The Crash of the Knowledge Economy

Posted: 15 Jul 2009

See all articles by Ugo Pagano

Ugo Pagano

University of Siena - Department of Economics

Maria Alessandra Rossi

University of Siena

Date Written: July 2009


This paper advances the hypothesis that some of the roots of the present crisis are to be found in the present institutions of the knowledge economy. While protectionism is seen as a possible dangerous outcome of the crisis, the extent of protectionism inherent to the strengthening and globalisation of intellectual property rights (IPRs) associated, in particular, with the signing of the Trade-related Aspects of Intellectual Property Rights agreement is not generally perceived as one of its possible causes. Indeed, IPRs have acted as ‘super-tariffs’. They have particularly raised the cost of investments for countries that had neither abundant cheap labour nor high amounts of intellectual property resources. Moreover, IPRs may have later exerted negative effects even on IP-rich firms, as the proliferation of conflicting rights has led firms to increasingly inhibit each other's investments. The resulting investment strike has manifested itself as a saving glut and has mainly affected the USA in a situation aggravated by inadequate regulations. If intellectual monopolies are one of the causes of the crash, the remedies should not only focus on monetary policy, financial regulations or even on standard Keynesian policies. Aggregate demand stimulus should be coupled with policies that decrease the level of intellectual monopolisation of the economy.

Keywords: Intellectual property rights, Economic development, Keynesian multiplier

JEL Classification: O34, O12

Suggested Citation

Pagano, Ugo and Rossi, Maria Alessandra, The Crash of the Knowledge Economy (July 2009). Cambridge Journal of Economics, Vol. 33, Issue 4, pp. 665-683, 2009, Available at SSRN: or

Ugo Pagano (Contact Author)

University of Siena - Department of Economics ( email )

Piazza S. Francesco, 7
I-53100 Siena
+39 057 7232614 (Phone)
+39 057 7232661 (Fax)

Maria Alessandra Rossi

University of Siena ( email )

Piazza S. Francesco, 7
Siena, I-53100

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