Edited by Jan Rosén
Chapter 2: The Law and Economics of Progress: IP Rights and Competition Policy
Rudolph J.R. Peritz INTRODUCTION 1. The New York Times and other respected voices of the press have been observing that the economics profession is in turmoil after its failure to predict the Great Recession that still threatens us. Indeed, it was modern economics’ overconfidence in its algorithmic routines and its faith in free market abstractions that drove the collapse in financial markets and its aftermath by enchanting the judgment of players from hedge fund strategists to investors to regulatory agency officials. But unpredicted financial panics and recessions are nothing new, of course. And economics has long been a troubled enterprise, aspiring to the heights of mathematics to escape its historical roots in moral philosophy and to avoid a behavioralist future as a branch of social psychology. Like the commerce it scrutinizes, modern economic analysis can itself be described as cyclical, with episodic developments, bubbles, panics, inflations, depressions, and recessions, all neatly plotted by the criticisms of esteemed practitioners from John Maynard Keynes and John Kenneth Galbraith to Nobel Laureates Amartya Sen and George Stiglitz, and Paul Krugman just two years ago. It should come as no surprise, then, that there has long been trouble brewing in the IP economics that prevails in the United States. (By the way, my references in this chapter to IP are intended as a shorthand for only patent and copyright.) Given economics’ powerful influence on public policy, the trouble has spilled into IP jurisprudence as well. The trouble with IP economics recently reached its boiling...
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