Why has antitrust enforcement been so lax in recent decades? I show that, in 1981, the federal government began challenging large mergers and acquisitions at much lower rates. Why have Democrats, since 1981, been reluctant to police large mergers more aggressively? I argue that some of this reluctance stems from the political realignment associated with the construction of the American knowledge economy. Using a panel study of top income shares at the state level, I show that antitrust deregulation has exacerbated top end income inequality and that the effect is mostly experienced in several consistently Democratic states. Using multilevel regression and post-stratication on survey data, I find that younger and more affluent individuals and those in states that are the most exposed to the knowledge economy support regulation of mergers and acquisitions at signicantly lower levels.
Today's antitrust reformers over emphasize ideological barriers to reform while failing to acknowledge significant institutional barriers arising from changes in Congress and at the Supreme Court and political barriers arising from the Democratic Party’s commitments to the knowledge economy. At the same time, reformers also fail to interrogate conservative ideology in depth, placing excess weight on the consumer welfare standard and neglecting other important aspects of the conservative argument that support the current system of lax antitrust enforcement, like a concern over regulatory capture and with the benefits of “takeover markets” for disciplining business managers. New frameworks for policy analysis should seek to confront and surmount these obstacles to develop an antitrust approach that accounts for crucial aspects of America's modern political economy. Two potential frameworks are proposed.
An extensive law review literature critiques the consumer welfare standard that federal antitrust officials use to review proposed mergers and acquisitions on grounds that the standard contravenes Congressional intent. This literature raises but fails to answer important empirical questions, like whether the consumer welfare standard is truly apolitical, but also sidesteps other important questions for reformers and students of political economy: do the actions of antitrust officials have any support in public opinion and does the standard's fixation on price actually reduce consumer welfare? To answer these questions, we developed the most in-depth public opinion survey on antitrust issues ever deployed. The experimental portion of the survey, which is still in the pilot phase, draws on economic studies of fair trade to test whether consumers are willing to tradeoff hypothesized price reductions from efficiency gains to achieve non-monetary goals, like avoiding layoffs, so that officials must consider non-price outcomes to truly maximize consumer welfare.
In this presentation, given at the Economics of Science workshop in April of 2019, I document the surpising increase in the share of patents owned by the top 1 percent of patenting firms from 1936-2010. At the same time, relative to the late 1970s and early 1980s, persistence (as measured by the likelihood of remaining in the top 1 percent of patenting firms five years later) had declined which suggests dynamism remains relatively high despite rising concentration. Publicly traded companies in some industries are astonishingly concentrated: the top 11 pharmaceutical companies own 99.3 percent of all drug patents. Universities are increasingly among the top patent holders. The value of a firm's patent assets are strongly correlated with market capitalization both across and within industries.
As the American political economy has become unequal in many respects, so it has also undergone profound structural transformations in the form of increasing financialization and increasing reliance on technological innovation as a source of economic advantage as part of the knowledge economy transition. But while the relationship between financialization and rising inequality is somewhat evident, the relationship between the knowledge economy transition and growing inequality has received less attention. This article draws on a wide variety of economic, historical, and political scholarship and data to argue that the peculiar institutional form of the American knowledge economy has made it an unparalleled engine of geographic, economic, and political inequality.
We develop a unique dataset of 24 thousand U.S. finance patents granted over last two decades to explore the evolution and production of financial innovation. We use machine learning to identify the financial patents and extensively audit the results to ensure their reasonableness. We find that patented financial innovation is substantial and economically important, with the number of annual grants expanding from a few dozen in the 1990s to over 2000 in the 2010s. The subject matter of financial patents has changed, consistent with the industry’s shift in revenue and value- added towards household investors and borrowers. The surge in financial patenting was driven by information technology firms and others outside of financial sector, which collectively accounted for 69% of the awards. The location of innovation has shifted, with banks moving this activity from regions with tight financial regulation to more permissive ones. High-tech regions have attracted financial innovation by payments, IT, and other non-financial firms. Turning to the source of these ideas, while academic knowledge remained associated with more valuable patents, citations in finance patents to academic papers, especially in those by banks, fell sharply.
