Modern Macroeconomics.pdf

Paul M. Romer 687have a finite duration. You would allow partial excludability – less than fullbut stronger than zero excludability. We often talk as if that is the generalsolution. But in fact, this is not the general solution. You have to break thequestion down by type of non-rival good. There are some non-rival goodslike the quadratic formula or pure mathematical algorithms that traditionallyhave been given no property rights whatsoever. There are other forms of nonrivalgoods like books. You will get a copyright for this book of interviews,which is a very strong form of protection. The text that you write and mywords – you can take them and put a copyright on them so that nobody elsecan reuse them. I can not even reuse my own words without getting permissionfrom you [laughter]. So that is a very strong form of intellectual propertyprotection. What we need is a much more careful differentiation of differenttypes of non-rival goods and an analysis of why different institutional structuresand degrees of property protection are appropriate for different kinds ofgoods.Patent rights or legal property rights are only a part of the story. We createother mechanisms, like subsidies for R&D. We create whole institutions likeuniversities which are generally non-profit and government supported, thatare designed to try to encourage the production of ideas. The analysis ofinstitutions for non-rival goods is more subtle than many people realize.For example, I have argued that it is very important to distinguish humancapital from ideas – they are very different types of economic goods. Humancapital is just like capital or land. It is an ordinary private good. I agree withGary Becker on this. I think a lot of claims about human capital externalitiesare wrong. Nevertheless, when people conclude that we should not have anygovernment subsidies for the production of human capital, I disagree. Why isthat? It is because human capital is the crucial input into producing ideas. Ifyou want to encourage the production of ideas, one way is to subsidize theideas themselves. But another way is to subsidize the inputs that go into theproduction of ideas. In a typical form of second-best analysis, you may wantto introduce an additional distortion – subsidies for scientists and engineers –to offset another – the fact that the social returns from new ideas are higherthan the private returns. You create a much larger pool of scientists andengineers. This lowers the price of scientists and engineers to anybody whowants to hire their services to produce new ideas.So in general, the optimal design of institutions is an unresolved problem.We have seen a lot of experimentation during the last 100 years. I have madethe claim that the economies that will really do well in the next 100 years willbe the ones that come up with the best institutions for simultaneously achievingthe production of new ideas and their widespread use. I am quite confidentthat we will see new societal or institutional mechanisms that will get put inplace for encouraging new ideas.