Property rights and externalities: the uneasy case of knowledge

Abstract

Abstract:Drawing from Coase's methodological lesson, this article discusses the specific case of knowledge, which was for a long time chiefly governed by exchange mechanisms lying outside the market, and has only recently been brought into the market. Its recent, heavy "colonization" by the property paradigm has progressively elicited criticism from commentators who, for various reasons, believe that the market can play only a limited role in pursuing efficiency in the knowledge domain. The article agrees with the enounced thesis and tries to provide an explanation of it that relates to the fact that in specific circumstances property-rights can produce distinct market failures that affect the social cost and can consequently prevent attainment of social welfare. In particular, the arguments set forth here concern three distinct externalities that arise when enforcing a property rights system over knowledge. First, the existence of a property right may itself alter individual preferences and social norms, thus causing specific changes in individuals' behaviour. Second, the idiosyncratic nature of knowledge, as a collective and inherently indivisible entity, means that its full propertization can be expected to produce significant harm. Third, property rights can cause endogenous drifts in the market structure arising from the exclusive power granted to the right holder: though generally intended as a necessary mechanism for extracting a price from the consumer, in the knowledge domain property rights can become a device for extracting rents from the market.

Endogenous Recombinant Growth and Intellectual Property Rights

“…where (29) with (27), using the dynamic constraint in (24) and rearranging terms we obtain the following instantaneous consumption growth rate:…”

Endogenous Recombinant Growth Through Market Production of Knowledge and Intellectual Property Rights

“…Recall from Proposition 4 (i) that to each τ -value in (46) corresponds a different (transitory) turnpikek τ (A) as defined in (38), each lying one below the other for increasing values of parameter τ , withk 0 (A) -i.e., the turnpike corresponding to τ = 0 -on top, characterizing a scenario in which the largest capital/knowledge ratio is optimal to sustain growth, andk 0.9 (A) at the bottom, envisaging an equilibrium with smaller capital/knowledge ratio and closer to the the first-best solution. Each curve converges to its own linear asymptotic turnpike,k ∞ τ (A), as defined in (39), which are parallel lines corresponding to long-run balanced growth with the same constant growth rate given by (43): Figure 1 depicts in the (A, k) space the stagnation line,k (A) = (156.25) A, in dark grey and three turnpike curves in light grey, dark grey and black, corresponding to τ = 0, τ = 0.5 and τ = 0.9 respectively. We shall identify with these three colors all relevant curves related to these three examples in subsequent figures throughout the paper.…”

“…By contrast, a critical approach that is gaining attention points out that knowledge is not just an intangible good or resource, defined and delimited like standard goods produced and exchanged on the markets, but a dynamic entity and a cognitive tool pertaining to social groups. 3 It is renewed through sharing among individuals, which is thus an indispensable feature for creative activity (Ramello, 2005(Ramello, , 2011. In fact knowledge for longtime was governed by appreciably open exchange mechanisms different from the market (mainly communication) and relying heavily on the sharing process.…”

“…Therefore, following the intuition of Ramello (2005Ramello ( , 2008Ramello ( , 2011, it is interesting to develop a model of economic growth that combines the role of market with that of the aforementioned dynamics, specifically recognizing that the stock of knowledge can grow endogenously with respect to itself, and not only respond to standard incentives provided by the economy, as maintained by most of the extant endogenous growth literature with a few exceptions.…”

The impact of software piracy on inclusive human development: evidence from Africa

“…While some scholars postulate that increased protection of IPRs stimulates economic growth and development via the positive impact on factor productivity (see for example, Gould & Gruben, 1996;Falvey et al, 2006;Ramello, 2005), some skeptics are of the stance that IPRs protection and adherence to international treaties (laws) may impede, rather than encourage economic growth in developing countries (Ramello, 2011;Nicita & Ramello, 2007 ) 1 . A great chunk of the opposition to stronger IPRs asserts that because the existing technology in developing countries is more imitative and/or adaptive in nature (rather than suitable for creation of new innovations) developing countries will be greatly hampered by such changes in policy (Asongu, 2014a, p. 527).…”