(NAS Colloquium) Science, Technology and the Economy (1996) / Chapter Skim
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The challenge of contracting for technological information
The challenge of contracting for technological information
Pages 89-94
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From page 89... ...
Theorists have proposed a variety of measures for information, which may involve counting bits or considering changes in odds ratios, but such measures could hardly be applied with meaning to information contained in the formulation of a new pharmaceutical or the design of a computer chip. (Tallies of papers, patents, and citations are frequently used as surrogate measures for technological advance.)
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From page 90... ...
Witness the recent agreement with Phillips, Toshiba, etc., relating to the next generation of compact disk technology, and the subsidized sales of software products seeking to become the standard. Many commentators believe Apple Computer made a major mistake not licensing its superior Macintosh technologies, which it has only begun to do recently.
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From page 91... ...
A superior video compression algorithm may be placed into an applications program specialized for the information provider. A fledgling biotech firm sells its expertise to the pharmaceutical company as a formulated product.
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From page 92... ...
Excessive focus on this feature, I argue here, has led us to slight the major class of market failures associated with TI that stems from its amorphous quality. This quality makes information hard to count, value, trade, or contract on in market or nonmarket transactions.
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From page 93... ...
· Private benefits from government research expenditures · Government subsidy proportional to leakage Rivalry Excludability Good produced Locus of production Transmlsslon Critical concerns Policy measures · Nonrivalrous · Nonexcludable · Nuggets of knowledge · Most efficient knowledge producer · Open literature · Forums and seminars · Internet and mass media · Underprovision · For second best world, tension between intellectual property and pricing above marginal cost best world · Substantial government subsidy · Required dissemination of government-sponsored results · Patents recognizing second best · Direct government provision to avoid appropriation · Government-industry proprietary research relationships · Patents recognizing second best · Antitrust policy recognizing second best Given contracting difficulties, information is likely to be produced in the wrong locale, by big firms rather than small, and in duplicative fashion rather than singly by the most efficient producer. These inefficiencies in production, moreover, may significantly reduce the output of TI.t These problems do not arise with songs or novels.
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From page 94... ...
In such unfamiliar territory, appropriate property delineations are much harder to define. This is particularly true since other salient values, such as freedom of speech, privacy, and the sanctity of life, are deeply involved with technological advance.
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