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8
Economic Overview of Open Access and the Public Domain in Digital Scientific and Technical Information

Robin Cowan

University of Maastricht, The Netherlands

SCIENTIFIC RESEARCH AS A PRODUCTION PROCESS

Economists think about production as a process that has inputs and outputs. In science the output is fairly clear: new knowledge—at least that is our hope. There are three kinds of inputs: (1) human input—people, their brains, their time, their labor, and so on; (2) physical input—the buildings, the computers, the laboratories, the equipment material, and so on; and (3) the information input. For our purposes it is the third input that is the most interesting.

Several things are meant by “information input.” There are data, which are factual information created by somebody in the past. There is also the primary scientific and technical literature and other related information products. And there is background information or know-how, which is learned in graduate school, by reading papers and books, by talking to people, and by listening to people at symposia. These are all various forms of information inputs. They get put together and combined with various physical and other human inputs to produce new knowledge.

Economists say that if the prices of inputs in some production process fall, you should get more output. In the case of science this means that easier access to knowledge should create more scientific output. Easier access implies easier knowledge creation.

ECONOMICS OF INTELLECTUAL PROPERTY RIGHTS

Where do intellectual property rights (IPRs) come into this picture? The economics of IPRs are based on the idea that economic agents, or any agents really, respond to incentives.

The problem with knowledge is that it is a public good, or at least a quasi public good, which means that everyone can use the same piece of knowledge without depleting it. One person using the periodic table of elements does not prevent anyone else from using it as well. Thus, the table of elements is a public good. That means the originator of the table of elements has a problem in appropriating the value from it. Intellectual property rights provide authors and inventors with some means to convert the public good into a private good. For a firm inventing a new product or process “getting the benefits” means making profits.

We therefore can generalize: IPRs create incentives to create new knowledge. They permit the inventor of a piece of knowledge or information to control the use of it in various ways, but in so doing they hamper the use of it.



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Open Access and the Public Domain in Digital Data and Information for Science: Proceedings of an International Symposium 8 Economic Overview of Open Access and the Public Domain in Digital Scientific and Technical Information Robin Cowan University of Maastricht, The Netherlands SCIENTIFIC RESEARCH AS A PRODUCTION PROCESS Economists think about production as a process that has inputs and outputs. In science the output is fairly clear: new knowledge—at least that is our hope. There are three kinds of inputs: (1) human input—people, their brains, their time, their labor, and so on; (2) physical input—the buildings, the computers, the laboratories, the equipment material, and so on; and (3) the information input. For our purposes it is the third input that is the most interesting. Several things are meant by “information input.” There are data, which are factual information created by somebody in the past. There is also the primary scientific and technical literature and other related information products. And there is background information or know-how, which is learned in graduate school, by reading papers and books, by talking to people, and by listening to people at symposia. These are all various forms of information inputs. They get put together and combined with various physical and other human inputs to produce new knowledge. Economists say that if the prices of inputs in some production process fall, you should get more output. In the case of science this means that easier access to knowledge should create more scientific output. Easier access implies easier knowledge creation. ECONOMICS OF INTELLECTUAL PROPERTY RIGHTS Where do intellectual property rights (IPRs) come into this picture? The economics of IPRs are based on the idea that economic agents, or any agents really, respond to incentives. The problem with knowledge is that it is a public good, or at least a quasi public good, which means that everyone can use the same piece of knowledge without depleting it. One person using the periodic table of elements does not prevent anyone else from using it as well. Thus, the table of elements is a public good. That means the originator of the table of elements has a problem in appropriating the value from it. Intellectual property rights provide authors and inventors with some means to convert the public good into a private good. For a firm inventing a new product or process “getting the benefits” means making profits. We therefore can generalize: IPRs create incentives to create new knowledge. They permit the inventor of a piece of knowledge or information to control the use of it in various ways, but in so doing they hamper the use of it.

