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A2K: Economics of Access to Knowledge |
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Speakers: Keith Maskus, Nagla Rizk, Suzanne Scotchmer, Eric von Hippel, Eli Noam
Moderator: Rishab Ghosh
What is the causal connection between access to knowledge (A2K) initiatives and economic growth/development? For decades now, the idea that stronger intellectual property protection is critical to economic development has been the driving motto of national and international law-makers. Recent studies have however begun to question the validity of this idea, given the absence of strong empirical validation. This session will question the assumptions operating behind this dominant hypothesis and simultaneously suggest alternative modeling -- that greater use and access may be more facilitative of economic development than mere exclusivity and proprietary control.
Detailed notes by Shaymkrishna Balganesh after the jump.
Also see the conference wikipage for more notes.
Rishab Ghosh:
What is property? Property in economics is assumed to be bounded, and to be a scarce resource. This is not the case with knowledge, which is always unbounded and once disclosed can be freely reproduced. Reproductions of knowledge are not scare. This presents the problem of infinity.
Knowledge itself is scarce – because people are scarce. But reproductions of knowledge are not scarce and therefore problematic and not readily accepted by the market.
According to the BSA, there were 151 million pirated software units in the US in 2004. Piracy doesn’t seem to have too much legitimacy.
Can knowledge be treated as something other than property? How do we create useful knowledge, without treating it as property? Further, how do we ensure equitable access?
Suzanne Scotchmer:
Legal and economics scholarship has transformed the way we think about incentives and innovation – we’ve moved away from this now. Intellectual property is no longer presumed to be the only solution. I hope to take a much broader point of view.
The modern economics view of incentives starts from the solution, not the problem. Of how to pay for and run R&D. The problem however is – how do we promote use and improvisation? Cumulativeness is the premise of science and this runs into problems because the interests of the users and improvisers can conflict with those of the inventors. Economists try to resolve this conflict. When this idea is embedded within the international trade framework, a whole new set of conflicts presents itself.
How do we overcome these conflicts? IP is one example. Others include open source, public sponsorship and free access, and trade secrecy (with lead time). IP promotes disclosure, but not use. Its purpose is to prevent use. Licensing assumes critical relevance – should we be pessimistic or optimistic about this option? Now, why is open source necessarily a good option, even when it is used by profit maximizers? The reason why open source has assumed relevance as a commercial model, is because of the ineffectiveness of IP! IP is too weak and doesn’t create an optimal platform for licensing. Public sponsorship and free access are obviously the most preferred option. It promotes use ex post, but doesn’t answer which project ex ante. Trade secrecy and lead time don’t need IP. IP exists to avoid this altogether.
Is the real debate about trade policy, and not necessarily about incentive theory? If one country is choosing a policy domestically, it translates itself to the international sphere as well – something that is often ignored. IP is a trade policy tool, not to modify incentives, but to direct profit flows. Trade policy developed in three phases. The first was a regime of autarky, with reciprocal externalities. The bottom-line is: harmonization is not the solution.
Eric von Hippel:
How can norms be a substitute for IP?
Why should we care? The reason we do, is because we want to get to an open commons. A lot of people innovate and it has been shown that when open collaboration is permitted, innovation happens much faster.
Novel recipes are very important to the success of French chefs. This is a basis for awarding Michelin stars. It has economic implications as well – it is critical to the success of French restaurants.
Novel recipes, despite all else, are not subject to intellectual property. So, how do social norms work? Social norms are pervasise an powerful structure characteristics of groups that summarize and simplify group influence processes. The source of authority is the community.
Our study was empirical and theoretical. Three norms emerged: 1. Accomplished chefs expect that other chefs will not copy their recipes exactly. 2. Accomplished chefs expect that chefs to whom they reveal information will not pass that information on without permission. 3. Accomplished chefs expect that chefs to whom they reveal information will acknowledge them as a source.
On the basis of the valuation of the information, inquiries are received by chefs.
This entire theory/approach within the sub-market of haute restaurants. This mechanism is substantially more efficient and cost effective. Norms are much richer than captured here and publication strategies complicate the discussion.