Intellectual property (IP) plays a crucial role in the American knowledge economy, but political scientists know surprisingly little about the political beliefs and behaviors of the firms and individuals who produce IP. I therefore merged U.S. patent and campaign contribution (DIME) data to develop a unique dataset capturing donations and ideology scores for 30,603 American inventors who donated from 1980 through 2014. Regression analysis suggests that, compared to their peers, inventors have only become slightly more liberal over time and are no more likely to donate to Democratic candidates and committees. An audit of their non-partisan PAC donations suggests that inventors are unique in the extent they divide their contributions between candidates of their preferred party and their employer’s corporate PAC. Inventors have also become more polarized over time, and a variance decomposition suggests the trend is driven by increasing geographic segregation, not by increasing polarization across firms or industries.
The American knowledge economy (AKE) is not a foreordained transition in the organization of economic production nor is it a form of political economy shaped predominately by the political demands of highly educated workers. It is a politically generated consensus for producing economic prosperity and economic advantage over other nations in which intellectual property (IP), and the businesses that produce it, play a leading role. The history of AKE development reveals as much. In the AKE’s formative period, from 1980 to 1994, IP producers and a faction of neoliberal Democrats (the Atari Democrats), not decisive middle class voters, played a pivotal role in reconfiguring institutions of American political economy to hasten the AKE transition. Their vision of AKE development inherently complicated the Democratic Party’s attitude towards rising market power and continues to shape contemporary disputes within the Party over antitrust enforcement and the validity of the AKE project itself.
This Article approaches the research exemption, and related legal developments, as a case study in the political economy of patent law. Part I recounts the history of the research exemption, touching briefly on historical origins but emphasizing developments since the 1970s in legislative, executive, and judicial forums. It also examines changes during the same time frame in related areas of patent law, like the Bayh-Dole legislation and the attempted repeal of state immunity from patent infringement liability. These legal developments indirectly affected the research exemption, or implicated similar concerns about imbalance in the patent system and the use of patents to tax, control, or inhibit research activity. Part II analyzes this history to illustrate and expand upon two major themes in the political economy of patent law, namely the surprising persistence of faulty economic ideology in patent policymaking and the institutional bias exhibited by the Court of Appeals for the Federal Circuit in shaping modern patent law. One major conclusion is that together these forces have created an excessively complex and ill-designed policy environment that is placing a significant strain on the national research system, a strain that executive agencies and the courts have tried to alleviate through ad hoc agreements and modifications of other patent doctrines, like the doctrine of subject matter eligibility.
On March 20, 2015, Robert Kastenmeier, who represented Wisconsin’s Second Congressional District from 1959 to 1991, passed away at his home in Arlington, Virginia. Though Kastenmeier may not have been well known outside of legislative circles and his home state of Wisconsin, he was in fact one of the most prolific policy makers—if not the most prolific policy maker—in the field of intellectual property law in the 20th century. He is impressively credited with authoring more than forty-eight laws dealing with intellectual property matters during his legislative tenure, including the Copyright Act of 1976, which remains the primary legal framework for copyright law in the United States.
One of the last bills that Kastenmeier introduced in the House of Representatives was a major piece of patent reform legislation dubbed the Patent Competitiveness and Technological Innovation Act of 1990 (PCTIA). Kastenmeier introduced the bill on September 20, 1990, but left office less than four months later on January 3, 1991, after losing an election to Scott Klug. The PCTIA contained five separate titles, and dealt with subjects as varied as the patentability of inventions made in outer space to the repeal of state sovereign immunity from infringement liability. One of those titles, Title IV, garnered little attention at the time, but addressed a subject of tremendous importance today: the need to codify and strengthen the long-standing common law research exemption in American patent law.
I have written elsewhere about the political economy of the research exemption in American patent law from 1970 to the present day, with an emphasis on analyzing the political coalitions that have historically argued in favor of or against such exemptions, and the economic arguments they often invoke. The purpose of this article, in contrast, is to carry forward the torch that Kastenmeier lit, and argue in favor of codifying a robust research exemption. To that end, section two briefly explains how the law pertaining to research exemptions has developed since 1970, with an eye towards understanding what these developments mean for policy makers. Section three summarizes the findings of relevant survey evidence and statistical studies. Section four critiques several scholarly proposals for a research exemption or proposals that attempt to accomplish similar ends through different means, like the proposal for creating a “fair use” exception in patent law, or for modifying the Bayh-Dole Act to give federal funding agencies more discretion when determining whether the results of publicly-funded research should be patented. Section five concludes by summarizing the basic argument in favor of the Robert Kastenmeier Memorial Act, a new bill to codify a robust research exemption in American patent law.