Patents do contribute to prosperity!

If we plot a wealth indicator and the number of granted patents, there should be shown some correlation. In the following graph, the number of Dutch granted patents was plotted against the GDP per capita (in international 2005 dollars) in the Netherlands [1].

Well not much to our surprise, there is indeed a nice correlation.... and the along the data points, neatly, the time evolves from 1800 in the utmost lefthand side lower corner to 2012, in the utmost righthand side upper corner.

Some strange things happen, e.g. in 1978, when the first European patents granted with effect for the Netherlands came to live. The number of patents increased massively, whereas the growth in GDP per capita didn't. Actually, in the late 70ties and early 80ties there was a quite severe economic downturn.

from 1800 till 1979 there was a very steep correlation between the number of patents granted and the growth of wealth in the Netherlands. One important factor in this is, much to my believe, the very strict granting policy of the former Dutch patent authority, de Octrooiraad.

In the 90ties, we see even a decade of reversed correlation, the number of patents granted for the netherlands decreased, whereas economy was booming. This effect is greatly due to the backlog building up at the premises of the European Patent Office, suffering from their enormous success.

 In the last decade, there appears to be again a decoupling of our economic fitness and the number of patents granted. Here again, it appears that though inventive power is extreme, economy is not (yet) picking up. To my opinion, the rise in patents granted will most certainly boost economy in the near future, such that the correlation is regained.

One remark though, a correlation is different from a causality. Correlation is relative easy to proof, causality is a lot more difficult. This being said, I do conclude, yet again, that patents do contribute to prosperity!

It is simply to difficult to ignore...



source:

[1] Gap Minder: http://www.gapminder.org/data/  Data on GDP/cap in PPP US$ 2005: Gross Domestic Product per capita by Purchasing Power Parities (in international dollars, fixed 2005 prices). The inflation and differences in the cost of living between countries has been taken into account.

Should we abolish our patent systems?

Holland, a most remarkable country!

In the Netherlands, in 1869 it was decided by the then residing government to abolish the entire Dutch patent system. The wave of a liberal spirit through Western Europe came to full expression in this courageous act of folly. In that time, patents were thought to delimit the free trade, to counteract innovation and to provide an unfair position to the holder of the patent. The patent system was believed to reduce economic prosperity [1].

Well did it really? Let us study some statistics to find some answers! 

Only in 1910, again a new Dutch patent law was adopted, which entered into force in 1912, 43 years after its abolision. Let us study the GDP per capita of the Netherlands and of its neighboring countries in this "patent absent era" to find some indicators: These GDP per capita data are meticulously collected by Gapminder [2]:

  

 In 1860, the GDP/cap in the Netherlands was 10% higher that that of Belgium and 20% higher that that of Germany. In 1913, the GDP/cap in Belgium had surpassed that of the Netherlands by 14%, and the German GDP/cap surpassed that of the Netherlands by 29%. In this period, in the Netherlands GDP/cap grew about 47%, whereas it grew 85% in Belgium and 122% in Germany. 

During the Dutch "patent absent era", the Netherlands had missed a tremendous growth in wealth in comparison to it neighbors. From leading in wealth, it became lagging in wealth.  

Conclusion

So those advocating abolishment of the patent system proved wrong, very wrong indeed! 

Sources

[1] "Nederland, een Volk van Struikrovers?", F. Gerzon, den Haag, (1986), p.10-25

[2] Gap Minder: http://www.gapminder.org/data/  Data on GDP/cap in PPP US$ 2005: Gross Domestic Product per capita by Purchasing Power Parities (in international dollars, fixed 2005 prices). The inflation and differences in the cost of living between countries has been taken into account.

Average family size in the Netherlands

Average family size in the Netherlands

The average family size has decreased ever since the end of the war. However, it appears that the average family size is now stabilizing at 2,30 persons per home. If we divide the number of inhabitants in the Netherlands by the number of houses in the Netherlands the following graph can be shown. [1,2]



The war has had a serious effect on family sizes. Home construction came to a stand still during the war, whereas much houses were destroyed. Only around 1980 the prewar trend had been caught up again.

