Search the archive.

Jeff Falk, October 28 2020, “US wealth, income inequality has declined, Baker Institute expert finds,” Rice University, https://news.rice.edu/2020/10/28/us-wealth-income-inequality-has-declined-baker-institute-expert-finds-2/

Analysis of Federal Reserve survey data shows U.S. wealth inequality has declined for the first time in nearly 30 years, while income inequality has seen its largest decline in three decades, according to a new working paper from Rice’s Baker Institute for Public Policy.

Is a new Cold War looming — or already present — between the United States and China? Many analysts argue that a combination of geopolitics, ideology and competing visions of “global order” are driving the two countries toward emulating the Soviet-U.S. rivalry that dominated world politics from 1947 through 1990.

But such concerns are overblown. Here are four big reasons why.

Medin 20 [John Theodore Medin, Johns Hopkins University, Master of Arts in Government. Master’s Thesis. "RISING TENSIONS: THE EFFECTS OF CHINA’S RISE ON THE UNITED STATES, CHINA’S REGIONAL NEIGHBORS, AND THE INTERNATIONAL SYSTEM." https://jscholarship.library.jhu.edu/bitstream/handle/1774.2/62699/MEDIN-THESIS-2020.pdf?sequence=1&isAllowed=y]

The international system, which can be defined as the western-backed liberal system that has existed since the end of World War II, is being impacted in subtle ways due to China’s rise. China's rise will harm the current western-backed international system because China has utilized its newfound strength the erode the liberal norms and values which the system is based on. China has looked for ways to contribute to the international system while altering the system to suit its ideals of non-intervention in the domestic affairs of sovereign nations. China has used its growing influence to curtail and limit attempts by the international system to deal with a variety of issues, including human rights. It has also looked for ways to undermine the Washington Consensus, which advocates for political and economic reforms in nations, for its own Beijing Consensus that only focuses on the economic growth of nations. This new concept has further undermined the norms and values of the international system as other nations can look for aid and funding from an alternative source which is not as concerned about social and political reforms such as environmental protections, anti-corruption measures, and human rights. However, the international system is still principally controlled by the Western powers of the United States and the European Union who maintain a distinct advantage over China economically, politically, and militarily. Their extensive system of alliances, which have been cultivated over the last several decades, also means that the international system has a loyal following of supporters committed to its maintenance and continuance. China's rise will allow it greater power and flexibility to allow it to alter the international system along the edges. However, overall, the rise of China will have a limited adverse impact on the international system as China alters the system around the edges by looking for ways to erode the values and norms, such as human rights and democracy, using its influence. However, it will not be a severe threat to the existing global order or its institutions because it has an interest in maintaining the status quo and does not have the power to alter it drastically.

There are a number of formidable restraints in place to keep the peace. The United States has worked hard over the decades to build these barriers—often as part of the very engagement strategy that Mearsheimer criticizes. These bulwarks have helped preserve peace and promote prosperity for the last 70 years, and they are still strong enough to prevent a U.S.-Chinese conflict. Although accidents or incidents connected to military brinkmanship may occur, they would almost certainly not lead to a wider war. That would require something exceedingly unlikely: the simultaneous failure of every restraint.

First, bilateral diplomacy would have to break down. Engagement is the opposite of estrangement, which describes the absence of U.S.-Chinese relations from 1949 to 1972. The purpose of engagement is to forestall misperceptions, provide reassurance, and prevent conflict. It is true that diplomacy and communication between China and the United States have been anemic for the past five years. And it is difficult to discern authoritative policy amid the current cacophony of diplomatic posturing on Twitter and elsewhere, creating an environment ripe for confusion and overreaction. But these deficiencies are not structural; they can be remedied. If top-level leaders in both countries consistently communicate and work to reduce public posturing, as they should, then the diplomatic barriers to war can be reinforced.

Wu Riqiang, “Assessing China-U.S. Inadvertent Nuclear Escalation,” International Security, Volume 46, Number 3, Winter 2021/2022, The MIT Press, https://direct.mit.edu/isec/article-abstract/46/3/128/109669/Assessing-China-U-S-Inadvertent-Nuclear-Escalation?redirectedFrom=fulltext

No One Would Go Nuclear

Some observers believe that how the United States handles the Ukraine crisis will be closely watched by China. That is true. But, as this paper argues, the Ukraine crisis will not influence Chinese decisions on whether or not to launch a full-scale amphibious invasion because, given the force demands, China simply lacks the capacity to do so for the foreseeable future.

