Monopoly patent protections endanger middle class jobs

A widely held view of the economy is that technology is destroying middle class jobs. The argument is that we used to have all these relatively high paying jobs in manufacturing and other sectors requiring routinized work, which are now being displaced by machines or, in the near future, robots. Pretty soon robots will also be driving our cars, buses and trucks, as the technology for self-driving vehicles becomes cost efficient.

The loss of these jobs is supposed to result in a shortage for workers without sophisticated skills. This means that more workers will be fighting for a rapidly shrinking number of jobs, leading to more unemployment and underemployment and lower pay. On the other hand, the folks who develop and therefore own the technology will be getting rich.

That sounds like a pretty bad story, at least from the standpoint of inequality. The loss of middle class jobs means that fewer people will be in a position to raise a family comfortably. From this perspective, we may try to redistribute income to help out the losers, but the underlying problem is technology, and no one wants to try to stop the development of technology.

Despite its popularity, the story lacks evidence. Productivity growth has been very slow in recent years — the exact opposite what we should expect from robots taking all our jobs. Also, the data contradict the story of disappearing middle class jobs, as opposed to weak job growth overall. 

The basic theory behind the argument is even weaker. The problem with its reasoning is that government policy, not technology, determines what it means to “own” the technology.

This point should be straightforward. Technology is simply knowledge. No one inherently owns knowledge. The government gives ownership of technology through patent or copyright monopolies or other forms of intellectual property. These monopolies allow individuals or corporations to sue anyone who uses technology without their permission. Patent infringers can pay large fines and even face jail if they persist.

It is this protection — not the technology itself — that allows those with sophisticated skills to get rich from technology. If we envision robots doing everything in a world without intellectual property, then robots would be incredibly cheap. After all, robots will be producing robots. Robots will be making and driving the trucks that deliver robots, as well as loading and unloaded the trucks.

This means that for a few dollars we should all be able to buy ourselves robots that will clean our house, wash our clothes, cook our meals, mow our lawns and do any other necessary task that we would rather not do ourselves. They should even be able to grow fruit and vegetables for us in our backyard.

In this story, because everything is now so cheap, real wages might skyrocket. We all should be able to put in just a few hours of work a week or month to pay for our robots which will then take care of just about all of our needs.

But the folks arguing that technology will increase inequality obviously have a different vision of the future. They expect that we will have long and strong intellectual property laws that will allow them to charge high prices for the robots and thereby makes lots of money for themselves. And, they actively work to ensure that we have strong protection for intellectual property.

We have been treated to an excellent example of such efforts in the final negotiating rounds for the Trans-Pacific Partnership. According to news accounts, one of the last major sticking points was the number of years that pharmaceutical companies could claim exclusive control over the test data they used to establish a drug’s safety and effectiveness. The United States insisted on the longest possible period. Another sticking point was that the United States insistence that the other TPP countries extend the length of copyright monopolies to 70 years.

In both of these cases the explicit intent is to redistribute money from the bulk of the population to those who own these intellectual property rights. Of course this redistribution is justified with an argument about incentives, but that doesn’t change the fact that this is an upward redistribution of income engineered by the government.

The TPP is just one example of many in which the government has acted to strengthen protections for intellectual property. Four decades ago, copyrights in the United States lasted for 55 years; they now last for 95 years. In the last three decades it became possible to patent business methods, software programs and even lifeforms.

There are serious arguments for these and the other policy changes that have strengthened intellectual property claims in recent decades, but the point is that these are public policy decisions that have made the owners of intellectual property richer. It was not the technology that did it.

Of course we need to provide incentives for innovation and creative work, but we are deciding what these incentives are. If we are creating enormous inequality with strong patents and copyrights, then it sounds like we are making the incentives too generous. The problem is the rules the government is creating, not the technology.

There is a scene in an old Marx Brothers movie where Groucho gets caught in a flat out lie. “Who are you going to believe,” Groucho asks, “me or your own two eyes?”

The debate over technology and inequality has this same character. Unfortunately, many people seem prepared to believe Groucho.