In 2012, the calculated average family size actually slightly increased, from 2,3019 people per home in 2011 to 2,3025 in 2012. This increment however is so small, that it does not show on the graph.....


Conclusion

Families in the Netherlands have virtually stopped shrinking, an equilibrium has apparently been reached. This has quite a significant effect on the demand for homes and thus on the price of houses.



Sources

[1] Tweehonderd jaar in statistieken in tijdreeksen 1800-1999:  http://www.cbs.nl/NR/rdonlyres/7934A2DE-B87C-4CDF-8BC7-D34F02225620/0/200jaarstattijdreeksen.pdf

[2] 111 jaar statistiek in tijdreeksen 1899-2010:  http://www.cbs.nl/NR/rdonlyres/76A03E00-8D45-498E-9959-9AB7F9FA2DAC/0/2010111jaartijdreeksenpdf.pdf

Predicting population growth

In my earlier blog, I've suggested that population growth can be predicted to a certain extend by previous years unemployment figures. In the Netherlands, according to this relative simple model, the population is predicted to decrease next year:

Just to give this simple and rather bold model some credibility, I have collected some data of some other European countries.

Italy

According to this model, Italian population is to decline from an unemployment level of 11,5%. Currently Italian unemployment is about 12,1% sufficient to have a negative population growth, similar to the Netherlands.

Spain

In Spain, the threshold for a shrinking population appears to be 25% unemployment, which was surpassed in 2011, and indeed last year (2012), the population in Spain shrunk. The number was spot on the (predicted) fitted line.... For 2013 I again expect shrinkage of the number of Spanish inhabitants, since unemployment is currently at 26,3%.

Greece

In Greece, a linear model was difficult to fit before 2010, but here a threshold appears to be around an unemployment rate of about 15%. Last two years, indeed, the population in Greece diminished. It is likely that the number of inhabitants of Greece will again diminish in 2013.  

From this late afternoon comparison with other countries, it appears that the prediction of a shrinking Dutch population is not all that bold.....  Most Dutch people have not yet realized how the world, also in our country is changing.

The figures on which the graphs are based, are from the years 1995 onward, for as far as I could retrieve them from the web.




[1]  Spanish Statistical Office: http://www.ine.es/prensa/np788.pdf

[2] Wikipedia, demographics of Spain: http://en.wikipedia.org/wiki/Demographics_of_Spain

[3] Unemployment figures of Spain: http://www.tradingeconomics.com/spain/unemployment-rate

[4] Population growth figures: http://www.gapminder.org/data/

[5] Unemployment figures of Greece: http://www.tradingeconomics.com/greece/unemployment-rate

[6] Demographics of Italy: http://en.wikipedia.org/wiki/Demographics_of_Italy

Will the population in the Netherlands shrink next year?

Population growth 

The Dutch population growth recently has become strongly correlated to the economic situation of the Netherlands. If we plot for instance the unemployment ratio to the population growth rate of the consequent year starting from the year 2000, the following figure emerges [1,2,4].

The worse the economy is, the lower the growth rate of the population. It is obvious that both migration and birth rates are effected by the economic situation. People tend to move away from downturn economies to more prosperous places. Young families are more likely to have children when they can be afforded, than when unemployment of any of the parents threatens.

From the fitted line model it may be concluded that when the Dutch unemployment surpasses about 8%, the following year a negative growth of the population emerges. Since the unemployment has reached 8,7% in August this year (2013), and since it is still rising, it may be well possible, that in 2014 the total population in the Netherlands will shrink. A shrinking population has not occurred in the Netherlands ever since the year 1848 [2,3].

Predictions of the CBS, the Dutch Statistical Authority are quite different. The CBS expects first shrinkage only after the year 2030.

Let us see what happens next year, I can't wait....

