Policymakers must reckon with a world in which companies invest in intangible assets

Martin Wolf:

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This transformation of the economy demands a rethink of public policy. Here are five challenges. First, frameworks for protection of intellectual property are more important. But this definitely does not mean these protections must be still friendlier to the owners of such property. Intellectual property monopolies may indeed be necessary, but, like all monopolies, they can be costly. Second, since synergies are so important, policymakers need to consider how to encourage them, including via policies on telecommunications and urban development. Third, financing intangibles is hard. For traditional collateral-backed bank lending, it is almost impossible. The financial system will need to change. Fourth, the difficulty of appropriating gains from investment in intangibles might create chronic under-investment in a market economy. Government will have to play an important role in sharing the risks. Finally, governments must also consider how to tackle the inequalities created by intangibles, one of which (insufficiently emphasised in this book) is the rise of super-dominant companies.

Messrs Haskel and Westlake have mapped the economics of a challenging new economy. It is a world in which many of the old rules do badly. We need to reimagine policy, carefully.