When I try to imagine how our civilization might rot and decline over the coming millennia, my thoughts first go to innovation, as that has long been our main engine of growth. And while over the years I’ve often struggled to think of ways to raise the rate of innovation, it seems much easier to find ways to cut it; in general, it is easier to break things than improve them.
This recent paper in the QJE finding negative impacts of taxation on quantity and location (though not quality) of innovation seems to support your argument:
The entertainment industry has already bought into the idea that they can sue whenever anybody indirectly benefits from their work (without them getting paid). For example, if you name your bar after a character in Star Wars, expect a lawsuit from Disney.
We need a name to distinguish compensable harms ("torts") from non-compensable harms ("?") such as being outcompeted by another firm, outbid in an auction, turned down for a date, etc.
The (US anyway) legal system has such high overheads that it doesn't seem a good candidate mechanism to compensate innovators.
It's a hell of a lot more difficult to sue a company that's based outside the US, and a lot of pretrial nonsense can be mitigated if you're outside the US. Many countries wisely don't allow for US-style "discovery" on their territory -- meaning that, if you're based outside of the US, you can be well shielded from some of the most expensive and burdensome parts of the process. And depending on what business you're in and what the case is about, you might be able to ignore US courts entirely -- most (very nearly all) countries won't enforce a US default judgment, and if the party that "won" that judgment wants to collect on it, it would have to (more or less) re-litigate the entire case in the country where you're based.
It's possible to minimize exposure. And the system is bad enough, right now, that you should want to.
This seems like it would just be a lemma of the rot hypothesis. An uncompetitive system rots due to the sum of rot of its uncompetitive components, a large one being law.
The "innovation" of the *contins was that the gradual release made it more convenient for actual pain patients and unsuited for recreational use (in which a more intense, if brief, high is sought). Nowadays most of the opioid deaths are caused by fentanyl mixed with illegal drugs.
Jubal Harshaw has a contrarian perspective on the opioid epidemic, which I discuss somewhat critically here but think is worth reading for those just hearing the currently conventional wisdom:https://entitledtoanopinion...
OxyContin is a direct result of what you’re advocating: a deliberate promotion of innovation and a legal framework that was designed to support innovative efforts.
One of my businesses has recently been involved in two civil suits. One where we had to sue a raw material supplier in China for ghosting us -- basically taking our money and running. Another where we were slapped with a ridiculous and vexatious lawsuit from a client of ours, in the USA, who wanted to avoid paying an invoice.
The Chinese lawsuit quickly, within 4 months of filing, went to a bench trial, which lasted about two hours. Pre-trial "litigation" was basically non-existent. We won the trial and immediately received our fair compensation -- namely, the money that we had paid for goods never received. The entire process cost a few thousand bucks, and produced a perfectly just outcome.
In the US, it has been years and the case still hasn't gone to trial. Lawyer's fees alone are in the mid six figures. The amount of utterly wasteful and pointless "litigation" and "discovery" work has been mind-boggling. The system strongly incentivizes settlement (the vast majority of cases settle,) but it seems insane to me to settle a case with a shakedown artist. It is, however, an unbelievably arduous and expensive process to attain one's "day in court." And it seems risky, because I now have very little faith in the ability of the process to produce a fair outcome. (I can't help but note that the Federal district judge, once a personal injury lawyer, is a complete sociopath with a God complex.)
I've come to the conclusion that it's foolish to run any business out of the USA, unless you have no other option. It's much smarter to incorporate in a saner country with a lower tax burden. That the taxes are much lower is a secondary consideration. The primary consideration is to minimize exposure to, and shelter assets from, the US legal system -- the most charitable thing that one can say about which is that it's poorly-administered and unreasonably expensive. There's a lot worse that can be said, I think.
Can things get worse? They probably will.
But none of this means that innovation will stop. It might stop in America. America might well go the way of Brazil and Argentina. Innovation will continue elsewhere. I was hugely impressed with the efficiency and even-handedness of China's civil legal system.
"society gains far more from innovations than do the people who push for them"
Much more natural to write "society gains far more from innovations than the people who push for them do". If common sense is not sufficient justification, see the entry for "inversion" in Fowler's Modern English Usage.
Yes, and after it was reformulated to defeat that addicts shifted to illegal drugs and fentanyl overdoses spiked.
