Over the next twenty years, the global economy will go through what the World Economic Forum calls the “Fourth Industrial Revolution.”
The WEF argues that the fourth industrial revolution is more or less an extension of the third revolution, or the digital revolution.
It’s “characterised by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres,” and by the growth of robotics, artificial intelligence, and the virtual economy.
As those lines become blurred, the question of who actually owns what will become more blurred, too. UBS economist Paul Donovan suggests that the role of intellectual property law will become more important going forward. As he wrote in a note to clients (emphasis ours):
“The importance of rule of law increases in the fourth industrial revolution because the economy is likely to become more virtual, and trade is likely to become more about trade in intellectual property rather than trade in physical product. In this situation protection of intellectual property becomes increasingly important, as this is where the value is likely to lie in the supply chain. Being able to rely on the rule of law to defend intellectual property is likely to encourage innovation, because the innovator has some certainty about being rewarded for their efforts. There is nothing new in this, save that the value of the idea may increase relative to the value of the physical product.
Perhaps more important, legal protection is likely to be necessary to encourage trade. An exporter may prove to be reluctant to sell computer code to a country where there is limited guarantee that the ownership of that computer code will be protected. Absence of legal protection may prove to be a barrier to trade.”
As Donovan himself writes, this isn’t anything new. There’s actually an economic growth theory arguing that part of the success of the first Industrial Revolution can be attributed to the fact that intellectual property rights were finally seriously respected: When people were finally able to rely on the rule of law to defend intellectual property at the beginning of the Industrial Revolution, they were more encouraged to innovate, as they now had some certainty about being rewarded for their efforts.
Of course, there have also been criticisms of the patent system. Northwestern University economic historian Joel Mokyr argued that money was not the sole motivator of innovation and that some people could have been motivated by “honour,” altruism, and the general love of solving hard problems.
Meanwhile, others suggest that there were too many factors involved in the Industrial Revolution to single out the patent system as a major cause of innovation.
But, in any case, it’s still interesting to think about how the protection of intellectual property could affect economic growth and trade, and how it will look going forward as the economy becomes more and more virtual.
Another interesting thing that Donovan touches on is where to draw the line when it comes to individual ownership versus “ownership for humanity” in medical and biological cases. As he wrote in the note (emphasis ours):
“Legal issues are likely to arise as technology creates new products. One medical issue could be ownership of DNA — if someone’s DNA could unlock the cure to cancer, who owns that? The individual, the medical researcher, or humanity as a whole? It becomes an interesting problem.”
In short, the role of law is going to be really interesting as the economy dramatically changes over the next couple of decades.
“Revolutions are always interesting to observe, though often stressful to participate in,” wrote Donovan. “We are about to live in interesting times.”