Why Government Sucks at Picking Economic Winners and Losers

[bone]

This is exactly why US owned patents, like those coming from the National Labs and NASA, are licensed to companies around the World for a modest royalty.

And this insane idea that a Country will hold innovators and inventors hostage in exchange for IP protection and a cut of the profits is equally absurd. Why should an inventor in the UK have to give the government a cut of his profits in exchange for patent protection - and pay income taxes on top of it?

That inventor will simply go to the United States, pay a few hundred dollars to file his patent, and get the same protection as the UK patent without the mafia protection haircut.

 

[bone]

Thanks for hijacking my thread. Read and think about my comment regarding State Owned Enterprises, countervailing tariffs and WTO enforcement.

Also read and think about the litany of ways that governments are horrible at picking winners and losers in the private sector. And how much money governments waste doing this. It also suppresses domestic competition, distorts markets, and limits consumer choice.

What if the government invests in a private business that owns the patents and they get a share as a joint venture?

There are other ways of doing to, through contractual agreements for the franchised use of new regulatory systems and products. This happens a lot in finance.

 

[morganist]

State owned enterprises and all their forms are subject to countervailing tariffs and this has been confirmed by WTO findings. So a Country may be able to take in XX dollars in export income, but they will be directly tariffed XX dollars by the affected Countries - offsetting the gain.

The Patent Cooperation Treaty will not allow one government to monopolize intellectual property. So this idea of one country taking in tens of billions of dollars annually from Countries around the World in IP royalties is utter nonsense.

No free lunch. No magic new money for the government beast to waste.

You keep saying state ownership of enterprises. This is very far from what I am trying to do. I just want to get a cut of the savings a new innovation will give an existing company or government when they use it. In terms of governments not being able to get patents, this contradicts my research and past experience, although there are other ways to get payment for the use of new developments without a patent such as contractual agreements.

 

[morganist]

Thanks for hijacking my thread. Read and think about my comment regarding State Owned Enterprises, countervailing tariffs and WTO enforcement.

Also read and think about the litany of ways that governments are horrible at picking winners and losers in the private sector. And how much money governments waste doing this. It also suppresses domestic competition, distorts markets, and limits consumer choice.

It has nothing to do with picking a winner or a loser. It is about making a breakthrough in thinking or technology that can save massive amounts of money when used by an entity in an industry or practice. The breakthrough will be observed when the originating country or corporation uses it and the savings are made, it can then be marketed internationally. It is also not a state owned enterprise it is more the state's use of the new innovation and its involvement in marketing that new innovation around the world.

You say that governments are prohibited from holding global patent rights, can you show me this legislation or limitation somewhere?

 

[bone]

Thanks for hijacking my thread.

See my comment above about why the US owned patents from National Labs and NASA are LICENSED. It is a very good legal reason. Read and comprehend before you respond.

You keep saying state ownership of enterprises. This is very far from what I am trying to do. I just want to get a cut of the savings a new innovation will give an existing company or government when they use it. In terms of governments not being able to get patents, this contradicts my research and past experience, although there are other ways to get payment for the use of new developments without a patent such as contractual agreements.

 

[longandshort]

There's been some threads created on this forum about how Governments should be subsidizing economic development - and as of late even more grotesquely taking pension funds and using them to invest in nascent commercial enterprises as venture capital investors and intellectual property owners.

Replace your title with "Why investors suck at picking winners and losers" and you pretty much nail it. It doesn't matter who does the investing -- we live in a laissez faire world where people pay a price (tax) for a service they want (gov). Sticky prices and sunken cost fallacy explains why people who no longer want that service (gov) keep paying the price (taxes), kind of like how some people don't cancel their Netflix bill even after they stop watching it -- what matters is that investing is challenging and many folks get it wrong.

However, I think that it is ok for the government to be in the business of early stage VC (via investment in basic research) and strategic investment in the public goods space.

 

[morganist]

This is exactly why US owned patents, like those coming from the National Labs and NASA, are licensed to companies around the World for a modest royalty.

And this insane idea that a Country will hold innovators and inventors hostage in exchange for IP protection and a cut of the profits is equally absurd. Why should an inventor in the UK have to give the government a cut of his profits in exchange for patent protection - and pay income taxes on top of it?

That inventor will simply go to the United States, pay a few hundred dollars to file his patent, and get the same protection as the UK patent without the mafia protection haircut.

The reason why is that they need to government to make alterations to regulations or set a up a new regulatory body to enable the new patented innovation. The other reason is as I said they want the backing of the government in patent enforcement and managing the royalty payments of the patented product on a global level. This is the part the government is good at, it can set regulations, get patents, get payments and deal with that side of the business, the innovator just has to concentrate on developing the new product. It doesn't have to be a massive cut that the government takes it is just the amount that is justifiable for their involvement.

In terms of hijacking your thread. I just wanted to make sure that what I am suggesting is different to government venture capitalism and that I had no intention for governments to take pension funds from people, just to set a requirement on secure fixed return investments. So if your thread is just about how bad governments are at investing in large scale business operations I agree with you. I put forward my alternative in this thread to clarify my position on how the government can get alternative revenue sources and take less tax. They can trade with the world but they can only tax their own population. Trade is better than tax!

 

[bone]

If a person has a great idea and it's good enough to get patented - he or she will have zero problems finding venture capital for it in most Western societies. Or at the very least they can take a plane ride to Silicon Valley - more than a few Silicon Valley start-ups came from ideas coming out of Europe, Israel, Russia...

At least you are smart enough to have stipulated "early stage" in terms of government VC. That's important because as I said earlier in the thread, governments that retain ownership stakes in firms that export goods are seen by the WTO and the importing Countries as SOE's and those goods are subject to countervailing tariffs.

In terms of the public goods space - things like utilities are fine. But any goods that compete with private domestic goods it's a problem of distortion and stifling consumer choice as I'm sure you are aware.

However, I think that it is ok for the government to be in the business of early stage VC (via investment in basic research) and strategic investment in the public goods space.

 

[longandshort]

In terms of the public goods space - things like utilities are fine. But any goods that compete with private domestic goods it's a problem of distortion and stifling consumer choice as I'm sure you are aware.

Cost is the primary distinction between a good being public or private. For example, very few people can afford their own patch of land in a crowded city, which is why the government owns and operates many of them. When the government does it, it surely "stifles consumer choices" through price distortion by offering something that is rather pricey for free. However, that is something most of us agree with.

My point is, this is all subjective. Fundamentally, as long as the government still adheres to a basic notion of property rights and the use of the market mechanism for price discovery, I think we are ok. Sometimes we need more government and sometimes less. Thinking dynamically about the role and size of government is more in-tune with the real world, and is far less ideological.

 

[bone]

Private venture capitalists have such a better track record at taking risk with new ventures than government bureaucrats. And they're not pissing away public funds meant for governance and public works.

I can't imagine where we would be if the US government had insisted on complete and ongoing control over the internet and GPS. And could you imagine if the US government insisted on collecting a royalty from every user of the internet and GPS and Siri (all DARPA projects) on plant earth?