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Open Access and the Public Domain in Digital Data and Information for Science: Proceedings of an International Symposium Control of knowledge implies control of mechanisms that prevent the unfettered use of it. Other people have trouble using it relative to uncontrolled knowledge. IPRs thus also reduce the ability of other people to use this work. The economics of IPRs is about striking a balance between incentives to invent and use of the knowledge for innovation and wealth creation, thus between inventors and users. There is a tension, and all of the economic literature on IPRs concerns the resolution of that tension or finding the optimal balance. This provides an explanation of why copyrights are used in scientific publications. People can use the information and resulting knowledge, but they cannot use the expression of it. There is an old-fashioned view that scientists are above all this, that they publish because they love creating knowledge. There is some truth in that; however do not think in terms of profits, but rather in terms of getting credit. A firm gets credit for its ideas by making profits. Scientists get credit for their work by other means. Plagiarism destroys a lot of the incentives for scientists to create because it allows another person to claim credit for the knowledge. This other person might become famous. The balance between creating incentives to publish and using the knowledge, which is the basis of the economics of IPRs, applies to science as well. We might think that we have had a pretty good balance between these two opposing goals. Recently, however, two things have changed that have upset the balance. They are the information and communication technology (ICT) revolution and the changing financial situation of open science. I can only speak from my own familiarity with the English-language sources and knowledge of the developed world. The ICT revolution began to take off with the Internet, and accelerated with the World Wide Web. Financial changes began in the United Kingdom with Mrs. Thatcher and swept through the rest of the English-language world—Canada, the United States, Australia, and New Zealand—and have begun to affect Europe with a vengeance. IMPACT OF INFORMATION COMMUNICATION TECHNOLOGIES ON INTELLECTUAL PROPERTY RIGHTS What have the new ICTs done to change the balance? The new ICTs are different techniques for storing, searching, sorting, and rearranging information. These are all technologies that scientists need. We need to be able to store information. We need to be able to have access to it. We need to find it, rearrange it, and package it in different ways. The new ICTs have made all of this much cheaper and faster. That means a piece of information as a public good or input to science becomes much more valuable because of the way ICTs have changed our ability to access it and store it. These changes in ICTs and the way information can be processed means that productivity in science should improve. We should be getting more results. On the other hand, such results are harder to control. If you are the originator or owner of a piece of information it is much harder for you to control that information if it is open, because it can be spread so much faster in so many different ways. This implies that the IPR regime is effectively being weakened. While the laws have been strengthened, they have become much more difficult to enforce and this provokes additional calls to strengthen the regime. This is all part of a long trend toward easier and cheaper duplication. Consider a plausible but fictitious tale: When my father was a student, to find out how to integrate a particular function he went to the library, found the Chemical Rubber Handbook, and wrote down the integral of that function on a piece of paper. When he became a professor, to do the same operation he walked to the library, photocopied one page from the Chemical Rubber Handbook, and then walked back to his office. Obtaining the entire page was preferable to a single integral because he had the integrals of a couple more functions in case he made a slight mistake and needed a slightly different function. Some years later, when I was a student, the way it worked was that students went to the library and photocopied the entire Chemical Rubber Handbook so they would not have to go to the library again. Now that I am a professor, we do not go anywhere near the library. We go to Google, type in Chemical Rubber Handbook, and download the entire PDF file. This is a fable, of course, and fables have lessons. Understandably, the Chemical Rubber Company (or any firm seeing a similar reduction in its ability to control its product) would be upset by these changes in behavior. They no longer seem to be able to