The current and former heads of Indo-Pacific Command have warned about China’s building the necessary forces to invade and conquer Taiwan, possibly by decade’s end. Given China’s long-standing determination to make Taiwan part of the mainland and achieve “one China,” a military takeover of Taiwan sounds plausible

Beijing already has reasons to avoid a new geopolitical crisis. After all, Xi is already contending with many challenges at home, including dramatically slower economic growth (in part due to Beijing’s failed “zero COVID” policies), an increasingly skeptical set of trading partners, and the biggest aging demographic crisis of any nation in history. And these leave aside the dire economic implications of a Chinese invasion of Taiwan: beyond the costs of a war, if China cannot get semiconductors from Taiwan, it would precipitate a collapse of the 70 percent of the world’s electronics that China produces and largely exports. If the United States and other countries lose access to semiconductors, a global depression will result. An unsuccessful effort to seize Taiwan, on top of these other challenges, might mean the end of Xi’s tenure in power and, possibly, the end of the Chinese Communist Party as the ruling regime.

The Assumption That Small Firms Are Inherently More Innovative Than Large Firms Is Not Borne Out by the Evidence

One core argument made by anti-monopolists who oppose large companies and argue that kill zones and killer acquisitions are real and harmful is that small firms are inherently more innovative than large firms. As FTC Commissioner Christine Wilson argued, “[M]any today believe that small firms are inherently more innovative than large ones, so that the acquisition of a small firm by a large one necessarily reduces innovation.”45 For example, Tim Wu recently testified before Congress that innovation in technology sectors would increase if government imposed greater regulations and increased antitrust enforcement because “[o]ver the last century, competitive, open sectors—ecosystems—have proved themselves superior to those monopolized or dominated by a ‘big three’ or ‘big four.’”46

In this study, we theorize and show how firms targeted by NPEs can reduce their litigation risk by shifting their innovation strategy. Specifically, after the initial NPE lawsuits, target firms will draw more upon their in-house technologies to reduce the potential legal ground for NPE lawsuits. Furthermore, non-target firms in related technology areas tend to shift the locus of their innovation activities away from those of the target firms to avoid the areas with high NPE litigation risks. The effects are more pronounced when R&D expenses for the patented technologies are higher and when the product markets are more competitive. Taken together, these results lend further support to the notion that firms seek to escape the patent trolls by isolating themselves in the network of technology. The findings from this paper yield important managerial implications. This study sheds light on the impact of patent infringement lawsuits initiated by NPEs on firm innovation strategies and interfirm innovation activities. Our results show that NPE litigations could interrupt the accumulation and build-up of follow-on technology, which disrupts technological development in the industry and is detrimental to inter-firm collaboration and society. Indeed, decision-makers and managers in firms should be cognizant of the impact of NPE litigations and how anti-patent troll laws can help enhance collaboration among firms and facilitate the systematic development of valuable technologies by allowing firms to build on one another’s patented technologies. This would allow them to make better plans and more informed decisions.

Several previous studies have found that prevailing patentees still receive permanent injunctions approximately three-quarters of the time following eBay. One article published in 2008 found that district courts awarded permanent injunctions in approximately 78% of cases.129 Another study of injunction decisions through May 2009 disclosed that permanent injunctions were granted 72% of the time.130 Similarly, in a 2012 article, Colleen Chien and Mark Lemley reported that “courts have granted about 75% of requests for injunctions, down from an estimated 95% pre-eBay.”131 A recent paper by Kirti Gupta and Professor Jay Kesan found that permanent injunction motions between eBay and 2012 were granted 80% of the time.132 Finally, a database of permanent injunction decisions hosted by the University of Houston Law Center’s Institute for Intellectual Property and Information Law indicates permanent injunctions have been granted 75% of the time from eBay through 2013.133 Although patentees as a whole appear to enjoy a relatively high success rate in obtaining injunctive relief following eBay, prior commentators have noted that patent holders who primarily engage in licensing and litigation— commonly referred to as PAEs134—are much less successful.135 For instance, Chien and Lemley found that through August 2011, district courts granted injunctions to PAEs only 26% of the time—and only 7% of cases where the injunction request was contested by the infringer.136 Similarly, a report by the Federal Trade Commission found that “non-practicing patentees have been less likely than practicing patentees to receive injunctions.”137 Many of these decisions relied on the reasoning in Justice Kennedy’s concurrence suggesting that patent holders who do not practice their patents generally should not receive an injunction because it would give them “undue leverage” in licensing negotiations.138

