Brad DeLong has had a series of interesting blog posts recently.
First, he links to a PhD thesis by Petra Moser, which claims that patent protection causes investors to direct more investment to industries covered by patents than in other industries.
Inventors in countries without patent laws concentrated in industries where secrecy was effective relative to patents, e.g., food processing and scientific instruments. These results suggest that introducing strong and effective patent laws in countries without patents may have stronger effects on changing the direction of innovative activity than on raising the number of innovations.
Next, he provides a pointer to a discussion on the need for both heders (producers and consumers) and speculators (traders) in markets. Hedgers have tacit knowledge of the underlying commodity, while speculators provide liquidity. Successful markets must have both. The argument claims that the terrorism market probably wouldn't have worked because there would have been no hedgers to act as producers of terrorism (terrorists themselves wouldn't have participated).
He then goes on to discuss the "Exhorbitant Priviledges" that the U.S. enjoys because it provides the key international currency. One priviledge is that because the world economy is growing, we can simply print money to pay for our debts, without incurring as much inflation as other countries would. Another priviledge is that because we're politically stable, rich people in other countries invest in the dollar as a hedge against instability in their own government, thereby increasing demand. In effect, we're "exporting" political stability as well as worldwide growth potential, and these exports can compensate for some of our trade imbalance.
And finally, he wraps up with his recurring theme about productivity. Productivity is growing so fast these days that the US economy will have to grow at least 4% a year just to hold on to the jobs it already has. Lots of of interesting historical charts to gaze upon. Apparently we're in a very odd time, where productivity is growing even though employment is decreasing.
Posted on August 18, 2003 01:54 PM
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