STILL MORE AGAIN ON ICT, KNOWLEDGE AND ECONOMICS

These are from the Stanford University Department of Economics:

Exorcizing the Resource Curse: Minerals as a Knowledge Industry, Past and Present
Abstract: "Recent literature argues that natural resource abundance is likely to be bad for economic growth. This paper provides a counterargument by highlighting examples of successful resource-based development. The first is historical: the United States from the mid-nineteenth century to the mid-twentieth. We show that U.S. mineral abundance was an endogenous historical phenomenon driven by collective learning, increasing returns, and an accommodating legal environment. Recent instances of successful resource-based growth affirm that so-called “nonrenewable” resources can be progressively extended through exploration, technological progress, and investments in appropriate knowledge. Indeed, minerals constitute a high-tech knowledge industry in many countries." By Gavin Wright , and Jesse Czelusta, July 2002. (PDF, 46 pages)
http://www-econ.stanford.edu/faculty/workp/swp02008.html

Economic Fundamentals of the Knowledge Society
Abstract: “This article provides an introduction to fundamental issues in the development of new knowledge-based economies. After placing their emergence in historical perspective and proposing a theoretical framework that distinguishes knowledge from information, the authors characterize the specific nature of such economies. They go on to deal with some of the major issues concerning the new skills and abilities required for integration into the knowledge-based economy; the new geography that is taking shape (where physical distance ceases to be such an influential constraint); the conditions governing access to both information and knowledge, not least for developing countries; the uneven development of scientific, technological (including organizational) knowledge across different sectors of activity; problems concerning intellectual property rights and the privatization of knowledge; and the issues of trust, memory and the fragmentation of knowledge.” By Paul A. David and Dominique Foray, February 2002. (PDF, 24 pages.)
http://www-econ.stanford.edu/faculty/workp/swp02003.html

From Keeping 'Nature's Secrets' to the Institutionalization of 'Open Science'
Abstract: ““Open science" as a practice became increasing widespread in Europe during the late sixteenth and early seventeenth centuries. It represented a departure from the previously dominant ethos of secrecy in the pursuit of Nature’s Secrets, and its emergence was a distinctive and vital organizational aspect of the Scientific Revolution. The development of norms of disclosure and demonstration, and the rise of “cooperative rivalries” in the revelation of new knowledge, constituted a functional response to heightened asymmetric information problems that had been posed for the Renaissance system of court-patronage of the arts and sciences. Pre-existing informational asymmetries had been exaccerbated by the claims of mathematicians and the increasing practical reliance upon new mathematical techniques in a variety of “contexts of application.” In late Renaissance Europe, the feudal legacy of fragmented political authority had resulted in relations between noble patrons and their savant-clients that resembled the situation modern economists describe as "common agency contracting in substitutes" -- competititon among incompletely informed principals for the dedicated services of multiple agents. These conditions not only induced the formation of mechanisms enabling would-be clients to build public reputations for scientific expertise and credibility, but also tended to result in more favorable contract terms (especially with regard to autonomy and financial support) for the agent-client members of western Europe's nascent scientific communities. Foundations were thus laid for the later seventeenth and eighteenth century institutionalization of the open pursuit of scientific knowledge under the auspices of State-sponsored academies. Rather than being a novel departure induced by the needs of the new style of inquiry, those institutional developments continued a broader intellectual and cultural movement that had been underway in Europe outside the medieval universities. This had manifested itself in the formation of myriad academies that were the precursor form of the private scientific societies that appeared under elite patronage early in the seventeenth century. The ethos and norms of disclosure, and the characteristic supporting institutions of modern, publicly funded open scientific research are, in an important sense, independent historical legacies; they were not derivative from the epistemological aspects of the Scientific Revolution, although to a considerable degree they have been responsible for the successes that “the scientific method” has achieved in the production of reliable knowledge. The fragility of these cooperative features of ‘the R&D infrastructure’ needs to be keep in mind by science policy makers.” By Paul A. David, March 2001. (PDF, 18 pages.)
http://www-econ.stanford.edu/faculty/workp/swp01006.html