A strong and inclusive economy is essential for American national security and global leadership. As the nation seeks to return from a historic economic crisis, the national security community should support an equitable recovery that helps every worker adapt to the seismic shifts underway in our economy. Broadly shared economic prosperity is a bedrock of America’s economic and political strength—both domestically and in the international arena. A strong and equitable recovery from the economic crisis created by COVID-19 would be a powerful testament to the resilience of the American system and its ability to create prosperity at a time of seismic change and persistent global crisis. Such a recovery could attack the profound economic inequities that have developed over the past several decades. Without bold action to help all workers access good jobs as the economy returns, the United States risks undermining the legitimacy of its institutions and its international standing. The outcome will be a key determinant of America’s national security for years to come. An equitable recovery requires a national commitment to help all workers obtain good jobs—particularly the two-thirds of adults without a bachelor’s degree and people of color who have been most affected by the crisis and were denied opportunity before it. As the nation engages in a historic debate about how to accelerate economic recovery, ambitious public investment is necessary to put Americans back to work with dignity and opportunity. We need an intentional effort to make sure that the jobs that come back are good jobs with decent wages, benefits, and mobility and to empower workers to access these opportunities in a profoundly changed labor market. To achieve these goals, American policy makers need to establish job growth strategies that address urgent public needs through major programs in green energy, infrastructure, and health. Alongside these job growth strategies, we need to recognize and develop the talents of workers by creating an adult learning system that meets workers’ needs and develops skills for the digital economy. The national security community must lend its support to this cause. And as it does so, it can bring home the lessons from the advances made in these areas in other countries, particularly our European allies, and consider this a realm of international cooperation and international engagement. Shared Economic Prosperity Is a National Security Asset A strong economy is essential to America’s security and diplomatic strategy. Economic strength increases our influence on the global stage, expands markets, and funds a strong and agile military and national defense. Yet it is not enough for America’s economy to be strong for some—prosperity must be broadly shared. Widespread belief in the ability of the American economic system to create economic security and mobility for all—the American Dream— creates credibility and legitimacy for America’s values, governance, and alliances around the world. After World War II, the United States grew the middle class to historic size and strength. This achievement made America the model of the free world—setting the stage for decades of American political and economic leadership. Domestically, broad participation in the economy is core to the legitimacy of our democracy and the strength of our political institutions. A belief that the economic system works for millions is an important part of creating trust in a democratic government’s ability to meet the needs of the people. The COVID-19 Crisis Puts Millions of American Workers at Risk For the last several decades, the American Dream has been on the wane. Opportunity has been increasingly concentrated in the hands of a small share of workers able to access the knowledge economy. Too many Americans, particularly those without four-year degrees, experienced stagnant wages, less stability, and fewer opportunities for advancement. Since COVID-19 hit, millions have lost their jobs or income and are struggling to meet their basic needs—including food, housing, and medical care.1 The crisis has impacted sectors like hospitality, leisure, and retail, which employ a large share of America’s most economically vulnerable workers, resulting in alarming disparities in unemployment rates along education and racial lines. In August, the unemployment rate for those with a high school degree or less was more than double the rate for those with a bachelor’s degree.2 Black and Hispanic Americans are experiencing disproportionately high unemployment, with the gulf widening as the crisis continues.3 The experience of the Great Recession shows that without intentional effort to drive an inclusive recovery, inequality may get worse: while workers with a high school education or less experienced the majority of job losses, nearly all new jobs went to workers with postsecondary education. Inequalities across racial lines also increased as workers of color worked in the hardest-hit sectors and were slower to recover earnings and income than White workers.4 The Case for an Inclusive Recovery A recovery that promotes broad economic participation, renewed opportunity, and equity will strengthen American moral and political authority around the world. It will send a strong message about the strength and resilience of democratic government and the American people’s ability to adapt to a changing global economic landscape. An inclusive recovery will reaffirm American leadership as core to the success of our most critical international alliances, which are rooted in the notion of shared destiny and interdependence. For example, NATO, which has been a cornerstone of U.S. foreign policy and a force of global stability for decades, has suffered from American disengagement in recent years. A strong American recovery—coupled with a renewed openness to international collaboration—is core to NATO’s ability to solve shared geopolitical and security challenges. A renewed partnership with our European allies from a position of economic strength will enable us to address global crises such as climate change, global pandemics, and refugees. Together, the United States and Europe can pursue a commitment to investing in workers for shared economic competitiveness, innovation, and long-term prosperity. The U.S. has unique advantages that give it the tools to emerge from the crisis with tremendous economic strength— including an entrepreneurial spirit and the technological and scientific infrastructure to lead global efforts in developing industries like green energy and biosciences that will shape the international economy for decades to come.

