of capital that requires less labor input. If higher quality capital can be produced quickly, we get a model of exogenous balanced growth as a special case. If, however, higher quality capital can be produced slowly, we get a model of endogenous growth in which the growth rate of the economy and the rate of adoption of new technologies are determined by preferences, technology, and initial conditions. ...
Working Paper
Asset pricing lessons for modeling business cycles