Patents and intellectual property are meant to incentives innovation. One person or company gets a limited monopoly on their innovation as reward for teaching everyone else how to do what they did. If that’s the case, why do we need separate government incentives for businesses?
Patents and intellectual property, allegedly, solve one problem but cause another. Even if they create an incentive to produce a new product (which some studies dispute), the resulting product will be more expensive because of the patent. That shrinks the market and societal benefit. Instead of relying on this exclusionary practice, why not let the market take care of innovation through competition (the basis of capitalism, right) and use government incentives, such as low interest loans, grants, or tax breaks, to build new markets.
The market is enough. Competition forces companies to out innovate each other; they have to keep costs down and value high otherwise customers will find the bigger and better thing. We’ve seen this work in the fashion industry, restaurant industry, and even in the drug and software industry before both were allowed patents (which courts only recently allowed). People will always need better technology, drugs, and gadgets and smart companies can and do succeed without strong-arming intellectual property.
But what about things the market won’t support? This is where we already have an incentive system in place: government incentives. Think about how much the government already pays out for scientific research. A third of drug research money comes from the federal government, but drug companies also get valuable patents and then charge taxpayers monopoly prices for a drug they already paid for.
The key difference is government incentives bring prices down while patents push prices up. For example, alternative fuels are an important leap in technology and currently very expensive and inefficient. It’s not that companies don’t want to do the research, several have formed already. The problem is new fuel systems are too expensive for the market. Oil and coal are cheaper. Patents can’t help this industry when no one wants to pay for it. With government incentives, instead of patents, the price these companies charge would be lower, expanding the market. As the market grows, the technology improves, prices drop, and eventually the market becomes cost-effective and self-sufficient. Government incentives over.
The same can be applied to drugs. Let designer drugs for weight loss and ED be the cash cows for private firms, but use government funds to develop malaria and HIV medication. The main customers for these drugs are poor and can’t afford the monopoly prices being charged, so let’s think of the greater good, and by greater good, I mean long term financial benefit. If we cure all the illness in poor areas, those people will be able to work and eventually join the global economy. China and India can tell you how that’s a good thing.
Government incentives accomplish what we want patents to accomplish. Unfortunately, patents are not pushing innovation, but following innovation. After alternative fuels get tons of government incentives and handouts, alternative fuel companies will patent their technology and prevent competition from making the technology better faster, even when taxpayers made the businesses viable in the first place. If patents were enough, we wouldn’t need the government incentives we have now. And if we need those incentives, why should taxpayers pay twice?