Patents and the Social Mileau

The Economist has a great graph on the lack of explanatory power simplistic single variable economic explanations have on predicting real world outcomes concerning innovation and the potential for future economic growth. [h/t Andrew Sullivan]




Note how there is a disparity of economic and industrial policies among the top tier countries. The United States funds massive amounts of basic research, but little application research; the Japanese MITI system pick winners and runs with them although to a much lesser degree today than twenty years ago, and the Scandanavian countries utilize niche expertise combined with a very high baseline level of education and social supports to support innovation. The tax systems also vary tremendously between systems, but there seems to be little significant difference on first glance on the marginal impact of taxation decisions and policies upon innovation when the initial endowments of human capital and pre-existing technological base is relatively equal.

I am not arguing that the US should adapt wholesale the Swiss or Swedish systems that seem to encourage similiar levels of innvoation. What works in Sweden is a complex mishmash of explicit policies, widely accepted social norms and path dependencies upon previous innovations. The same applies for the United States. However innovation does and can occur in multiple regulatory and tax environments that differ from our own, and this is always a lesson worth remembering even if and when we do not emulate those other environments