Bibek Debroy from the Indian Express recently carried an article on the International Property Rights Index (IPRI) and India's retreat from reforms. While the IPRI 2010 report came out a while ago, I only recently got down to looking at it.
The IPRI, which in its latest edition covers 125 countries, tries to present an index of property rights and show a link to a country's economic prosperity. Coming under 3 heads - Legal and Political Environment, Physical Property Rights and Intellectual Property Rights, it uses about 10 indices to calculate its measure.
While Bibek Debroy is concerned about the lack of economic reforms that our country is facing as represented by the IPRI report, I have a few reservations about the index itself. (Just to clarify, due to my limited knowledge about physical property rights, my comments are regarding the IP parts of the report alone unless otherwise mentioned)
For starters, I don't quite understand why "IPRs" is being clubbed with other property rights. No doubt both have economic repercussions, but that doesn't necessarily put them in the same boat. Indeed, in the foreward to the Report, by Barun S. Mitra of Liberty Institute, he makes several valid points about property rights and their repercussions, but aside from a couple of passing mentions, there is no justification of the inclusion of IP rights within this index. However, the Executive Director does make several mentions of 'innovation'. I reproduce a para:
"Economic well being and property rights are positively correlated. This correlation is due to the fact that innovation and investments grow the more citizenry is assured of the protection of their property. In countries where there are low levels of property rights, many innovators move to developed countries with a broader private sector. The movement of these innovators discourages economic growth in the countries from which these people migrate."
And indeed, that seems to be a fair representation of the importance of innovation. However, IP and innovation are not quite the same, and as far as taking policy measures go, the distinction is important to keep in mind, especially in the current circumstances where there is a lot of evidence against strong ip being the best way forward for innovation.
Even if I were more comfortable with the idea that IP directly correlates to innovation, I still wouldn't be comfortable with the clubbing together of different types of IP. For eg, I don't see how copyright laws dealing with a comedy movie (for instance), and patent laws dealing with life saving medicines can be treated similarly - each requires answers to a very different set of policy questions before a 'suitable' model can be set upon as ideal - and if they can't be treated similarly in terms of setting IP laws, I don't see how they can then be clubbed together and represented by an index, which is further clubbed together with other physical property rights and then for this overall index to represent something meaningful. Statistics is not really a strong point of mine, so readers please correct me if I’m wrong, but it seems to be that It’s one thing to quantify indices into numbers, and quite another thing to quantify up to 10 indices over three headings, between which the correlation is not quite clear, and present it as a measure of economic growth.
It also seems that causation and correlation are being mixed up perhaps. The report points out that countries with high GDPs are also high up on the IPRI list. However, again, without going into the actual validity of any particular system of IP or innovation, it must still be noted that IP standards are constantly debated (in the past - the TRIPS flexibilities, Doha declaration, etc ; in the present - the ACTA debate, the EU-India FTAs, etc), yet these same debated standards are being used in measuring and presenting the IP index, as part of the IPRI. (For example, the Special 301 Reports are one of the three indices used in measuring IP for this report) When the standards that developed countries are using, are being used as a measure, it is natural that the countries most in line with these standards are those same developed countries which have a high GDP. A crasser way of putting it is that it is the rich countries who can afford to attempt to force their standards on others, and it is natural that if these standards are used in an index the richer countries will dominate the table.
There are other debated points which the report assumes to be true - for instance that of stronger IP rights in developing countries leading to technology transfer to those countries. This has a very contested, and if false, a very vital point. But again, while perhaps well-intentioned, the report glosses over it and takes it as a given.
Also, I found another curiousity in the report. Only non-OECD countries were surveyed for gender equality (another of the indices) stating that this was so "since OECD countries generally fully recognize gender equality". To be blunt, I don't understand this at all. Just for the record, South Africa, Philippines, Sri Lanka, Trinidad and Tobago, and Mozambique amongst other non-OECD countries are ahead of USA's 31st rank in the Global Gender Gap index, World Economic Forum 2009.
Having said all this, I'd like to emphasise that I'm simply stressing on the possible flaws because it is important that these are addressed if they are flaws, or that they are clarified if they are not. Leaving such matters hazy can be quite detrimental to any body looking to use this report as unclear/flawed reasoning can very easily lead to wrong conclusions.