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Property rights and externalities: The uneasy case of knowledge

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  • Ramello, Giovanni B.

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Abstract

Drawing from Coase's methodological lesson, this article discusses the specific case of knowledge, which was for a long time chiefly governed by exchange mechanisms lying outside the market, and has only recently been brought into the market. Its recent, heavy "colonization" by the property paradigm has progressively elicited criticism from commentators who, for various reasons, believe that the market can play only a limited role in pursuing efficiency in the knowledge domain. The article agrees with the enounced thesis and tries to provide an explanation of it that relates to the fact that in specific circumstances property-rights can produce distinct market failures that affect the social cost and can consequently prevent attainment of social welfare. In particular, the arguments set forth here concern three distinct externalities that arise when enforcing a property rights system over knowledge. First, the existence of a property right may itself alter individual preferences and social norms, thus causing specific changes in individuals' behaviour. Second, the idiosyncratic nature of knowledge, as a collective and inherently indivisible entity, means that its full propertization can be expected to produce significant harm. Third, property rights can cause endogenous drifts in the market structure arising from the exclusive power granted to the right holder: though generally intended as a necessary mechanism for extracting a price from the consumer, in the knowledge domain property rights can become a device for extracting rents from the market.

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Bibliographic Info

Paper provided by Institute of Public Policy and Public Choice - POLIS in its series POLIS Working Papers with number 149.

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Length: 21 pages
Date of creation: Nov 2010
Date of revision:
Handle: RePEc:uca:ucapdv:149

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Web page: http://polis.unipmn.it

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Keywords: property rights; knowledge; invention; externalities; efficiency;

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  1. Ramello, Giovanni B., 2010. "Copyright and endogenous market structure: a glimpse from the journal-publishing market," POLIS Working Papers 146, Institute of Public Policy and Public Choice - POLIS.
  2. Nicita Antonio & Ramello Giovanni B., 2007. "Property, Liability and Market Power: The Antitrust Side of Copyright," Review of Law & Economics, De Gruyter, vol. 3(3), pages 767-791, December.
  3. James Bessen & Michael J. Meurer, 2009. "Of Patents and Property," Working Papers 0901, Research on Innovation.
  4. Haeussler, Carolin, 2011. "Information-sharing in academia and the industry: A comparative study," Research Policy, Elsevier, vol. 40(1), pages 105-122, February.
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  8. Ramello, Giovanni B., 2007. "Access to vs. exclusion from knowledge: Intellectual property, efficiency and social justice," POLIS Working Papers 90, Institute of Public Policy and Public Choice - POLIS.
  9. Alessandro Nuvolari, 2004. "Collective invention during the British Industrial Revolution: the case of the Cornish pumping engine," Cambridge Journal of Economics, Oxford University Press, vol. 28(3), pages 347-363, May.
  10. Breschi, Stefano & Lissoni, Francesco, 2001. "Knowledge Spillovers and Local Innovation Systems: A Critical Survey," Industrial and Corporate Change, Oxford University Press, vol. 10(4), pages 975-1005, December.
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  14. Nuvolari, A., 2004. "Collective invention during the British Industrial Revolution: the case of the Cornish pumping engine," Working Papers 04.02, Eindhoven Center for Innovation Studies.
  15. Allen, Robert C., 1983. "Collective invention," Journal of Economic Behavior & Organization, Elsevier, vol. 4(1), pages 1-24, March.
  16. F. M. Scherer, 2005. "The Role of Patents in two US Monopolization Cases," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 12(3), pages 297-305.
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  18. Levmore, Saul, 2002. "Two Stories about the Evolution of Property Rights," The Journal of Legal Studies, University of Chicago Press, vol. 31(2), pages S421-51, June.
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Cited by:
  1. Alberto Cassone & Giovanni Ramello, 2011. "The simple economics of class action: private provision of club and public goods," European Journal of Law and Economics, Springer, vol. 32(2), pages 205-224, October.

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