Will Building ‘Good Fences’ Really Make ‘Good Neighbors’ in Science?
Abstract: “Problematic issues are raised by the expressed intention of the European Commission to promote greater awareness on the part of scientists in the “European Research Area” about intellectual property rights and their uses in the context of “Internet intensive research collaborations.” Promoting greater awareness and encouraging more systematic usage of IRP protections are logically distinct, but as policies for implementation - especially within the EC’s Fifth Framework Programme - the former can too readily shade into the latter. Building “good fences” does not make for “good (more productive) neighbors” in science. Balance needs to be maintained between the “open science” mode of research, and private proprietary R&D, because at the macro-system level the functions that each is well-suited to serve are complementary. Recent policy initiatives, particularly by the EC in relation to the legal protection of property rights in database, pose a serious threat to the utility of collaboratively consttructed digital information infrastructures which provide “information spaces” for voyages of scientific discovery. The case for alternative policy approaches is argued in this paper, and several specific proposals are set out for further discussion.” By Paul A. David, March 2001. (PDF, 8 pages.)
http://www-econ.stanford.edu/faculty/workp/swp01005.html

The Digital Technology Boomerang: New Intellectual Property Rights Threaten Global "Open Science"
Abstract: “There is a serious threat that ill-considered government support for expanding legal means of controlling access to information for the purpose of extracting private economic rents is resulting in the "over-fencing of the public knowledge commons" in science and engineering. Such a new "tragedy of the commons" would bring adverse long-run consequences for future welfare gains through technological progress, and re-distributional effects further disadvantaging the present economically less advanced countries of the world. Radical legal innovations in intellectual property protection that seriously jeopardize the effective conduct of open, collaborative science have been introduced by the little noticed European Database Directive of March 1996. This initiative forms an emblematic and substantively significant aspect of the broader set of transformations in intellectual property rights institutions that have been initiated in response to the economic ramifications of rapid progress in digital information technologies. The EC Directive poses numerous contentious issues in law and economics that will create ambiguities for business and non-profit activities in this area for years to come. The terms on which those issues are resolved will materially affect the costs and organizational feasibility of scientific projects that are of global reach and importance, especially those that depend heavily upon the collection, management and analysis of large volumes of observational data that cannot be regenerated. This paper sets out the economic case for the effectiveness of open, collaborative research, and the forces behind the recent, countervailing rush to strengthen and expand the scope of intellectual property rights protection. Focusing upon innovations in copyright law and the sui generis protection of hitherto unprotected content, it documents the genesis and analyzes the economic implications of the EC's Database Directive, and related legislative proposals (H.R. 3125, H.R. 354 and H.R. 1858) in the US. Several modest remedial proposals are advanced to mitigate the adverse impact of "the digital technology boomerang" upon open science.” By Paul A. David, October 2000. (PDF, 32 pages.)
http://www-econ.stanford.edu/faculty/workp/swp00016.html

Information and Governance in the Silicon Valley Model
Abstract: “This paper argues that the truly unique role of venture capitalists is found in their information-mediating and governance functions, which can be understood only in the context of relationships between the "clustering" of entrepreneurial firms and (a club) of venture capitalists. The entrepreneurial firms in Silicon Valley compete in innovation and thus their activities are fundamentally substitutes. Therefore, their information processing activities need to be encapsulated from each other to excel competitors. A new product system may be then evolutionarily formed by combining modular products ex post that evolve from such decentralized efforts. In order for such evolutionary selection is possible, however, common standards for interfaces among modular products need to be provided to make individual product attributes compatible. Venture capitalists plays an important role in mediating information necessary for endogenously forming and governing competition among entrepreneurs under such framework. The first section assembles stylized facts about venture capital - entrepreneurial firm relationships as a basis for modeling. The second section presents a framework for comparing information systemic aspects of alternative R&D organizations and tries to understand the unique innovation capability of the Silicon Valley model. The third section then proceeds to the analysis of the venture capital governance as an institution for supporting such information system. Repeated tournaments among initially funded firms for refinancing necessary for the completion of projects, and the threat of termination of financial support by the venture capitalist, are seen to provide greater incentives for the entrepreneurs than under traditional arms length financing. The fourth section discusses the incentives of the venture capitalist and other institutional characteristics of the Silicon Valley model.: By Masahiko Aoki, October, 1999. (PDF, 32 pages.)
http://www-econ.stanford.edu/faculty/workp/swp99028.html

