The Impact of R&D Subsidy on Innovation

The Impact of R&D Subsidy on Innovation: a Study of New Zealand Firms by Adam B. Jaffe, Trinh Le – #21479 (PR)

Abstract:

This paper examines the impact of government assistance through R&D grants on innovation output for firms in New Zealand. Using a large database that links administrative and tax data with survey data, we are able to control for large number of firm characteristics and thus minimise selection bias. We find that receipt of an R&D grant significantly increases the probability that a firm in the manufacturing and service sectors applies for a patent during 2005–2009, but no positive impact is found on the probability of applying for a trademark. Using only firms that participated in the Business Operation Survey, we find that receiving a grant almost doubles the probability that a firm introduces new goods and services to the world while its effects on process innovation and any product innovation are relatively much weaker. Moreover, there is little evidence that grant receipt has differential effects between small to medium (<50 employees) and larger firms. These findings are broadly in line with recent international evidence from Japan, Canada and Italy which found positive impacts of public R&D subsidy on patenting activity and the introduction of new products.

 

Gotcha Journalism as bullshit: Propaganda v anti-propaganda

[O]ne does not go about identifying the weaknesses of what another person says in order to prove that one is always right, but one seeks instead as far as possible to strengthen the other’s viewpoint so that what the other person has to say becomes illuminating. Such an attitude seems essential to me for any understanding at all to come about. This is nothing more than an observation. It has nothing to do with an ‘appeal’ and nothing at all to do with ethics. Even immoral beings try to understand one another.   Hans Georg Gadamer

As I was driving to the airport on Thursday night I listened to this exquisitely ghastly specimen of the emptiness of modern political life. Patricia Karvelas is interviewing Assistant Minister for Education and Training Simon Birmingham. It’s a contest not a conversation – which is fairly par for the course.

But it’s an unusual kind of contest. Because Karvelas sees it as her role to disrupt the Assistant Minister in whatever way she can. Constant interruptions are par for the course. She begins by asking him a question which, according to the rules of political combat the Minister can’t answer straightforwardly. In announcing some help for manufacturing industry in Geelong and elsewhere ”Is the coalition just trying to sandbag” seats where it’s become now “desperately vulnerable”.

So here’s a situation where the Government spokesman has come on to talk about how good his policy is. You’d expect a hostile interview to be one in which the spokesperson’s case that it’s a good policy might be challenged. But instead the interviewer takes the interview in directions that the spokesman, as a spokesman, is unable to go in any bona fide way without being seen by all and sundry (including the media) as doing his job badly. Continue reading

Another workaround our dysfunctional legal system

Barristers protesting against cuts to the legal aid budgetThis article explains the idea being explored in Victoria for a ‘victims redress’ scheme for victims of institutional child abuse. It’s clearly yet another scheme for cutting the dysfunctional legal system largely out of the action of providing redress for abuse and handing it over to something that makes more sense – via some more administrative scheme.

We have such schemes in all sorts of areas now. Often workers compensation schemes close down full access to the legal system – ditto various kinds of negligence liability. And there’s small claims. Ken Parish and others can presumably flesh out the list.

But to drag an idea out of the economics playbook, there’s something a bit dodgy about all these special schemes. They are set up as exceptions, when the overarching legal system should be delivering something similar. There may be a case for specialist tribunals and so on if those hearing a case need or would benefit from special knowledge. But generally the legal system should embrace this principle which I’ve set out before:

Economists’ ‘imperialism’ towards other disciplines has manifested itself largely in the application of economic methodology to problems which are not purely economic. If few of the results have been sublime, some have been ridiculous. A more promising kind of imperialism would be the application of simple economic principles to the way various social systems are managed. HECs and managing child support within the tax system are examples of this kind of reform. We should apply it more widely to our system of civil law which, as it stands is a scandal – available to the rich and those poor enough to access legal aid, but only otherwise to those willing to risk a large part of their life savings. With absolute respect to the need for judicial independence on interpreting the law, the costs of arbitrating disputes should be commensurate with the magnitude of the damages at risk. This simple micro-economic principle should be reflected in all legal procedure. Further, both justice and efficiency demand that either litigant to a dispute should be able to pre-emptively elect a low cost tribunal free from any threat of appeal, except upon their opponent bearing all resulting costs.

This is a huge micro-economic reform issue, but sadly it’s seen as fairly esoteric. And in so far as it’s discussed within mainstream reform thinking it tends to be within a deregulatory frame – as in breaking the various monopolies and restrictive practices of the profession. The problem is the whole architecture of the system.

