Willy today

There is one good bit in Hutton today:

China\’s banking system is a house of cards, with billions of dollars of toxic loans made at the party\’s request to loss-making enterprises set against tiny amounts of core capital.

Both true and a warning to us. That\’s what happens when you have political control of the banking system. Loans are handed out for political reasons. And no, politicians are not better at being bankers than bankers are.

That\’s why we want our own banking system sold off again, as soon as is possible (ie, as soon as everyone is convinced they won\’t fall over if they are).

This however is nonsense:

Then there is innovation, where its track record is abominable. China accounts for only 0.1 per cent of the world\’s patents that apply in Japan, the EU and the US. Economists believe the invention of general-purpose technologies, like the internal combustion engine, internet or aeroplane, that have massive general application, holds the key to growth and will accelerate in the decades ahead. Not one of this century\’s general-purpose technologies will be made outside the West and Japan, which have held a monopoly for 300 years. Their lead will widen rather than narrow.

The Chinese government knows it must unblock control of universities, laboratories and business if China is to change this dismal prediction and create the subtle combination of freedom to experiment and incentives in which innovation flourishes.

If you actually go and read the books on innovation (as I currently am, this one for example) who does the initial research is an irrelevance.

If we\’re talking high science then that is a public good. That\’s why we support it from tax money, because those who do it cannot collect the full value of their results. A public good, by it\’s very definition, is non-rivalrous and non-excludable. Newton couldn\’t stop other people from using gravity after he\’d worked it out. The same is true of any other piece of science: they do publish this in journals you know, and anyone can read them.

If we go a stage further, and look at patents, again, it really doesn\’t matter who files these. They end up being licensed to manufacturers anyway. Who cares that an English patent is licensed to a Chinese, an American or a UK company? And vice versa of course.

Where innovation is very important is in the spread of the actual products or services made available by it through the economy. That depends upon the felixibility of said economy, the lack of barriers to entry.

There may well be problems in China in this regard….as there are in many economies, the Continent included. But the problems about innovation don\’t depend upon the high end research at all….the results of that are available to all on exactly the same terms, either free through the journals or via patent licensing. It\’s how those results are spread through the operating economy, how quickly they are adopted, that makes the difference.

3 thoughts on “Willy today”

  1. Right, so the US and Japan, who didn’t invent the internal combustion Engine have had no benefit from it, everyone worldwide drives a Mercedes don’t they? And only the Americans have benefitted from the Aeroplane- the Airbus is just a computer simulation. And of course the yanks kept the internet (and computers) to themselves, so no-ones reading this (and the Guardian is published in the States and shipped in).
    I have a feeling that Japanese contributions to research started some time after they had absorbed western technology and outlook- not before the Meiji restoration.

  2. Terence Kealey’s Sex Science and Profits is a very engaging and interesting book on the way science can be funded.

    And, as you would perhaps expect, govt is as useless at funding science as it is at funding education or transport. Private funding of science works out much better, in terms of discoveries and usefulness. Public funding has the misfortune to crowd out private funding pretty rapidly.

    links to its Amazon.co.uk entry

  3. two points. Did anyone ever read up about what happened to Herr Otto’s licensing scheme for the four stroke internal combustion engine? His ownership of it was practically stolen from him by the courts – so much for general purpose inventions!

    Second point. We are measuring patents, which only mean something if you put faith in them.

    The Chinese have plenty of inventions which are not covered by patents, but also have no respect for ours (seen in the no of Iphone ripoffs on ebay)

    The biggest problem with comparing the East and the West is that we are using the West as the datum line, and that seems a little biased to me!

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