"Money Ruins Everything" (Innovation/Intellectual Property Edition)

Australian professors John Quiggin (economics) and Dan Hunter (law) in a provocatively titled paper “Money Ruins Everything,” which is coming out in the Hastings Communications and Entertainment Law Journal, argue that the nature of innovation is changing, and that in turn means that we need to rethink policies and incentives. Specifically, they note that the Internet and cheap personal computing now allows for successful amateur innovation, such as open source software, wikis and blogs, something that is beyond the ken of conventional notions of innovation. They provide some recommendations that are germane in a non-US context, but the detailed background discussion, on the history of innovation, the evolution of intellectual property precepts, and how they break down in certain Internet contexts, are valuable for generalist readers who have an interest in technology.

As a blogger, I don’t see what I am doing as innovative; I think of blogging as having much in common with being a pamphleteer in the eighteenth century. To the extent this sort of activity can be classified innovative (as open source software is), it isn’t clear that technology will get cheap enough in other fields to allow for amateur experimentation (I doubt if you will ever find an inexpensive particle collider, for instance).

But the article nevertheless makes many worthwhile observations. The piece is very readable but it is 54 pages, so I’ve excepted some of the key sections.

The authors start by describing how the very idea of innovation has evolved:

But prior to the industrial revolution, innovation was not seen in utilitarian terms and existed largely independent of any market forces.16 Most innovations occurred on the farm or perhaps within the confines of a village as a result of specific needs of the individual and then those nearby, who happened to hear of the innovation and saw that it might be useful to their lives, adopted them.

Sometimes the innovation did come to resemble the modern concept of property in an idea or process—for example, the idea might make its way outward through trade routes, and then other people in different locales commercialize the innovation, and sometimes the idea or process became the centerpiece of a guild or trade association, which protects it as a trade secret. But in the absence of a marketplace for ideas, localization was the norm, and until the industrial era, there was little sense that an innovative idea or concept or expression could be exchanged for anything. Innovation was commoditized, and so there wasn’t even a conception that one needed economic incentives to drive social progress: for example, patents were monopoly rights granted as a reward for services to monarchs, not to encourage invention

The piece continues with the development of notions of property, property rights, and markets, and gives a succinct overview of the theory underpinning our current intellectual property rights regime:

Capitalist societies see innovation as dependent on exclusive property interests. We assume that it is necessary to propertize intellectual activity if we wish to spur creativity or inventiveness. This assumption is based on the fear that the benefits of intellectual activity will be under-produced if it is inadequately commoditized because of public goods and free-rider concerns. For the last two hundred years this model has produced great social benefits and so we reasonably assume that new types of innovations will conform to this model. This model of innovative activity, however, has always under-produced innovations that have significant value but which have not been commoditized within the intellectual property system.

This point has long been recognized in relation to fundamental or “pure” research, where the link between discovery and any commercial application is too indirect to allow propertization. Fundamental research has been analyzed as a public good, that is, a good that is both non-rival and non-excludable. In fact, information is the canonical example of a non-rival good, since making information available to one person does notreduce its availability to others. Rather, if anything, dissemination to one person makes it more available to others. On the other hand, information in general, is not excludable—it can be kept secret or patents and other forms of propertization can restrict its use. The crucial feature of fundamental research is that excludability is either unfeasible or undesirable…..

The dichotomy between fundamental research, considered as pure public good, requiring government provision or funding, and applied development work producing patentable innovations, dominated discussions of innovation policy in the Twentieth Century. These polar alternatives, however, do not exhaust the set of possible modes of innovation, or even define the ends of a spectrum within which other modes can be organized.

Then we get to the thesis:

The central argument of this paper is that, with the rise of the Internet and related technologies, the mode of innovation based on free revealing has become radically more important than it was in the past. It has also shifted in location, taking place primarily in the household sector which, for the purposes of this paper, is taken to include work literally undertaken at home and unofficial work undertaken in the workplace. Within the household sector then, the role of non-commercial motivations is extremely important and under-theorized. Indeed, it is barely recognized. So to understand how innovations occur and what our innovation policy should be, it is necessary for policy makers to recognize that many innovations occur outside of the intellectual property system. Thus, any account of innovation policy needs to consider aspects unrelated to the simple utilitarian incentive model of motivation for innovative production, and the attendant property system that we have created to generate the incentive.

Then to a bold claim:

A profound shift is occurring in assumptions about the production of socially valuable expression…The most significant and largely unrecognized aspect of this change is the way that readers have become writers and how digital technologies remove the need for highly capitalized intermediaries to guarantee the widespread dissemination of content. This is the “amateur collaborative content” movement, and it is the most significant development in content since the development of the printing press.

With all due respect to the writers, the printing press ushered in vastly greater changes than we see today. A simple example: reader reminded me that William Tynsdale, who translated the Bible into English and sought to have it printed and distributed was pursued and eventually captured and executed, since giving the laity access to the Holy Word was seen as a threat to the authority of the Church.

The article argues at some length that commercial motivations don’t operate well in this amateur space, and puts considerable emphasis on altruistic motivations. It would have helped if the authors had drawn a clearer line between collaborative efforts, such as open source software and citizen journalism, versus ones like blogs, where there is discrete and considerable output from identified individuals. Indeed, the whole appeal of a blog to readers is the distinctiveness of the author, be it his expertise or access to privileged information, his skill and effort in sifting and presenting interesting information, or simply his writing style. And that does offer the opportunity for revenue generation, as Gawker and the existence of recognized, salaried bloggers like Felix Salmon attest.

