Davidson and Potts on the global struggle for rents

I recently did a post on the global struggle for rents.  In response, Jason Potts sent me a very interesting paper co-authored by Sinclair Davidson that discusses similar ideas.  Here is one excerpt:

Governments predate on intellectual property. Where they protect it, and seek to do so globally—as the US does when tying intellectual property agreements into trade treaties or other foreign policy sanctions—they do so not out of moral respect for the creative rights of its citizens, but because that offer of protection maximizes the government’s future tax stream (the corollary is that US citizens are taxed by the US government wherever they are domiciled). But where they predate directly, through theft or various mechanisms to minimize its value, they do so because governments are most everywhere the predominant consumers of intellectual property—examples are in socialized healthcare, infrastructure, media and communications, and defense, all of which are technology intensive.

The global distribution of intellectual property, and of firms and industries that are heavily reliant on it, seems to conform to our models predictions. Intellectual property intensive industries predominantly locate in institutionally robust tax havens, such as the US, Switzerland, and more recently Singapore and Ireland.



8 Responses to “Davidson and Potts on the global struggle for rents”

  1. Gravatar of foosion foosion
    5. September 2016 at 09:10

    Intellectual property moves to tax havens because tax lawyers and accountants have figured out that’s the best way to avoid income taxes. Simplistically, have profitable parts of the business which can’t easily move pay the IP company in a tax haven, effectively moving profit to the tax haven.

    Perhaps govts protect IP because IP owners are rich and powerful businesses, and rich and powerful businesses tend to get what they want from politicians.

    If govts wanted to maximize tax revenue, they could raise rates. In the US, at least, there’s no good evidence that individuals would move in order to avoid taxes in numbers sufficient to offset higher rates (at least not anywhere near current levels).

    OTOH, consider Delaware’s corporate law. It’s the home to a very large number of corporations. Its law is very corporation (management) friendly and it gets a lot of revenue from taxes due to companies incorporating there.

    (I didn’t read the whole paper, so apologies if it dealt with these issues.)

  2. Gravatar of H_WASSHOI (Maekawa Miku-nyan lover) H_WASSHOI (Maekawa Miku-nyan lover)
    5. September 2016 at 09:23

    I wonder how will be PER of Global-Rent index futures
    If they are holding massive cash, capital cost will soar when interest rate raised

  3. Gravatar of ChargerCarl ChargerCarl
    5. September 2016 at 11:45

    Raghuram Rajan being dumb, again:


  4. Gravatar of Major.Freedom Major.Freedom
    5. September 2016 at 19:49

    Governmental rent seeing, positively identified as bad and advocated against.

    Governmental bank rent seeking, not positively identified as bad and not advocated against.

  5. Gravatar of Benjamin Cole Benjamin Cole
    5. September 2016 at 20:56

    In some ways I agree with sentiments of this article.

    But one could also posit that the US military has created a global platform for multinational commerce from which a company like Apple benefits, but then avoid paying taxes for.

  6. Gravatar of Ray Lopez Ray Lopez
    6. September 2016 at 01:21

    Good post by Sumner. Another point not mentioned is that in the USA you cannot sue either states nor the Federal government for IP theft due to statutory immunity (in certain cases the US gov’t will pay you a ‘reasonable royalty’ which is usually too low). Further, it’s been said for true pioneering inventions the patentee makes less than 5% of the true worth of the invention to society (and that’s a best case). IMO the biggest tragedy is lack of a good IP protection scheme. If we had one, we’d have flying cars (and more) by now.

    When Sumner sticks to micro, he makes sense. When he moves to macro, he says crazy things like “printing money to finance a deficit”–that’s a knee slapper!

  7. Gravatar of engineer engineer
    6. September 2016 at 17:28

    “Further, it’s been said for true pioneering inventions the patentee makes less than 5% of the true worth of the invention to society (and that’s a best case).”

    Yes, Sheldon Kaplan RIP. I wish you I could give your family 5% of the senator’s daughter, turned gov’t lobbyist, turned Mylan CEO’s salary.

  8. Gravatar of Ray Lopez Ray Lopez
    7. September 2016 at 05:21

    @engineer, thanks, the two articles that encapsulate what you say are found here:



    I agree with you, and I trust you realize that Sheldon Kaplan’s EpiPen inventions are well off patent by now (it’s been thirty years since he invented them, and patents only last 17 to 20 years). No doubt the trademark is still active, since they can last forever.

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