Beijing’s rise increasingly has led to fears and predictions of conflict. The broad range of philosophical and economic controversies are unlikely to lead to war. The struggle over territory is much more dangerous. The U.S. has security treaties with Tokyo and Manila, which Washington officials have stated cover contested islands. Whether any particular administration would respond militarily to a shoot‐​out over the Senkaku/​Diaoyu Islands or Scarborough Shoal/​Huangyan Island, however, remains uncertain.

Most dangerous is Taiwan, over which Washington retains a policy of “strategic ambiguity,” meaning a formal refusal to commit to the island’s defense. However, sentiment among the U.S. foreign policy establishment, indecorously nicknamed “the Blob,” appears to run strongly in favor of backing Taiwan militarily. The main disagreement in Washington today is over whether to move to “strategic clarity,” not to eschew military involvement. Indeed, President Joe Biden has four times stated that his administration would defend the island state; his aides’ attempt to walk back his comments fooled no one, least of all the Chinese.

Not so long ago there was a widespread assumption that China’s economy surpassing that of the US to become the world’s largest was both inevitable and imminent. This was expected to be a major historical event, heralding a shift in geopolitical power to the East. This was not the first time in recent decades that an East Asian economic surpassing of the US had been expected. In the 1970s and early 1980s there was much talk of how Japan’s economy would become the world’s largest, and many a sci-fi movie of the era imagined Japanese economic and cultural dominance in the future.

Yet of course that never happened. Is the case of China different? It increasingly appears not. Or at least, if China’s economy does have a period as the largest, that increasingly seems likely to be very short-lived.