The article goes through a number of shortcomings of traditional models, and while not proposing specific mechanisms, makes a cogent case for government support (or let’s more politely say encouragement) of amateur innovation (and its use of protected intellectual property):

When selling these [trade] deals to foreign lawmakers, the U.S. intellectual property interests—and the U.S. Trade Representative who acts as their muscle—cannot rely on the same arguments as they might exercise back home. Neither Singaporeans nor Australians nor even Canadians care much about the workers in intellectual property-related jobs in Hollywood, California, Redmond, Washington, or Blue Bell, Pennsylvania. So the rhetoric used relies on a combination of consumer economics (“The Free Trade Agreement means cheaper drug prices and access to new movies”) or simplified Hegelian property theory (“This is our property and we should be allowed to stop others from using it without reimbursement.”). These arguments are hard to resist, and coupled with the threat of U.S. trade sanctions, regularly prevail.

Except in one area: culture. National governments have been successful in applying the rhetoric of cultural protection against the rhetoric of property and commercial innovation. The best example of this is, of course, the French…

The reference to the protection of indigenous cultural industries and local content is one of the few ways in which countries can justify protectionism, and can resist the imposition of U.S.-led free trade in intellectual property laws. For example, in the recent negotiations of the USA-Australia Free Trade Agreement, one of the few areas where U.S. intellectual property interests did not triumph entirely was in local content controls for broadcast television…..

The intersection of cultural policy and innovation policy is extremely important in the era of amateur content production. Poorly capitalized creators create amateur content for motives that are generally not commercial. So they have little desire and no incentive to create massmedia content that appeals to a broad audience.

I need to interject. I think most bloggers would LOVE to reach a large number of people. It isn’t that they have no desire to reach a mass audience; I think most recognize their limitations, go where they have something to offer, and hopefully find a sympathetic readership. The conclusion is correct, but the emphasis is a bit off.

Back to the article:http://www.blogger.com/img/gl.quote.gif

This is the source of a great deal of misunderstanding on the part of the mainstream media, which assumes that the numbers of readers or the number of links for a given blog are the only significant metrics of success. Thus, the fact that the most widely trafficked blogs now include some professionally produced blogs from the mainstream media283—where once the most popular blogs were almost wholly amateur—can be misread as in indication that the significant blogs will become professional in time. But this metric ignores the scope of the so-called “long tail” of the readership distribution, that is the 27.5 million blogs which cater to specialized interests ranging from high-energy physics, through advertising, the relationship crises of Judy from Oklahoma City, Oklahoma, and every topic in between. And as the latest Technorati report shows, there is a huge audience for amateur content, especially very localized content.

Why is this important for cultural policy? Amateur content is typically very localized and often small-scale: for example, blogs address issues of niche and geographic interest, and by definition are not mainstream media sources. Amateur content is about having a local voice, reflecting the needs and interests of a local audience. The local scale of amateur content is, or should be, extremely important to the large range of counties (and smaller geographic entities like states and provinces) that are not commercial exporters of content. Places like Canada, Singapore and Australia will never be able to compete with the mass media content produced by Hollywood and Britain for English language content…The same is true for place like Quebec and Côte d’Ivoire for francophone content; or Timor Leste for Portuguese language content….

But amateur content is produced for little cost, and for non-commercial reasons. It does not have the same economic structure
as that which drives the mass media industry. So if these minor places want alternatives to mass media content—and if they want alternatives which speak to their specific interests and needs, and not the needs of Parisiens or Los Angelenos—then they should encourage amateur content production as a matter of local cultural policy.

Encouraging an amateur content movement therefore has important implications for the cultural policy of numerous countries. First, it provides opportunities for self-expression and creative self-development for the citizens of those countries and those populations…. nations have an interest in producing creative individuals who feel empowered to express their creativity. Not only do these people produce creative works that are socially meaningful, their presence is correlated with improved economic activity even in non-creative arenas. Then there is the issue of the audience for this creativity: nations-states clearly Then there is the issue of the audience for this creativity: nations-states clearly have a benefit in having material which reflects the interests and needs of its people. have a benefit in having material which reflects the interests and needs of its people…..Therefore national regulators, who want to produce a vibrant corpus of material that is directed to the ethnic and cultural needs of their people, are much better off encouraging the amateur content producers within their country by intelligent use of their cultural policy.

The forms that this encouragement might take are the ones that we are generally familiar with in dealing with policy. Public subsidy and legal controls are the most obvious candidates. As to the former, the most significant public subsidies should be reserved for the public provision of Internet access, on the basis that it has the biggest multiplier effect on the ability of local content to be disseminated. In some countries and locales this will involve the creation of municipal wifi networks, in other cases it will involve building out net infrastructure in other ways.

As to the latter, taking cultural policy seriously means resisting the “level-playing field” argument which is advanced for the uptake of U.S. intellectual property policy in non-U.S. countries, and recognizing that local bloggers, wikipedians, citizen journalists, open source programmers, amateur musicians, and so on, are generators of significant cultural content. Where intellectual property laws constrain their ability to express their local view these laws should be changed.