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Robin Hanson's avatar

On your point 1, it is exactly like why a monopolist wants to raise prices above the competitive level; he loses marginal customers and gains on all infra-marginal customers.

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Overcoming Bias Commenter's avatar

So, it makes more sense if I think of the long-term rights that solve the problem not as extended patents -- because the problem is the race to be patentable. What you want is a lower barrier to lock up research toward a particular patentable item early on in the dev process. So you could apply for a pre-patent right to deliverable a patentable item in N years. This would then be made public and bid on. Like other patent rights it should be tradeable. What the winner (holder) gets is basically the sole right to patent this item if they produce it within the term. If anyone else wants to beat them out, they have to buy the pre-patent or hope the holder can't produce a patentable product within the term so that it expires.

If this is the kind of right Robin imagines, that would make sense (at least in the patent space). There is still the social cost of the year wait, and while there's no reason to think it's as much as 100 million, it's still significant (probably on the order of 20M if the net benefit over the patent term is 200M).

Plus we haven't considered how much of the extra 100M in spending is dead-weight loss versus mere utility transfers. In your contrived hypothetical, it's easy to imagine dead-weight loss being more than 20%, so that probably represents a net social cost, that some kind of pre-patent right would eliminate or at least drastically reduce.

I'd love to have a real world example to chew on, though. I'm not aware of any races to be first where the cost ratio was that dramatic (10 x cost for 10% time savings). With less extreme numbers and a small percentage of dead-weight loss on the extra spending, a race to be first in innovations could end up being a net social positive, even if it is negative for all the entrants in the race.

The social benefit is less obvious for something like homesteading.

I've thought some more on the interest rate issue, and if there is no economic profit (due to efficient competition), then it makes sense that all investments would earn the market rate plus something the investor brings to the table. But the difference is still just transfers except at the investment margin which, as Jordan Amdahl notes, is an unclear (to me anyway) trade off between delayed now profitable investments (social good) and scrapped no-longer profitable investments (social bad).

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