Our Automatic Assumptions about Automation

Senator and likely presidential hopeful Marco Rubio (R-FL) appeared on last Tuesday’s The Daily Show with Jon Stewart, promoting his new book and weathering an endless stream of jokes about his home state of Florida. While the discussion covered a range of policy ground, we wanted to highlight one comment by Senator Rubio that showed an all too common misunderstanding of innovation and automation.

Rubio said, “The concern I have about the minimum wage increase is that we have been told by the CBO and independent analysts that it will cost certain jobs. And that happens when some businesses will decide that well, you’ve now made our employees more expensive than machines so we’re going to automate. So in 5-10 years it’s going to happen anyway but this will accelerate this process, when you go to a fast food restaurant it will not be a person taking your order, there will be a touchscreen there that you will order from and when you get your order it will be right. [uneasy laughter] But the point is, if you make that person now more expensive than that new technology, they’re going … Read the rest


Wheeler Sets the Broadband Bar Higher than South Korea

Recently, FCC Chairman Tom Wheeler gave a speech arguing that “A 25 Mbps connection is fast becoming ‘table stakes’ in 21st century communications,” with the implication that anything less than 25 mbs is not really broadband.

This is an odd sort of statement, as it appears to be based not on any real analysis, but simply on the Chairman’s opinion. He tried to provide some rationale for this number when he stated “It’s not uncommon for a U.S. Internet connected household to have six or more connected devices – including televisions, desktops, laptops, tablets, and smartphones. When these devices are used at the same time, as they often are in the evenings, it’s not hard to overwhelm 10 Mbps of bandwidth.” I don’t know about you, but I personally am generally not using two devices at once. And as the Census Bureau reports, the average household size in the U.S. is 2.58 people with the median size being less. So, the majority of households are not overwhelming 10 Mbps of bandwidth.

So, if sub-25 Internet connections are not really broadband what does this mean in terms of what nations have … Read the rest


Mobile Telecom Offers Enormous Benefits, Finds New Report

Boston Consulting Group and Qualcomm have just released a new report examining the impact of mobile devices on the economy, focusing on the benefits mobile brings to small businesses and consumers in six countries including the United States, Germany, Korea, Brazil, China and India. The authors estimate that mobile technologies increase consumer welfare by the equivalent of 10 percent of total income in developed countries, and 20-45 percent of total income in developing countries. In fact, the total value that mobile brings to consumers is estimated to be more than double the size of the of the entire mobile industry revenue.

These economic gains have been enabled by remarkable technological progress. Global average cost per megabyte has declined from nearly 98 percent between 2005 and 2013, while maximum data speed has increased from ~10 to 250 mbps over the same period. These vast changes in cost and performance have made mobile technology affordable to billions of people around the world. Even so, more technological progress is necessary: 90 percent of mobile technology users report having problems with their connection. 5G and 6G technologies will continue to improve access and connectivity … Read the rest


Can Competition Hurt Innovation?

A new NBER paper, “Starving (or Fattening) the Golden Goose?: Generic Entry and the Incentives for Early -Stage Pharmaceutical Innovation” (summarized here), asks whether competition from generic drugs disincentivizes research. The authors, Branstetter, Chatterjee and Higgins, find that this does broadly seem to be the case: drug development activity decreases after generic drugs are introduced. This result highlights the important tradeoff between research and consumption. When consumers pay for drugs, intellectual property (IP) policies play a large role in determining how much of that cost goes toward future drug development.

Pharmaceutical markets are risky: drug development takes 12 years from initial pre-trial preparation to bringing a drug to market, and between the complexity of the human body and the extended regulatory approval process only a small proportion of drugs make it all the way to market. Of the ones that do, a small minority make up the large majority of profits.

This riskiness means that policies play a critical role in getting pharmaceutical markets to work correctly: if companies do not have incentives that outweigh the risks, they will not invest in researching new drugs and bringing them … Read the rest

Pill Box

IPRs and Access to Medicines: New Evidence

Intellectual property rights (IPRs) attempt to balance static and dynamic efficiency. By allowing innovators to appropriate a greater share of the value generated from their ideas, IPRs can create incentives for investment in research and development (R&D). With regard to pharmaceuticals for developing countries, incentives for drug development are critical, since many diseases prevalent in developing countries lack appropriate treatments. However, those in the global health community often allege that prices of new innovative drugs under patent make them unaffordable to most people in developing countries because of the absence of generic competition.

Thus, understanding the effects of IPRs on access and affordability are important for researchers, policymakers, and firms. In December 2014, Margaret Kyle and Yi Qian published a new paper investigating this with the National Bureau of Economic Research. Titled Intellectual Property Rights and Access to Innovation: Evidence from TRIPS, the authors examine the effect of pharmaceutical patent protection on the speed of drug launch, price, and quantity in 60 countries from 2000-2013.

The paper begins by noting that though the introduction of IPRs is an endogenous decision taken by policy makers, developing countries were required by … Read the rest