Keith Maskus:
Trade liberalization has been accompanied in recent times with increases in global technology protection. Liberalization leads to greater FDI flows, licensing, etc. The efficiency and growth implications are complex. This can have fairly clear redistributive effects (from the South to the North!). Some positive effects may exist too. Imported technology is a central form of technological change in many developing countries. International innovation marks are subject to certain market failures and externalities. Further, technology transfer is costly and faces uncertainty – appropriability problems, difficulties in selling information, problems associated with signaling origin and quality.
Are IPRs a solution? Maybe one. There is evidence that transparent and enforceable IP regimes encourage market based technology transfer and associated export growth as well. The evidence supports it from both aggregate and firm-level studies. The claim is however condition – it may hold in middle-income countries, and not in LDCs; the extent of the benefit depends on other economic characteristics; further, there is evidence of increased backward spillovers associated with patents/FDI.
IPRs are endogenous variables and tend to strengthen with economic interests in selling technology and knowledge goods. Studies seem to show that when domestic economies strengthen IP regimes, no significant change occurs.
In developing countries evidence is scarce, for several reasons, which makes it hard to assess the real impact of strengthening IPR regimes. The biggest problem however is that they block follow-on innovation and imitative competition.
Access to basic knowledge is important. Very little evidence exists showing how developing countries may access this basic knowledge. Increasing privatization, raises transaction costs for access and reduces the scope of available scientific and educational materials.
Policy suggestions: IP harmonization is questionable; TRIP is not harmonized; a moratorium on global IP could permit some useful experimentation with TRIPs standards; developing countries require some policy space for working with flexible IP systems.
Nagla Rizk: Knowledge and Development
The heart of the relationship lies is the belief that knowledge is an element of human dignity and active citizenry.
Knowledge is a driver of dignity. It is a tool of empowerment. Knowledge is a wide spectrum – the sum of what is learnt and perceived. Knowledge can be both formal and informal.
When industrialized countries were developing – awareness of IPRs was not as it is today. Today, a huge development divide exists. With an increase in the channels of communication, a global flow of knowledge has become inevitable.
All of this is happening against the background of harsh, socio-cultural, economic and political realities. Take the case of Egypt. When we speak of A2K – it assumes a different kind of relevance for the developing world. For my part of the world (Egypt), it would mean a whole set of different things, given the low literacy rates and other related socio-economic issues. People just want to survive.
Even the data that exists is distorted for political reasons. Stories from Egypt – IPR law passed in 2002. TRIPs implementation started in January 2005. Local pharmaceutical industry covers 90% of the demand. Microsoft is a major player in the market and has its office right next to the ministry. The government is hesitant to make OSS a policy preference because of FDI issues.
Perhaps the question is not whether to protect or not? Rather, looking at alternative business models within the permissible paradigm.
To sum up: Knowledge is an integral part of human development, vbut a clear knowledge divide exists. A2K is crucial and this means (for Egypt), better negotiation with private IPRs and encourage knowledge commons and innovative business models. Development should happen through knowledge liberalization, empowerment through human dignity in participation,. The motto should be free knowledge along with free trade.
Eli Noam:
So what happens if we have access to knowledge and information? Most obviously, it lowers access costs, lowers production costs and increased information and knowledge production. Once we redefine rights, that’s not the end of the story.
Knowledge is no longer a scarce commodity, but an abundant one. How does one deal with this rise?
The coping mechanisms are – more specialization and better technology and organizational and structural changes within the organization. The additivity of processing capacity is not linear. Organizations exist for information processing. Firms are command and control mechanisms and they exist to reduce transaction costs. The higher the costs are, the greater the realm of the firms within the market. The firm should be thought of as a human computer, since it processes information reach decisions.
I argue that business firms are organized around the most important processing tool at a given time. Pre-industrial firms resembled persons, in the individual sense. As we move into the industrial age, they viewed the firm as a machine, no longer as a person. In the 1950s, the firm became the mainframe – centralization of information and rigidity of structure and hierarchy. These didn’t endure, with the emergence of microcomputers, networks and the Internet. Firms reorganized themselves to reflect this change – and thus emerged the network firm. So where will the next stage take the structure of the firm?
In the same logic, we should expect a shrinkage of the realm of the firm and an increase in the market environment in which they operate. We should witness a decomposition of the large firm as a structure and a greater decentralization of the structure. This is the fifth stage – the transactional model. Small, specialized, self-sustaining bodies. It is the logical consequence of the economic explanation. This will have a fundamental impact on democracy and technology.
The medium is the company; the medium is the organization.
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