May 09, 2006

National Data, By Edwin S. Rubenstein

Immigration Stunting, Not Stimulating, Innovation?

You’ve heard it a million times—this version is from an op-ed by the head of TechNet, an IT industry lobbying firm, and Scott McNealy, who just stepped down as the head of Sun:

What do the founders of Intel, Sun Microsystems and Google—Andy Grove, Andy Bechtolsheim, Vinod Khosla and Sergey Brin—have in common with Albert Einstein and Wernher von Braun? All are part of America's tradition of welcoming talented immigrants who have made significant contributions to our industry. [Stingy immigration policy stifles U.S. innovation USA TODAY, April 25, 2006]

Forget that Andy Grove was a businessman, not a techie. Forget that Google’s success rests as much on its marketing prowess as its search engine, which by some accounts, is no better than competitors. And forget, also, the evidence suggesting that IT employers crave “talented immigrants” mainly to avoid paying equally talented, albeit older, natives a decent wage.

The notion that immigration in general, and an expanded H-1b visa program in particular, are needed to maintain our technological superiority, is firmly entrenched in the business world.

But anecdotes aside, the data simply don’t support this view.

Since the start of the H-1b program in the early 1990s the share of U.S. patents granted to inventors residing in the U.S. has declined: (Table 1)

To be sure, patent data are notoriously hard to interpret. We don’t know, for example, what percent of inventors “residing in the U.S.” are, in fact, immigrants—or how many overseas inventors are expatriate H-1bs employed by foreign subsidiaries of U.S. companies. Equally important: the U.S. patent data doesn’t distinguish between truly valuable inventions and the more numerous minor inventions, often patented on a whim.

Enter the Organization of Economic Cooperation and Development.

OECD’s patent database counts only those inventions for which patent protection is sought in three major markets: the United States, Europe, and Japan. The enormous legal costs and filing fees involved in three separate patent applications makes this a better screen for important—and potentially marketable—inventions than simple patent counts.

The OECD data show U.S. inventors receive only about 34 percent of the important patents awarded annually—far less than their 52 percent share of all U.S. patents. (Table 2.)

But the really eye-catching figures relate to Japan. After adjusting for population and GDP, the Japanese are far and away the most inventive people on the planet:

“In 2002, the patent-to-GDP ratio of Japan (4.0 triadic patents per billion GDP) was more than double that of the United States (1.8) and the European Union (1.8). The number of triadic patents per million population for Japan (104) is far higher than that of the United States (64) and the European Union (36).” [OECD, Compendium of Patent Statistics 2005, PDF]

Sure, the Japanese may be smarter than the average American or European. But their hyper-creativity is borne of economic necessity rather than I.Q. Japan, unlike Europe and the U.S., has steadfastly refused to import millions of unskilled workers to do the “jobs Japanese won’t do.” Instead they’ve robotized many menial service jobs.

The nexus between innovation and harsh immigration restrictions should come as no surprise. Ironically, economist Julian Simon, the immigration enthusiasts’ designated hitter until his death in 1998, [read Peter Brimelow's Forbes obituary] described the process in his 1981 book The Ultimate Resource:

“It is important to recognize that discoveries of improved methods and of substitute products are not just luck. They happen in response to ‘scarcity’—an increase in cost. Even after a discovery is made, there is a good chance that it will not be put into operation until there is need for it due to rising cost. This point is important: Scarcity and technological advance are not two unrelated competitors in a race; rather, each influences the other.” [Julian Simon, The Ultimate Resource(second edition). Princeton University Press, 1996. p. 59.]

Immigration may have destroyed the mother of American invention: necessity….and, ultimately, prospects for a better life in the U.S.