Data:

[1]     CBS Figures on population: http://statline.cbs.nl/StatWeb/publication/?VW=T&DM=SLNL&PA=37943ned&LA=NL (the population growth in 2013 is estimated on doubling first half year growth figure)

[2]     111 Jaar statistiek in tijdreeksen, 1899–2010:
http://www.cbs.nl/NR/rdonlyres/76A03E00-8D45-498E-9959-9AB7F9FA2DAC/0/2010111jaartijdreeksenpdf.pdf

[3]  Tweehonderd jaar statistiek in tijdreeksen 1800-1999:  http://www.cbs.nl/NR/rdonlyres/7934A2DE-B87C-4CDF-8BC7-D34F02225620/0/200jaarstattijdreeksen.pdf

[4] Beroepsbevolking; vanaf 1800: http://statline.cbs.nl/StatWeb/publication/?VW=T&DM=SLNL&PA=71882ned&LA=NL

Innovation drivers

Innovation is the true key to a more prosperous world.

What drives innovation? What enhances human ingenuity, creativity and the persistence to change? Can a government stimulate innovation? To my opinion, any governmental or institutional stimulation of innovation as such is simply impossible. People cannot be forced to innovate, on the contrary, innovation is more likely to flourish when true liberty is provided. Yet, some environments are more likely to evolve into innovation hot spots than others. How come?


Boundary conditions

I am convinced that innovation will evolve only by setting the right boundary conditions. Thus a fertile environment for innovation can be created. if such fertile environment is created, innovation will evolve naturally. It will evolve because it is embedded within our nature as human beings. The following ten conditions may help:

1. Respect of property

Respect of ownership and property is the most important boundary value for innovation and the will and spirit of people to create and enhance their life. If property is seized by any authority without repercussion, any successful initiative will suffer the thread of being seized. Dictatorships that do not respect property are the biggest innovation killers. Fighting these regimes enhances innovation!

2. Personal freedoms

freedom of speech, freedom of travel, freedom of interaction, freedom of religion, freedom of trade, freedom of starting a business, freedom of residence.

These freedoms sound very logical, though we should bear in mind that these freedoms are not that obvious. In western societies, these freedoms predominantly find their roots in the implementation of a trias politica. However, in current (also western) societies, I fear that the trias politica is under severe threat. The power of money is slowly corrupting the legislative and administrative powers and is merging with both of them to become one. This effect induces a thread of a new form of dictatorship, a dictatorship with no face, swallowing substantial amounts of global taxpayers money. This effect implies a severe thread to our most valuable asset: liberty.

The freedom of trade is in a shrinking economy at threat too. Governments trying to safe local manufacturers forget that only global competition urges local manufacturers to innovate and stay ahead. Protection makes any protected industry lazy and reluctant to innovate. In industry a healthy Darwinism is essential for a survival of the fittest, wherein those successful innovations win over the inferior ones.
Freedom of travel is essential for innovative ideas to find fertile soil. By traveling, people spread innovations and thereby enhance the diffusion of innovation. By traveling of people certain hot spots can find new brains, hands, harts and minds needed to reach its full potential.

Freedom to start a business is quite obvious. If one is not allowed to incorporate his innovation, well he will not manage to find investors, employees and most importantly he will not find much clients.

Any restrictions in these freedoms will reduce innovation.


3. Good infrastructure

Throughout historic development, innovative ideas were mostly derived from people sharing knowledge. By interchanging ideas, better ideas evolve. Good communication infrastructure will enhance innovative interaction and help interchange ideas and opinions.

In order to distribute both innovative ideas, innovative services and products based on these innovation a well functioning transport infrastructure is essential. A good infrastructure enhances diffusion of innovation and market penetration.


4. Good education

Without the proper knowledge and insights, obtained in early age, innovators can not come to the best innovations. The knowledge of the state of the art, is essential in obtaining insight in choosing directions for the right innovation. Good education is essential for gathering this knowledge and insights.

Good education is a combination of two things, inspired teachers and motivated pupils. The status of the worlds teaching class needs a serious upgrading, good and inspired teachers are essential for an innovative climate.


5. Innovator role models

In order to inspire young innovators, and to motivate young pupils, successful role models play an important role. They show that innovation can lead to success based on personal performance. Role models innovators can be like Zuckerberg, Mittal, O'leary, Rockefeller.


