Technology, patents, and inequality: An explanation that even economists can understand


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It is popular for people, especially economist-type people, to claim that technology has been a major driver of the increase in inequality over the last four decades. This view is very convenient for those on the winning side of the inequality divide, since it implies that the growth in inequality was largely an organic process independent of government policy. Inequality might be an unfortunate outcome, but who would be opposed to the advance of technology?

However convenient the technology driving inequality story might be, it falls down on even the most simple examination of its logic. To take an example that has often been used, there is a concern that displacing workers with robots will lead to a transfer of income from workers to the people who own the robots.

While this comment is often treated as presenting the basic problem created by technology, in fact it does the exact opposite. “Owning” the robot is not a technical relationship, it is a legal one, and therefore one that depends on our laws. 

To be more concrete, the income from owning a robot is not the result of owning the physical robot. Robots will generally be relatively cheap to manufacture. So people will not be deriving large incomes from owning the steel and other components of the robot. The reason some people might get very rich from owning robots is because they own patents and copyrights that are needed for the making of the robots. Without these patent and copyright monopolies, robots would be cheap, like washing machines, and there would be no large-scale upward redistribution associated with them.

A World Without Patent and Copyright Monopolies

If it is not already obvious, patent and copyright monopolies are instruments of public policy, not acts of god. We can make them stronger and longer if we want, or shorter and weaker, or not have them at all. The treatment of these monopolies in the constitution is a very good starting point for a clear understanding of the issues. 

Patents and copyrights appear as one of the specific powers granted to Congress (Article I, Section 8, Clause 8).

Center for Economic and Policy Research for more

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