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Open Access and the Public Domain in Digital Data and Information for Science: Proceedings of an International Symposium control who uses the handbook. As soon as somebody puts a PDF file of it on the Web, they lose control, and in so doing they have lost their ability to make money from their product. It is perfectly natural that firms or individuals in this position would seek protection against people stealing their database. Let me make a quick editorial comment. When the automobile was invented, the makers of horse-drawn carriages lost the ability to make money on their product. Did the public say, “That is pretty bad. What we should do is restrict the top speed of automobiles to 5 miles an hour” (actually this did happen but only for a short while) or “We should force automobile manufacturers to pay a royalty to the makers of horse-drawn carriages because their economic viability has been destroyed”? No, what we said was, “Too bad. Times have changed and we don’t want your product anymore. There is a better one available. Find another way to make money.” This is what the market said to the Encyclopaedia Britannica about 10 years ago when they were close to being bankrupted by the CD-ROM. Rather than calling for restrictions on CD-ROM encyclopedias they figured out a way to turn their product into something that would make money in the new world. It seems to me that the same sentiment should be told to the holders of databases instead of creating database directives. FINANCIAL PRESSURES ON PUBLIC-SCIENCE INSTITUTIONS Funding for open science or public science has been shrinking, at least in the North, for a couple of decades. As a consequence universities in particular, but research institutions in general, are looking at cost recovery; in other words, making things pay for themselves. Partly as justification for squeezing education budgets policy makers are saying things like “the problem today is that our scientists do not know what to do with their inventions. We know that there are billions of dollars of great inventions sitting on university lab benches, unexploited by industry. This is a colossal waste.” This is the rationale for the Bayh-Dole Act in the United States and similar laws elsewhere. But there is a second rationale that has subsequently been adopted by university administrators as well: “We can solve the university funding problem just by getting the inventions out of the hands of the professors and into the market.” Universities have succumbed to this temptation, and scientists are being forced to become entrepreneurs and to start making money on their inventions. The idea is that there are many products being invented in universities and nobody, not even the university, is making money on them. There is pressure to change that, and universities are trying by creating technology transfer offices. As a result public research becomes a lot more like private research, especially with regard to intellectual property rights. There has been a huge increase in the number of university patents in the last decade. Universities are changing their views about IPRs and opting for much stronger protections on their inventions. What does this mean for the future? I see two things that are both likely to happen, and neither is particularly nice. The first is that science will become harder or more expensive, which for an economist amounts to the same thing. The extent of protection for information goods increases, forcing scientists or their institutions to pay for information inputs, many of which were (monetarily) free in the past. If you want some data you have to buy them. If you want to use somebody else’s technique, you will have to pay license fees. If you want some instrumentation, you will have to buy the instrument. This simply adds to the financial pressure on these institutions that then have to recoup yet more costs, thus creating a vicious circle. The incentives to make money out of everything we do become stronger and stronger, forcing private research institutions to make money by some other means. The second is that the world of science divides into a group of haves and have-nots. In order to avoid the vicious circle just mentioned, consortia of universities will arise, the goal being to share their intellectual property among themselves. This is just what we see in the “patent pooling” of firms in the market. But not all of the universities in the world will get to join. Harvard, Stanford, MIT, and Chicago will probably form one consortium and Cambridge, Oxford, London School of Economics, and University College London will form another. Many other institutions will be left out. IPR sharing will exist, but naturally you want to share with someone who has lots to give you. While everyone might like to join the MIT consortium, MIT will not be that interested in having everyone join, as that would destroy the market for MIT’s knowledge products.

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Open Access and the Public Domain in Digital Data and Information for Science: Proceedings of an International Symposium CONCLUSION Some external changes have upset the balance in the IPR regime in science. The new technologies make open science more valuable because of the way people are able to use increased amounts of information more effectively and quickly. This suggests that we should create more open information, which in turn suggests weakening the IPR regime. On the other hand, new technologies make it harder to control information products, which suggests that the IPR regime should be strengthened to give people back the control they are used to. At more or less the same time, financial issues create incentives to close information and to demand stronger protection for it. Given that these changes argue in opposite directions for what we should do with the IPR regime, it is possible that the right thing is to do nothing. But it is certain that the wrong thing to do is to react quickly to the lobby with the loudest voice.