Whether civilization can survive the 21st Century is an open question. As humanity lumbers through the 2000s, the growing challenges of slow economic growth, disadvantageous demographics, and climate change, threaten humanity’s survival.

The key to solving the problems that lie ahead require barreling full force forward in new technology at a pace much faster than we did in the 20th Century. But the creaky political institutions designed to encourage innovation are stuck in the last century. The path forward requires a new approach.

Imperfect, Inefficient Success

Governments have long sought to incentivize technological progress through public policy. These efforts generally fall into two categories: Patents and Direct Investment. Both of these approaches are highly imperfect, but nonetheless useful means of encouraging innovation for the benefit of society.

A patent is government-granted legal protection, often for 20 years, that gives an inventor the exclusive right to profit off an idea, thus encouraging future innovation in pursuit of this exclusive legal royalty.

Direct Investment, on the other hand, is an important but often forgotten means of supporting innovation. Instead of granting a royalty to the private sector, the government itself subsidizes research directly using taxpayer dollars. Often, the fruits of this research would then be placed into the public domain, royalty free.

Limitations

Patents, while certainly useful, often create just as many problems and barriers to innovation as they solve. As an example, monopoly pricing of AZT, a drug used to treat AIDS, prices many people in developing countries out of treatment, leaving millions of children with preventable illness.

The societal benefit of opening up the AZT patent would be advantageous to us all, but would also discourage innovation by eliminating the incentive to develop the drug in the first place.

Further, to work around exorbitant licensing fees, companies will often develop similar technology and “patent around” existing patents, creating immense waste in research and development dollars.

Even then, patents still fail to provide truly sufficient incentive for innovation. Even at monopoly pricing, patents do not fully reward researchers for the positive externalities of their research. Indeed, studies suggests that the social return is, on average, around twice the private return.

In short, patents protections are better than nothing, but inefficient in what they do and leave a great deal of innovative capacity dormant.

Direct Government Investment, on the other hand, can help mitigate some of these problems by ensuring that the fruits of all taxpayer-funded research goes directly into the public domain for anyone to use. But as with anything that is government directed, spending is often politically influenced and inefficiently allocated.

There may be a middle way that can overcome these limitations, a middle path that brings us closer to an ideal: Patent Buyouts.

Patent Buyouts

Patent Buyouts leverage the power of open-sourcing most patents through government money, but do so by buying the output of research, rather than inefficiently directing money at the input.

To get a sense of how this works in practice, anytime a company or individual develops a patent, it would automatically go up for public auction. Interested parties could bid to buy the patent for themselves by submitting anonymous bids.

The government too, would also submit a bid. The government’s bid, however, would take the private value of the patent (as determined by the auction) and add a multiplier of two. This multiplier takes into account the aforementioned positive externality that the private market cannot effectively absorb.

By default, the government’s bid would always win the auction. The patent holder could choose to sell or to retain the patent. If sold to the government, the patent will be placed into the public domain for the benefit of humankind.

Now, to keep private bidders honest and ensure that their bids are genuine, the government will step aside on random auctions, forcing the highest bidder to take on the patent at the price they had bid.

Supercharging the Future

Using a societal benefit multiplier, we can internalize positive externalities back onto the researchers and innovators themselves. This will provide unprecedented incentive to innovators to spend money and take risks developing new pharmaceuticals, transportation technology, energy storage…etc.

At the same time, by release most patents into the public domain, society gets the immediate benefit of the fruits of their work without duplicative and wasteful spending. Further, immediate access to cutting-edge research will enable follow-on technology to grow and mature more quickly.

The challenges that lie ahead are as much political as they are technological. If humanity is to be able to overcome the challenges of the 21st Century, then it must first learn to overcome the political limitations and thinking of the 20th.

About the Lianeon Project |

The Lianeon Project is a publication for people who recognize that civilization’s growth requires forward-looking public policy that prioritizes reason, truth, and human progress.

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