6. Skill/merit based social hierarchy

If innovators in early stage of their life are confronted with a merit based or skill based social hierarchy, they will incorporate a feeling that investing in knowledge and skills pays off. If a social hierarchy is skill based, future garage type innovators will be inspired and hungry for ascending the social ladder.


7. Poverty and the confidence to change

Poverty is a true innovation booster. As long as the poor innovator sees that by putting efforts in innovating and putting his innovation to the market, he can increase his income level and social status, he most certainly will innovate. If however his situation is hopeless for what ever reasons, because of increasing personal debts, because there is no possibility to start innovating because of lack of one or more personal freedoms, than the innovator is lost.

Not at all rich innovators were starting from a students dormitory or a garage. Now some of them are famous innovation icons.


8. Proper rewards for innovators

A good and functioning reward system for innovators, such as a temporary monopoly is essential for innovators to be able to regain a return on their investments. Temporary monopolies on innovations can encompass copyrights, model protection, patent protection and protection against unfair trade. These rights can temporarily block others from copying the profitable ideas without having to bear the development costs.


9. Fair legal enforcement system for temporary monopolies

If any innovation, being a book, a design a product a theater play becomes successful, others may be seduced to start copying the innovation. A good enforcement system is therefor needed to maintain on a temporary basis the rewards there where they should be, with the innovator.


10. Open markets 

For a good scale up of innovations, an open international market is essential. Innovation will hardly enter any closed market economy.


Any regime, country, state or institution setting these boundary conditions well, will automatically empower innovation, for the benefit of the globe.

Patents on solar cells and EU tariffs

Now that the EU has decided to put tariffs on solar cells from China, let us have a look at what is happening in the patent field in the world [1]:

In 2012, the number of published patent applications on solar cells in China was an astonishing 1814 applications, whereas the corresponding number in the USA was 268 and the number of published European Patent applications was only 95. Nowadays, in China, about 20 times as much patent applications are filed on solar cells as in the "European Patent Area" (38 members).

Not only did China take over the global production of solar cells, it appears from these numbers, that China also took over the innovative lead in this technology.

In 2005, when hardly any Chinese patent on solar panels was filed, less than 30% of the solar cells originated from China, now this number is about 60%. Since the intellectual property on this topic has even stronger departed from the western world, we can only expect the Chinese portion of the global solar cell production to increase even more in both absolute and relative quantities.

Putting import tariffs on a solar cell technology from a country that is apparently ahead and gaining speed in in this technology and production is in my opinion counterproductive. Counterproductive in the sense that local USA and European manufacturers are no longer forced to innovate and can remain producing with a less competitive manufacturing techniques. Thus, it is directly against the benefit of a globalized competitive world. In my view it is also heavily unfair to the Chinese manufacturers who do contribute to a more green world by innovative and efficient manufacture.

The consumers of Europe pay a heavy prize, they find their alternative energy costs increasing, to the benefit of the traditional energy generating sector, being fossil and nuclear power generation. This decision is thus directly antagonizing the abatement of carbon dioxide production. Not the road to be taken from an environmental perspective.

The European union, with its ill decision on import tariffs is thus poisoning the innovative climate, is disadvantaging their own inhabitants both money wise and health wise and is endangering the environment by unnecessary stimulating the planet endangering greenhouse effects.

Being a fervent proponent of the European integration, the decision to put up a tariff structure can thus be seen as a pitch dark page in Europe's integration history. It is step back in a technology sense that we, on a global level cant afford ourselves.

Those responsible for this decision: shame on you! SHAME ON YOU!!!

This decision is to be reverted as soon as possible, for the benefit of Western manufacturers, Chinese manufacturers, the European citizens and the inhabitants of the entire Globe.



Sources and literature

[1] http://worldwide.espacenet.com/?locale=en_EP,  numbers based on search hits of applications, comprising the combination of words "solar panel"in title and/or abstract.

[2] http://en.wikipedia.org/wiki/Photovoltaics Wikipedia article on Solar Cell manufacture