The Explicit Economics of Knowledge Codification and Tacitness
Conclusions: “This paper has looked intensively and critically at one of the several dimensions David and Foray (1996) identified that in their schematic description of the space in which “knowledge products” were distributed. Our focus has been maintained on the most problematic and, for many economists, the most esoteric of the three axes defining that space: the dimension along which codification appeared at one extremum and tacitness occupied the other. This has permitted some further unpacking of the economic determinants of codification decisions, and the resources committed thereto, and it has revealed that the term tacit is being used so loosely in the current economics of science and technology literature that important distinctions, such as the
one separating that which is uncodified in a particular context and that which will not (likely) be codified at all, are blurred, or entirely lost. Also lost from view in many modern discussions of codification is the important difference between codification of procedural knowledge, as distinct from factual propositions. By bringing these into greater prominence, a number of puzzles and inconsistencies which detract from the logic of the analysis of the social return to investment in codification can be resolved.” By Robin Cowan, Paul A. David, and Dominique Foray, May 1999. (PDF, 32 pages)
http://www-econ.stanford.edu/faculty/workp/swp99027.html

General Purpose Technologies and Surges in Productivity: Historical Reflections on the Future of the ICT Revolution
Abstract: “In this essay we reflect on the relevance of early twentieth century experience for understanding the more general phenomenon of recurring prolonged swings in the TFP growth rate in advanced industrial economies. Our discussion builds upon our recent re-examination of the marked acceleration of the pace of total factor productivity growth that occurred in U.S. manufacturing following World War I (David and Wright 1999. After a ‘productivity pause’ of some three decades, during which gross manufacturing output grew at less than one percent per annum relative to inputs of capital and labor, TFP in this sector expanded at more than five percent per annum between 1919 and 1929. This remarkable discontinuity has often been overlooked by modern productivity analysts and economic historians alike; yet it contributed substantially to the absolute and relative rise of the US domestic economy’s TFP residual, and in many respects launched the high-growth era that persisted into the 1970s. Upon closer scrutiny, this implied shift in the prevailing technological regime can be traced to critical advances in the electrification of industry, which we interpret as a phase in the diffusion of a general purpose technology (GPT) that made possible significant fixed-capital savings while simultaneously increasing labor productivity as well. But a purely technological explanation of the productivity surge is inadequate. It would neglect the concurrence of these developments with important structural changes in US labor markets, and the interrelationships that appear between managerial and organizational innovations and the new dynamo based factory technology, on the one hand, and between both forms of innovation and the macroeconomic conditions of the 1920s on the other hand. We explore this more complex formulation of the dynamics of GPT diffusion by considering the generic and the differentiating aspects of the US experience with industrial electrification in comparison with that of the UK. The cross-national perspective brings to light some differences between leader and follower economies in the dynamics of GPT diffusion and its relationship to the strength of surges in productivity growth. It also serves to underscore the important role of the institutional and policy context with respect to the potential for upgrading the quality of the workforce in the immediately affected branches of industry. The concluding sections of the essay offer some reflections on the analogies and contrasts between the modern experience of the information and communications technology (ICT) revolution, and the historical case of a socio-economic regime transition involving the electric dynamo. Contextualizing the GPT concept in explicitly historical terms enables us to shed further light upon the paradoxical phenomenon of the late twentieth century productivity slowdown, and also to point to some contemporary portents of a future phase of more rapid total factor productivity growth.” By Paul A. David and Gavin Wright, July 1999. (PDF, 27 pages.)
http://www-econ.stanford.edu/faculty/workp/swp99026.pdf

At last, a remedy for chronic QWERTY-skepticism!
In this paper Paul A. David argues that the course of technological diffusion is really path dependent – that history counts, and that economists should do research on the topic. Perhaps through better understanding of the nature of this phenomenon, it will be possible to reduce costs associated with such dependence. The QWERTY example is famous: the keyboard was designed for mechanical typewriters, and it has been demonstrated that alternative designs allow faster typing with modern devices; however, the design has been locked in via historical processes that occurred; it might have been possible to intervene at some point to move to more efficient designs, and reduce overall social costs of QWERTY. David faces critics of his views, and argues that path-dependency is a researchable topic. September 1999. (PDF, 13 pages.)
http://www-econ.stanford.edu/faculty/workp/swp99025.html