It is often argued that a country’s long-term performance depends to a significant extent on the quality of its institutions, including its political and legal institutions (Acemoglu, Johnson, and Robinson 2005). Economic research mostly focuses on explaining long-term differences in growth rates. As seen above, some researchers argue that high inequality will reduce growth rates, among other things, because it can worsen institutional quality. However, besides facilitating economic growth, public institutions have other functions that matter from a long-term perspective. For example, disaster preparedness, education, public health, foreign policy, science policy, and many other areas could influence long-term trajectories. If such things go badly, they could increase existential risk. Conversely, good institutions will help reduce existential risk. For many existential risk reduction strategies likely require public goods and collective action, which in turn require good public institutions (among other reasons, because some such public goods are unlikely to be provided by markets). So, it seems reasonable to assume that, with most other societal goals, good institutions can help deliver existential risk reduction. Here is a cheesy analogy: targeted actions like washing your hands regularly or getting a flu shot can reduce your risk of dying from an infection. But you will also do well investing in a strong immune system, as that is an ‘all-purpose goods’ in lowering your risk of dying from any bacterium or virus. Investing in good institutions might similarly be an all-purpose-good: rather than tackling individual sources of existential risk directly, we improve conditions for tackling whatever existential risks may come our way. There are at least two reasons why higher inequality could decrease institutional capacities for longtermist public goods. First, there is some direct evidence that, whatever the causal pathway, inequality reduces institutional quality (which in turn typically leads to more inequality) (Chong and Gradstein 2007; Savoia, Easaw, and McKay 2010). Second, high inequality can lead to elite capture. Empirical work on studying political and de facto legal power is difficult, yet there is a growing consensus that high levels of inequality can lead to elite capture and thereby reduce the long-term quality of legal and political institutions (Acemoglu and Robinson 2008; 2013; Bartels 2018; Bavel 2016; Chong and Gradstein 2007; Cummins and Rodriguez 2010; Savoia, Easaw, and McKay 2010). Further, if institutions are disproportionately geared towards elite interests, then they might be less likely to be geared towards positive longterm trajectories. We might see more rent-seeking and less investment in public goods. Moreover, if elite capture is strong enough, such capture, and the potential inequality that comes with it, can intensify going forward (Chong and Gradstein 2007). Now, one might object and wonder whether elite interests and longtermist interests will necessarily be misaligned. Could an enlightened elite not even be more longtermist than a more democratic system? Here are two potential arguments. First, wealthy donors fund a significant part of research and direct action on existential risk and longtermism (the Open Philanthropy Project, for example). Indirectly, inequality might thus reduce existential risk through such funding. Second, rich people might have a lower rate of pure time preference than less well-off people, which would make them more naturally aligned with investing in long-term causes. In response to the first argument, remember we here focus on income inequality reductions. Private funding only requires ‘enough’ wealth inequality going forward, it need not require elite capture. And reducing income inequality is unlikely to eradicate the required wealth inequality and the existence of big donors. In response to the second argument, we are somewhat sceptical that elite capture would translate a lower impatience rate into longtermist strategies in policy. A successful 14 transmission would require influence to be systematic and well-coordinated across time and, probably, across different elite actors. Yet lobbying and elite influence must often capitalise on shorter windows of opportunities, which makes well-coordinated intertemporal, and positive longtermist, policy capture less likely. Of course, such considerations are speculative. But, in any case, we think that, on balance, there are stronger reasons to believe elite capture would increase – rather than decrease – existential risk. First, elite capture often comes with rent seeking, which lowers institutional quality (Chong and Gradstein 2007). Second, industries like oil, gas, weapons and others are often concentrated and well organised in exerting influence in law and legislation. Their interests and influence overall are likely to be more short-term than longtermist. Third, recent decades have seen a shift towards a stronger shareholder value orientation in corporate governance. A common criticism of this shift is that it incentivises more short-term decisions. Accordingly, corporate influence into public institutions will likely display short-termist bias too. Finally, we can of course imagine that ‘prolongtermist elite capture’ could happen and gamble on that possibility. However, if strong democratic and legal oversight and the power to check elite influence is lost, we might struggle to reverse our gamble. Second, high inequality is likely to reduce social capital and trust (Alesina and La Ferrara 2002; Knack and Keefer 1997; Rothstein and Uslaner 2005). Social capital and trust in public institutions in turn are important for effective public goods provision (Knack and Keefer 1997; Beugelsdijk, Groot, and Schaik 2004). Effective public goods provision, in turn, is important for (some) effective measures to reduce existential risk (and, more generally, to coordinate towards more valuable long-term trajectories). Therefore, high inequality could reduce societies’ capacities to effectively respond to large-scale challenges like existential risk. Finally, some limited direct evidence suggests societies with higher social capital and lower inequality exhibit better preventive and adaptive outcomes for environmental risks and can show greater resilience to external shocks (Bavel and Curtis 2019; Kahn 2005). For example, Matthew Kahn provides some evidence that more equal countries, when controlled for GDP, have significantly lower death rates in natural catastrophes (Kahn 2005). While smaller natural catastrophes are different from global catastrophic risk scenarios, resilience in such events might be somewhat indicative of societies’ resilience to catastrophic risks. So, good social and institutional conditions could help reduce existential risk. Consider next how, conversely, bad conditions might increase existential risk. A key driver of existential risk is conflict, both between and within nation-states (or what (Ord 2020, 175–79) calls a ‘risk factor’). Conflicts and arms races raise human-induced existential risks such as nuclear war, the outbreak of a bioengineered virus or the launch of misaligned artificial intelligence. Note that an existential catastrophe could be set in motion either purposefully or accidentally. Both are more likely during conflict. Nuclear warheads, cyberweapons, and bioweapons could all be used purposefully to attack enemy states, leading to potential global escalation. But as past nuclear incidents and close calls during the Cold War show, arms races also increase the probability of accidental catastrophes (Schlosser 2013). Esteban and Schneider find that formal and empirical evidence suggests that political and social polarization increases the risk of violent conflict, both intra-nationally and internationally (Esteban and Schneider 2008). If income inequality increases polarization, inequality may indirectly drive existential risk. Indeed, recent evidence suggests that income inequality can increase the degree of polarization between groups of citizens. Bonica et al. find that the degree of polarization within the US House of Representatives, for example, is accurately tracked by domestic income inequality, with correlation coefficients rising up to 0.95 depending on the chosen time-period (Bonica et al. 2013, 105–8). Of course, correlation does not imply causation and the correlation is likely at least partially the result of reverse causation or a confounding variable. That said, we should assign a non-negligible credence to inequality partially causing polarization. Moreover, inequality and polarisation might also play some role in getting polarising and populist candidates elected (Piketty 2018). In a preliminary analysis of US election data, Darvas and Efstathiou find that more unequal states were more likely to vote for Donald Trump, after controlling for variables such as income, race and education (Darvas and Efstathiou 2016). Populist politicians – like Trump, Bolsonaro and others – are likely bad news for existential risk reduction. They are less cooperative in delivering regional and global public goods and typically prefer riskier, and more conflictual and nationalistic policy styles.