Unfortunately the gradual release mechanism of the first pill design could be defeated by simply crushing the pill into a powder. :(
This recent paper in the QJE finding negative impacts of taxation on quantity and location (though not quality) of innovation seems to support your argument:
https://doi.org/10.1093/qje...
The entertainment industry has already bought into the idea that they can sue whenever anybody indirectly benefits from their work (without them getting paid). For example, if you name your bar after a character in Star Wars, expect a lawsuit from Disney.
We need a name to distinguish compensable harms ("torts") from non-compensable harms ("?") such as being outcompeted by another firm, outbid in an auction, turned down for a date, etc.
The (US anyway) legal system has such high overheads that it doesn't seem a good candidate mechanism to compensate innovators.
It's a hell of a lot more difficult to sue a company that's based outside the US, and a lot of pretrial nonsense can be mitigated if you're outside the US. Many countries wisely don't allow for US-style "discovery" on their territory -- meaning that, if you're based outside of the US, you can be well shielded from some of the most expensive and burdensome parts of the process. And depending on what business you're in and what the case is about, you might be able to ignore US courts entirely -- most (very nearly all) countries won't enforce a US default judgment, and if the party that "won" that judgment wants to collect on it, it would have to (more or less) re-litigate the entire case in the country where you're based.
It's possible to minimize exposure. And the system is bad enough, right now, that you should want to.
That's all true, but if you do business in the US you're vulnerable to the US legal system.
This seems like it would just be a lemma of the rot hypothesis. An uncompetitive system rots due to the sum of rot of its uncompetitive components, a large one being law.
The "innovation" of the *contins was that the gradual release made it more convenient for actual pain patients and unsuited for recreational use (in which a more intense, if brief, high is sought). Nowadays most of the opioid deaths are caused by fentanyl mixed with illegal drugs.
Jubal Harshaw has a contrarian perspective on the opioid epidemic, which I discuss somewhat critically here but think is worth reading for those just hearing the currently conventional wisdom:https://entitledtoanopinion...
OxyContin is a direct result of what you’re advocating: a deliberate promotion of innovation and a legal framework that was designed to support innovative efforts.
https://www.law.msu.edu/ipi...
I have an amusing anecdote on this point.
One of my businesses has recently been involved in two civil suits. One where we had to sue a raw material supplier in China for ghosting us -- basically taking our money and running. Another where we were slapped with a ridiculous and vexatious lawsuit from a client of ours, in the USA, who wanted to avoid paying an invoice.
The Chinese lawsuit quickly, within 4 months of filing, went to a bench trial, which lasted about two hours. Pre-trial "litigation" was basically non-existent. We won the trial and immediately received our fair compensation -- namely, the money that we had paid for goods never received. The entire process cost a few thousand bucks, and produced a perfectly just outcome.
In the US, it has been years and the case still hasn't gone to trial. Lawyer's fees alone are in the mid six figures. The amount of utterly wasteful and pointless "litigation" and "discovery" work has been mind-boggling. The system strongly incentivizes settlement (the vast majority of cases settle,) but it seems insane to me to settle a case with a shakedown artist. It is, however, an unbelievably arduous and expensive process to attain one's "day in court." And it seems risky, because I now have very little faith in the ability of the process to produce a fair outcome. (I can't help but note that the Federal district judge, once a personal injury lawyer, is a complete sociopath with a God complex.)
I've come to the conclusion that it's foolish to run any business out of the USA, unless you have no other option. It's much smarter to incorporate in a saner country with a lower tax burden. That the taxes are much lower is a secondary consideration. The primary consideration is to minimize exposure to, and shelter assets from, the US legal system -- the most charitable thing that one can say about which is that it's poorly-administered and unreasonably expensive. There's a lot worse that can be said, I think.
Can things get worse? They probably will.
But none of this means that innovation will stop. It might stop in America. America might well go the way of Brazil and Argentina. Innovation will continue elsewhere. I was hugely impressed with the efficiency and even-handedness of China's civil legal system.
"society gains far more from innovations than do the people who push for them"
Much more natural to write "society gains far more from innovations than the people who push for them do". If common sense is not sufficient justification, see the entry for "inversion" in Fowler's Modern English Usage.