Heart of Darkness: Public-Private Interactions Inside the R&D Black Box
Abstract: “This paper is a first step toward closing the analytical gap in the extensive literature on the results of interactions between public and private R&D expenditures, and their joint effects on the economy. A survey focusing on econometric studies in this area reveals a plethora of sometimes confusing and frequently contradictory estimates of the response of company financed R&D to changes in the level and nature of this category of public expenditures. Yet, a theoretical framework seldom is provided within which the empirical results are to be interpreted. Some such structure is necessary, in view of the multiple channels through which public research can affect private R&D performance, especially as not all the effects flow in the same direction. A major cause of "inconsistencies" in the empirical literature is the failure to recognize key differences among the various policy "experiments" being considered depending upon the economy in which they are embedded, and the type of public sector R&D spending that is contemplated. Using a simple, stylized structural model, we identify the main channels of impact of public R&D. We thus can characterize the various effects, distinguishing between short-run and long-run impacts that would show up in simple regression analyses of nominal public and private R&D expenditure variables. Within the context of our simple model it is possible to offer interpretations that shed light on recent cross-section and panel data findings at both high (i.e. national) and low (specific technology area) levels of aggregation.” By Paul A. David and Bronwyn H. Hall, March 1999. (PDF, 25 pages.)
http://www-econ.stanford.edu/faculty/workp/swp99024.html

Is Public R&D a Complement or Substitute for Private R&D? A Review of the Econometric Evidence
Abstract: “Is public R&D spending complementary and thus additional to private R&D spending, or does it substitute for and tend to crowd out private R&D? Conflicting answers are given to this question. We survey the body of available econometric evidence accumulated over the past 35 years. A framework for analysis of the problem is developed to help organize and summarize the findings of econometric studies based on time series and cross-section data from various levels of aggregation (laboratory, firm, industry, country). The findings overall are ambivalent and the existing literature as a whole is subject to the criticism that the nature of the experiment(s) that the investigators envisage is not adequately specified. We conclude by offering suggestions for improving future empirical research on this issue.” By Paul A. David, Bronwyn H. Hall, and Andrew A. Toole, September 1999. (PDF, 67 pages.)
http://www-econ.stanford.edu/faculty/workp/swp99023.html

The Political Economy of Public Science
Paul A. David reviews the assumption of “Open Science” that underlies much of the argument for government support of science. He then reviews trends in science and science institutions in developed nations, to focus on fundamental issues of science policy. May 1999. (PDF, 23 pages.)
http://www-econ.stanford.edu/faculty/workp/swp99022.pdf

Was an Industrial Revolution Inevitable? Economic Growth Over the Very Long Run
Abstract: “This paper studies a growth model that is able to match several key facts of economic history. For thousands of years, the average standard of living seems to have risen very little, despite increases in the level of technology and large increases in the level of the population. Then, after thousands of years of little change, the level of per capita consumption increased dramatically in less than two centuries. Quantitative analysis of the model highlights two factors central to understanding this history. The first is a virtuous circle: more people produce more ideas, which in turn makes additional population growth possible. The second is an improvement in institutions that promote innovation, such as property rights: the simulated economy indicates that the single most important factor in the transition to modern growth has been the increase in the fraction of output paid to compensate inventors for the fruits of their labor.” By Charles I. Jones, September, 1999. (PDF, 49 pages.)
http://www-econ.stanford.edu/faculty/workp/swp99008.html

Adjusting to a New Technology: Experience and Training
Abstract: “How does the economy react to the arrival of a new major technology? The existing literature on General Purpose Technologies (GPTs) has studied the role that mechanisms like secondary innovations, diffusion, and learning by firms play in the adjustment process. By contrast, we focus on a new mechanisms based on the interplay between technological change and human capital accumulation. We show that technological change that requires more education and training, like computerization, necessarily produces an initial slowdown. Surprisingly, however, technological change that lowers the training requirement, like the move from the artisan shop to the factory, can produce either a bust or a boom. We identify three key properties that determine which effect will occur: (1) the productivity of inexperienced workers; (2) the speed with which experience increases productivity; and (3) the level of general skills required to operate the new technology.” By Elhanan Helpman and Antonio Rangel, December 1998. (PDF, 35 pages.)
http://www-econ.stanford.edu/faculty/workp/swp99002.html