The International Consortium on Agricultural Biotechnology Research (ICABR)

Non technical abstract
Pests and Patents:
An Analysis of a Biotechnology Industry as a Patent-driven Response to Pathogen Evolution

Timo Goeschl and Timothy Swanson

  Human interventions within the biological world produce natural responses that automatically erode the effectiveness of the initial intervention.  This effect is seen in the phenomenon of antibiotic resistance in the health context, or in the phenomenon of pest resistance in the agricultural context.  These responses from nature are predictable and automatic because, when we choose to make a biological resource more prevalent than it would otherwise be, we are simultaneously selecting higher rates of prevalence for the pests and pathogens that prey upon that resource.  These pests and pathogens will prosper by reason of our choices, and erode any gains from the initial intervention, unless we are able to intervene once again in a way that will restore the original gain.


This means that the dynamics of the biological world generate certain predictable and destabilising responses to any attempts to make progress within that world.  Attempts to expand the productivity at the expense of biological competitors are met automatically with biological adaptations that neutralise those efforts.  Increasing the scale of intervention also increases the rates of arrival of such adaptations. And, once intervention has occurred, the option of retaining the “status quo” is no longer available.  Society is then engaged forever within a contest of innovation and adaptation.

The biotechnology sector is the branch of R&D that undertakes society’s cause within this contest.  As suggested by previous research in this area, we view the fundamental determination to be made by this sector as the optimal determination of the relative size and extent of the biological resources that are dedicated to productive as opposed to “reserve” uses.   Since these reserves serve an important role within the R&D process, the decision is also related to the decision concerning the amount of investment to allocate to the stabilising role of biotechnology.   Investments in biotechnology may be seen as investments in maintaining sustainable growth within these parts of the economy.

 The novel question the paper addresses is whether a decentralised industry motivated by patent-based incentive mechanism is able to approximate the socially optimal outcome in this contest of innovation. We demonstrate that in the most fundamental sense the incentives facing private firms motivated by patents simply do not accord with the objectives of society.  The basic societal objective in this arena is to manage the growth capacity of the economy, by investing in the capacity to respond to biological innovations.  Our analysis of the patent-based incentives facing private firms indicates that these firms are wholly indifferent to the growth capacity of the economy (as opposed to the cyclical pursuit of technological innovation), and that the incentives for investments in response mechanisms are fundamentally mis-aligned.  Hence, at the most fundamental level, the decentralised biotechnology industry is not pursuing the objectives society would set out for it.
In addition, the incentives that do exist under the patent system contain numerous externalities which generally cut in the direction of under-investment. To the extent that the biotechnology industry does invest, it is demonstrably less than that which is socially efficient. 

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The problem here is the institutional one caused by the intersection of two dynamic phenomena: the patent-based incentive system and the biology-based adaptation system.  Patent systems require widely-demanded innovations with reasonable life-spans to be effective. Biological systems contain inherent adaptations that automatically respond to and shorten the life-span of any innovation that is applied extensively.  The dynamics of the two systems are incompatible.  The use of a patent system to manage an adaptive biological system is doomed to failure.