Search

We offer a theory that explains the wide variance in levels of economic development around the planet, accounts for its geographic clustering, and makes plain why these patterns only emerged over the past two centuries. Its mechanics focus on the fundamental challenge of survival that faced all human societies prior to the 19th century: insuring against starvation. Local factor endowments conditioned how societies could respond to that challenge, thereby shaping pre-1800 forms of social organization. Those forms of social organization, in turn, conditioned how quickly societies could respond to the next great challenge they all faced: absorbing rapidly a broad suite of mutually dependent, post-1800 technologies that were crucial to economic development and geopolitical competition in the modern world. We develop novel datasets to put the predictions of the theory to the test. We find that a vector of exogenous factors that were binding constraints on food production, transport, and post-harvest storage (conditional on 18th century technologies) within the densely populated nuclei from which nation states later emerged account for 60 percent of the cross-country variance in per capita GDP today. Importantly, we also find that this vector of exogenous factors accounts for progressively less of the variance in levels of economic development (as measured by urbanization ratios) going back in time, such that circa 1500-1700 they account for almost none of the variance. We also discover that a particular complex combination of ecological factors that permitted some societies to insure against starvation through local trade is associated with faster economic growth from 1800 to 2000, faster development of market towns from 1500 to 1800, higher levels of investment in trade-related human capital circa 1800, faster absorption of 19th century technologies, and lower probability of being colonized.

We argue that in adjudicating SEP royalty rates, courts should do what they do in pricing other assets or the flows of income they produce: rely on information from the market about the value of comparable assets or their rental rates. The comparables method is based on price theory, which explains where value comes from and how it is distributed among factors of production, including intellectual property. Courts should not employ the “bottom up” or “top down” techniques of royalty apportionment. Both are based on the theory of patent holdup and royalty stacking, which assumes that any observed royalty is the result of “excessive royalties” wrought by the additional monopoly power conferred by standardization. This theory has been shown to be logically inconsistent and logically incomplete, and its predictions have been rejected by systematic empirical tests. As a practical matter, the bottom up technique cannot actually be operationalized. Top down techniques can be operationalized, but employing them requires a court to reject the implications of price theory.

A large literature asserts that standard essential patents (SEPs) allow their owners to “hold up” innovation by charging fees that exceed their incremental contribution to a final product. We evaluate two central, interrelated predictions of this SEP hold-up hypothesis: (1) SEP-reliant industries should experience more stagnant quality-adjusted prices than similar non-SEP-reliant industries; and (2) court decisions that reduce the excessive power of SEP holders should accelerate innovation in SEP-reliant industries. We find no empirical support for either prediction. Indeed, SEP-reliant industries have the fastest quality-adjusted price declines in the U.S. economy.

Why do individual patent holders assign their patents to "trolls" rather than license their technologies directly to manufacturers or assert them through litigation? We explore the hypothesis that an asymmetry in financial resources between individual patent holders and manufacturers prevents individuals from making a credible threat to litigate against infringement. First, individuals may not be able to cover the upfront costs associated with litigation. Second, unsuccessful litigation can result in legal fees so large as to bankrupt the individual. Therefore, a primary reason why individual patent holders sell to PAEs is that they offer insurance and liquidity. We test this hypothesis by experimentally manipulating these financial constraints on a representative sample of inventors and entrepreneurs affiliated with academic institutions that are particularly known for their innovative activity: Stanford University and the University of California, Berkeley. We find that in the absence of these constraints, subjects were significantly less likely to sell their patent to a PAE in a hypothetical scenario. Furthermore, treatment effects were significant only for subjects who were hypothesized to be most sensitive to these constraints.

Why are some societies characterized by enduring democracy, while other societies are either persistently autocratic or experiment with democracy but then quickly fall back into autocracy? I find that there is a systematic, non-linear relationship between rainfall levels, human capital, property rights institutions and regime types such that stable democracies overwhelmingly cluster in a band of moderate rainfall (540 to 1200 mm of precipitation per year). I advance a theory to explain this outcome that focuses on how differences in the crops that could be grown in different rainfall bands affected societies’ institutional paths of development. I then test that theory against a unique cross-country dataset, a comparison of democracies and autocracies in antiquity, and a series of natural experiments.This paper builds upon an earlier collaboration with Victor Menaldo (University of Washington). Our joint paper, “Rainfall, Human Capital, and Democracy,” is available on SSRN. I also gratefully acknowledge discussions with Ran Abramitzky, Isa Chavez, Roy Elis, Stanley Engerman, Rob Fleck, Avner Greif, Tim Guinnane, Mark Kleinman, Dorothy Kronick, Naomi Lamoreaux, Ross Levine, Joseph Manning, Ian Morris, Josh Ober, Robert Packenham, Paul Sniderman, William Summerhill, and Barry Weingast. Nicholas Baldo, Kevin Cook, Roy Elis, Anne Given, and Scott Khamphoune, Dorothy Kronick, and Cole Lupoli, provided invaluable research assistance.

Why are some societies characterized by enduring democracy while other societies are persistently autocratic? We show that there is a systematic, non-linear relationship between rainfall levels and regime types in the post-World War II world: stable democracies overwhelmingly cluster in a band of moderate rainfall (550 to 1300 mm of precipitation per year); persistent autocracies overwhelmingly cluster in deserts and semi-arid environments (0 to 550 mm per year) and in the tropics (above 1300 mm per year). We also show that rainfall does not work on regime types directly, but does so through the its impact on the level and distribution of human capital. Specifically, crops that are both easily storable and exhibit modest economies of scale in production grow well under moderate amounts of rainfall. The modal production unit is a family farm that can accumulate surpluses. In such an economy there are incentives to make intergenerational investments in human capital. A high level and broad distribution of human capital makes democratic consolidation more likely.

This Essay surveys recent developments across the fields of finance and innovation to highlight some common themes concerning the importance of property rights to economic success. Society regularly makes choices when shaping the precise contours of the legal institutions that govern the behavior of market actors, often in response to high profile issues like the collapse of Enron and the patenting of life-saving AIDS drugs. Recognizing that no set of legal institutions or related enforcement mechanisms will be perfect, this Essay explores some particularly helpful institutional features based on property rights that too often are overlooked by policy makers and commentators, even though these property-based institutional features have long been associated with economic success in a number of diverse settings.

After the 1995 crisis, the Mexican banking system experienced significant changes in bank accounting standards. Most of these changes took place between 1996 and 2001, and had a significant impact in the structure and interpretation of financial information of banks. This document explains the major changes on bank accounting, their purpose and structure, and discusses their impact on financial information reported by Mexican banks. It also provides the English equivalent of the major accounting terms used by Mexican banks. The main purpose of this document is to provide a standardized guide to better understand financial information produced before and after the crisis, within the current context of internationalization of Mexican banks' ownership.