Subject: Re: Returns to service professionals
From: "Stephen J. Turnbull" <turnbull@sk.tsukuba.ac.jp>
Date: Mon, 5 Jul 1999 14:31:32 +0900 (JST)

>>>>> "Brian" == Brian Bartholomew <bb@wv.com> writes:

    >> I really do believe that a lot of companies have, that the
    >> internet as they now encounter it, is a limitless resource,
    >> when in fact it was created by a cooperative spirit, and the
    >> kind of innovations that gave them their springboard will get
    >> "used up", and they are going to have to start doing more of
    >> the heavy lifting themselves to get to the next level.  My
    >> point is that like sustainable agriculture, it's better to
    >> start before you've depleted the soil.

    Brian> Perhaps the pool of volunteer/charity programming talent is
    Brian> a commons which can be overgrazed.

Afraid not.  Not unless it's slave labor with no choice about what it
works on, or too stupid to have its own opinions about what's worth
doing.  I know you favor the former interpretation, Brian, but it's
not tenable.

As long as I'm here...

I was wrong, there is an economic literature on common pool problems
in intellectual property.  Brian D. Wright, "The Economics of
Invention Incentives," American Economic Review 83:4, Sep 1983,
691-707.  This applies particularly to patents, and assumes that
fishing for patents is like fishing for, well, fish.  (The standard
mathematical formulations are identical.)  The basic result there is
that R&D is _over_provided.  This is a completely different issue from
the free rider problem we discussed in an earlier thread.

Also in the same issue of the AER is an interesting article by Jennifer 
Reinganum: with uncertainty, incumbents have less incentive to do R&D
than challengers.  Thus the challenger eventually wins, despite the
monopolist's incentive to preserve their monopoly.  Consistent with
the behavior of MSFT, which uses alternative methods to preserve its
incumbency.

Finally, a very recent article by Cornelli and Schankerman, "Patent
Renewals and R&D Incentives," RAND Journal of Economics 30:2, Summer
'99 (note the y2k problem), 197-213, suggests that from the point of
view of encouraging R&D to socially optimal levels (ie, aggregate
consumer benefits at market prices are maximized), the current WTO
proposal of 20-year patent lifetimes is too _short_.  However, they
also propose a sliding scale for patent renewals, rising sharply with
term.  (Of course this amounts to a tax, with all the problems of
government incompetence that that brings with it.  However, it does
not discourage R&D relative to the social optimum if done correctly.)
I don't know how well their parametrization of the innovation process
fits software, probably pretty poorly.

Dunno how much any of these apply to software under copyright
protection, of course; I suspect that all the patent literature is
bogus in software, since most software development is
"straightforward" given a correct specification.  Wright shows that in 
that case doing development on contract is the socially preferred
method (although he provides no mechanism for deciding how to allocate 
resources to different projects).

-- 
University of Tsukuba                Tennodai 1-1-1 Tsukuba 305-8573 JAPAN
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What are those two straight lines for?  "Free software rules."