Nurturing the Creative Roots of Growth

Governments all over the world try to encourage economic growth. But growth--with the high employment and rising living standards that politicians crave--results from creativity. As people pursue new directions in business, science, and the arts, they develop innovations and improvements that drive the economy forward. So how, beyond mere rhetoric, can governments promote creativity?

Intellectual property law--patents and copyrights--is the clearest example of a government policy designed to stimulate creativity. The idea dates back to renaissance Italy, but modern patent law originated in England, where, in 1624, the Statute of Monopolies was enacted to grant a 14-year exclusive right to the "true and first inventor" of any manufacturing method. The law benefited inventors in a way that tied an invention's reward to its economic dividends.

This approach can result in large rewards for important inventions--precisely what is needed if maximum incentive is to be given to people to develop bold new concepts--and has served us well over the centuries since 1624. But until recently, patent law was based on a rather narrow definition of creativity, usually the kind embodied in the invention of devices or industrial processes.

In recent years, however, patent law widened enormously with the acceptance, in the United States, Australia, Japan, and Korea, of business-method patents --that is, patents not on a technological process but on a way of doing business. The turning point in the US came in 1998, when a federal court decision upheld a patent on an accounting system, which launched a flood of business-method patents--over a thousand a year in 1999 and 2000.