The result of four decades of Chicago School antitrust theory and policy on industrial structure in the United States can now be seen in today’s increased levels of industrial concentration. As Jonathan Baker and Steven Salop (2015) contend, the United States now has a “market power” problem which contributes to slower overall growth and increased economic inequality.10 Barack Obama’s Council of Economic Advisors (CEA 2016)highlighted its concern with decreased competition in the U.S. economy. Gustavo Grullon, Yelena Larkin, and Roni Michaely (2019) also report that, over the last two decades, more than 75% of U.S. industries have seen an increase in concentration levels, with an average increase in concentration of 90% (See also Gutierrez and Philippon 2017; Autoret al. 2017; Gao, Ritter, and Zhu 2013; Doidge, Karolyi, and Stulz 2017; Kwoka 2017).Thomas Philippon (2019) supports these findings, arguing that laxer scrutiny and “excessive tolerance” 11 of mergers in the United States has contributed to a rise in the pace of merger activity and further consolidation of firms (i.e., the Chicago School of Antitrust).What are the implications of this increase in industrial concentration for corporations and for labor? Clearly, corporations have done well. Several studies have documented higher returns to capital from higher rates of market power. German Gutierrez and Thomas Philippon (2017) find that the profit share has increased across all industries since the 1970s,consistent with a rise in concentration and market power. The CEA brief (2016) identified higher economic rents especially for firms at the ninetieth percentile. Grullon, Larkin,and Michaely (2019, 698–699) identify “higher returns on assets . . . driven primarily by a given firm’s ability to extract higher profit margins,” especially for firms in industries with increasing concentration levels. 12 Although corporations have enjoyed these higher returns to capital, labor has lost ground over the years: as Joseph Stiglitz (2012) argues, the increase in economic rents has shifted income from labor and toward capital, increasing economic inequality (See also Furman and Orszag 2018). David Autor et al. (2017) also conclude that industries with the largest increases in concentration have seen the largest declines in the labor share. Kaushik Basu and Joseph Stiglitz (2016) find that the increase in economic rents is in turn causing an increase in wealth inequality.

The lack of resilient supply chains in the United States (and around the world) was masked, until a global shock came among. That Covid would cause such a shock was obvious; as I noted above, before the pandemic hit in force, I predicted it. And now, the pandemic is introducing shortages into our politics for the first time in living memory, largely because our highly thinned out supply chains are no longer resilient.

Forty years of consolidation suddenly met with a pandemic that required a social flexibility that our monopolistic commercial systems can no longer provide.