Bitcoin: another public good privately provided

In July last year I gave a talk to a Bitcoin conference and was whisked away (as one sometimes is) to give an interview that would be chopped up into ‘grabs’ for a doco on bitcoin. The ‘uncut’ interview (it’s lightly cut, not uncut, but it’s the feedstock that was chopped into a few grabs for the doco) is above for your delectation in case you’re interested. Apologies for occasionally repeating myself which I did because I knew that the interview was really a pretext to get me to express myself as compellingly as possible within a sound-bite. So I occasionally re-bit the sounds when I thought I should.

Towards a post-capitalist or a post-WTF world?

Hitler riding a rainbow on a sled.Vint Cerf is a serious guy or so I thought I was entitled to believe - he’s one of the early architects of the internet. Anyway, with David Nordfors he’s disrupting unemployment. How? He’s got this amazing idea for an internet platform to match people who want to work with people who want work done for them. Capiche?

Today there is a product or service being developed for every possible need and desire. Can the economy develop valuable jobs for every person, letting them do something that fits them like a tailored suit, creating the highest possible value and satisfaction for everyone involved? Then there will be an infinite number of job possibilities for a limited amount of people. People will be the scarce resource, not jobs. Imagine instead of getting a job because you can do something that other people (or machines) can do, you get a job because you are special in a way that creates real value for other people.

Sounds so simple it makes you kick yourself for not seeing it. Demand? Supply? Skills? Their relation? The disutility of labour for those at the bottom of the heap? The utility of labour for those at the top? Centuries of worry about inadequate demand for lower skilled workers just melts away before the power of Digital Disruption. If only we had platforms for matching job seekers with employers right now, why we’d be pretty much over the problem. Oh wait . . .

Anyway, perhaps you can see more in this extraordinary essay than I can. If so please sing out in comments below. We are expanding the fleet of prizes from the Merc Sports and Rooter the PV to Bronwyn the helicopter, so we’ve certainly thrown the switch for this one.

But that’s not all. Continue reading

Some wisdom on Europe from 1972!

Euro Crisis In 2012John Pinder, “Economic Growth, Social Justice and Political Reform,” in Richard Mayne (ed.), Europe Tomorrow: Sixteen Europeans Look Ahead (1972):

“… the European Community appears to be moving towards a repetition of the old centralizing errors of the nation-states, by making economic policy instruments uniform over the whole area without considering whether this will allow the peripheral regions to be prosperous or not. For the thrust of the Community’s development has been towards free trade, uniform agricultural prices, uniform tax systems and rates, and now a common currency, rather than towards common action to abolish poverty, unemployment, and regional depression. … [A]mong the first casualties, if the new European economic system is constructed [along these lines], will be the regions outside the golden quadrangle [between Milan, Paris, the Midlands, and the Ruhr]. For they will find themselves bound to that golden Moloch by Community rules of fiscal and monetary uniformity; and this, because the Community’s economy is bigger and its institutions still more remote than those of the existing nation-states, will make their predicament even worse than it is now.”

HT: Tommi Uschanov

Hayek – left right and centre

My friend Martin Stewart-Weeks points me to this piece by Simon Griffiths which argues that “an engagement with Hayek does not mean a capitulation to the market”. Quite. Indeed it’s always struck me that it’s a pity that Hayek pursued his ideas in such a tendentious way. He had a great critique of the necessary foibles of central planning and he won that debate, even if it took until the fall of the Berlin Wall to really drive the victory home.

I wonder how much this is actually typical of many political philosophers. They start with some ideological intuition they want to support and then produce a set of considerations that tend in that direction. Still I think Hayek’s ideas and sensibilities have plenty of implications that don’t point particularly clearly to the right, implications that Hayek, and sadly, so many of his followers show virtually no interest in. Continue reading

The great globalisation slowdown mystery

Here’s something I only noticed while writing a short piece for INTHEBLACK magazine: the rise of globalisation is not only slowing down almost to a halt, but in some places (like the Netherlands) may have been slowing down since around the turn of the century. That’s well before the global financial crisis and indeed before the global economic boom of the early 2000s.

It’s obviously very hard to measure globalisation; we don’t even have a clearly accepted definition of the phenomenon. The best measure may come from the KOF Swiss Economics Institute, which tries to incorporate social, economic and political data. The figures in the graph below come from there.

What’s going on here? I really don’t know, and expert commentary seems to be thin on the ground. A few observers have suggested a post-GFC increase in trade protection, but that doesn’t fit the timing shown in the KOF data – and anyway, the post-GFC protectionist surge hasn’t really happened.

Feel free to read the more detailed piece at INTHEBLACK.com, and make suggestions (and/or point to relevant research) in the comments section below.

Globalisation slowdown graph

The globalisation slowdown began as early as the start of this century