Subject: Tom W. Bell paper
From: <>
Date: Fri, 1 Sep 2006 14:56:48 +0900

Don Marti writes:

 > Paper about how to connect markets to R&D incentives
 > without monopolies:

That's a misstatement.  R&D inherently involves monopoly---the first
entity to discover something is by definition a monopolist, at least
at that instant.  What you mean is *government franchises*.

But this is not really practical, as far as I can see.  What you're
looking at here is a large collection of individual securities, each
subject to "events" that could imply swings of hundreds of billions of
dollars---and the inevitable bankruptcy risk on the side facing the
adverse change.  Would I buy a share on a market?  Not a chance,
unless it were ultimately insured by something with assets denumerated
in the trillions of dollars.  *A mortgage on Microsoft is not big

Another problem you're going to run into is that by definition you're
looking at insider trading (another form of monopolistic
exploitation).  If insiders can't trade on their information, how are
they going to use this market to fund completion of their research?

I'm not saying that this proposal won't be an improvement over the
government franchise involved in intellectual property.  But it's not
a panacea, and I would be willing to bet that in the end making these
markets work will require large-scale government intervention.  I'm
very pessimistic that intervention on that scale will be much better
than what we currently have.