The Economic Efficiency of the Amount of Resources Devoted to R&D
Conventional analyses of this issue have three things in common. First, they focus exclusively on the fact that the use of research-discoveries by actors that do not pay for the right to use them causes the profits yielded by industrial R&D of all types to be lower than the economic efficiency of that R&D—in my terminology, to be “distorted” (more specifically, to be “deflated”). Second, they conclude that the non hyphen internalization of the externalities on which thy focus implies that, from the perspective of economic efficiency, too few resources are devoted to industrial R&D of all types (since the associated deflation in the profits yielded by R&D will cause some economically-efficient R&D projects to be unprofitable). And third, they conclude that, for the above reason, R&D-related economic inefficiency will be reduced by tax policies that allow R&D investments to be expensed and antitrust policies that declare lawful horizontal mergers and acquisitions because they lessen competition if the company they created would do more R&D than the participating companies would have done as separate entities. Most conventional scholarship argues that lengthening and broadening IP protection would probably be economically efficient (only “probably” because its authors are concerned that the pricing of IP-protected discoveries might lead to their underutilization from the perspective of economic efficiency).
This lecture makes three criticisms of this scholarship. First, it argues that the profitability of R&D is distorted by many types of Pareto imperfections that the conventional analysis ignores. Second, it argues that, from the perspective of economic efficiency, too many resources are devoted to product R&D and too few to production-process research. Third, it criticizes the conventional R&D-policy recommendations both on the grounds that they do not distinguish between the treatment of product R&D and production-process R&D and on the more general ground that they manifest their supporters’ failure to take account of many of the types of Pareto imperfections that distort the profitability of both of these types of R&D.
Professor Markovits has a B.A. from Cornell University, a Ph.D. in economics from the London School of Economics, a law degree from Yale, and significant training in ethics and jurisprudence. His scholarship focuses on (1) the correct definition of the economic efficiency of a choice, the correct way to analyze the economic efficiency of choices, and the moral or legal relevance of a choice’s economic efficiency, (2) the economic efficiency of particular kinds of government and non-government choices, (3) the useful definition of the intensity of price, quality-or-variety-increasing-investment, and production-process-research competition, (4) the determinants of the intensity of each of these three variants of competition and the different ways in which those determinants interact to determine the intensity of each, (5) the business functions, competitive impact, and economic efficiency of vertical integration and its contractual and sales-policy surrogates, (6) the legality of various categories of business conduct under U.S. and E.U. competition law both as actually and as correctly applied, (7) the structure and content of valid legal argument in the United States, and (8) U.S. constitutional law both as correctly and actually applied. In addition to teaching at Texas Law School, Markovits has taught at 4 other U.S. law schools, in two U.S. economics faculties, in 3 German law faculties, and in 3 German economics or law and economics faculties. From 1981-1983, he was Co-Director of the Centre for Socio-Legal Studies at Oxford University and a member of the university’s law faculty.
The lecture will be held on Wednesday, 9 October 2019 at 6:30 pm, Munich Intellectual Property Law Center, Marstallstraße 8, 2nd Floor, MIPLC Classroom.