Economic recovery efforts since the 2008-2009 global financial crisis have mainly depended on unconventional monetary policies. As fears rise of yet another international financial crisis, there are growing concerns about the increased possibility of large-scale military conflict.

More worryingly, in the current political landscape, prolonged economic crisis, combined with rising economic inequality, chauvinistic ethno-populism as well as aggressive jingoist rhetoric, including threats, could easily spin out of control and ‘morph’ into military conflict, and worse, world war.

Weakened systems only require the smallest shock to edge past the tipping point of resilience. In the second time frame covered by the survey, respondents were asked to rank the likely impact of risks in the next two years. The results suggest that corrosive socioeconomic vulnerabilities will be amplified in the near term, with looming concerns about an Economic downturn (Chapter 1.5), resurgent risks such as Interstate armed conflict (Chapter 1.4), and rapidly evolving risks like Misinformation and disinformation (Chapter 1.3).

As discussed in last year’s Global Risks Report, less predictable and harder-to-handle inflation heightens the risk of miscalibration of efforts to balance price stability and economic growth (Chapter 1.5: Economic uncertainty). Economic risks are notable new entrants to the top 10 rankings this year, with both Inflation (#7) and Economic downturn (#9) featuring in the two-year time frame (Figure 1.3). Economic risks are prioritized in particular by public- and private-sector respondents (Figure 1.5). Geoeconomic confrontation (#14) is a marked absence from the top 10 rankings this year (Figure 1.4) and has decreased in perceived severity compared to last year’s scores. However, like related economic risks, it features among the top concerns for both public- and private-sector respondents (at #10 and #11, respectively) as a continuing source of economic volatility.

In summary, in this study, we reported a significantly negative impact of uncertainty on R&D investment at the country level. The analyses were based on a sample covering 109 countries from 1996 to 2018. It was also found that uncertainty reduced the number of annual new patent applications. The adverse impact of uncertainty on R&D was not only significant statistically, but also economically. According to the estimation results, if the uncertainty index rises by one unit (one standard deviation), the scale of R&D investment and the number of patent applications will decline by 15.6% (2.1372%) and 22.7% (3.1099%), respectively. Further analyses demonstrated that the effect of uncertainty was not uniform across all countries. In some country groups, the effect was strong and statistically significant. However, in several country groups, the effect was moderate and insignificant. However, we always observed a negative effect. Overall, Hypothesis 1 in our study is verified, and Hypothesis 2 is contradicted.

The study results provided strong support to some previous studies which reported a negative impact of uncertainty on R&D investment, including Arif Khan et al. [5], Cho and Lee [11], Czarnitzki and Toole [8], Goel and Ram [12], Ivus and Wajda [1], Jung and Kwak [15], Nan and Han [17], Wang et al. [4], and Xu [20]. The results did not support several studies that reported a positive effect of uncertainty, such as Atanassov et al. [3], Gu et al. [13], Han et al. [14], Jiang and Liu [6], Meng and Shi [16], Ross et al. [9], Stein and Stone [18], Tajaddini and Gholipour [7], and Vo and Le [19]. Our study utilized a wide sample of more than 100 countries and examined the country-level aggregate R&D investment. This feature enabled our study to better depict the overall situation in the world, compared to most of the extant studies, which have only focused on the R&D of business corporations within one country.

This study’s findings have several implications for both participants and policy makers in the patent system. First, district courts have applied eBay in a manner that awards permanent injunctions to operating companies who compete with the infringer in the vast majority of cases, while simultaneously denying them to most PAEs and non-competitors.329 This result holds even after controlling for other potentially confounding factors, such as the field of patented technology and courts where PAEs commonly file infringement claims.330 In particular, the first factor of the eBay test appears to be the main stumbling block for PAEs and other non-competing entities, as they rarely can demonstrate the type of competition-related harm that qualifies as an irreparable injury under existing precedent.331 Denying injunctive relief to PAEs may be normatively desirable in many cases, such as patentees who engage in rent-seeking behavior by exploiting the high transaction costs of patent litigation to extract nuisance-value settlements without any corresponding public benefit.332 eBay’s four-factor test apparently has helped mitigate holdup by such patentees,333 even if PAE litigation remains widespread.334