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On Biology and Technology: The Economics of Managing Biotechnologies

Author

Listed:
  • Timo Goeschl

    (Department of Land Economy University of Cambridge)

  • Timothy Swanson

    (Department of Economics and Faculty of Law, University College London)

Abstract

This paper considers those sectors of the economy that operate under the same regimes of rewarding private innovators as others, but differ in that they face recurring problems of resistance, as occur in the pharmaceutical and agricultural industries. This recurrence originates in the natural processes of selection and evolution among humanity’s biological competitors. The paper examines the capacity for decentralised patent-based incentive mechanisms to result in socially optimal outcomes in these sectors under scale- and speed-dependent evolution of pathogens. It demonstrates that there is a fundamental incompatibility between the dynamics of the patent system and the dynamics of the resistance problem under both types of evolution. Under scale-dependent evolution, the externalities within a patent-based system indicate that decentralised mechanisms will result in systematic underinvestment in R&D that decreases further with an increasing severity of the resistance problem. Under speed-dependent evolution, a patent-based system will fail to target socially optimal innovation size. The overall conclusion is that patent-based incentive mechanisms are incapable of sustaining society against a background of increasing resistance problems. The paper concludes with appropriate policy implications of these results.

Suggested Citation

  • Timo Goeschl & Timothy Swanson, 2003. "On Biology and Technology: The Economics of Managing Biotechnologies," Working Papers 2003.42, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2003.42
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    References listed on IDEAS

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    1. Martin L. Weitzman, 2000. "Economic Profitability Versus Ecological Entropy," The Quarterly Journal of Economics, Oxford University Press, vol. 115(1), pages 237-263.
    2. Sedjo, Roger & Simpson, R. David, 1996. "Valuation of Biodiversity for Use in New Product Research in a Model of Sequential Search," Discussion Papers dp-96-27, Resources For the Future.
    3. Mason, Robin & Swanson, Timothy, 2002. "The costs of uncoordinated regulation," European Economic Review, Elsevier, vol. 46(1), pages 143-167, January.
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    Citations

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    Cited by:

    1. O'Shea, Lucy & Ulph, Alistair, 2008. "The role of pest resistance in biotechnology R&D investment strategy," Journal of Environmental Economics and Management, Elsevier, vol. 55(2), pages 213-228, March.
    2. Oleg Yerokhin & GianCarlo Moschini, 2008. "Intellectual Property Rights and Crop-Improving R&D under Adaptive Destruction," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 40(1), pages 53-72, May.
    3. Rupert Gatti & Timo Goeschl & Ben Groom & Timothy Swanson, 2011. "The Biodiversity Bargaining Problem," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 48(4), pages 609-628, April.
    4. David J. Spielman & Xingliang Ma, 2016. "Private Sector Incentives and the Diffusion of Agricultural Technology: Evidence from Developing Countries," Journal of Development Studies, Taylor & Francis Journals, vol. 52(5), pages 696-717, May.
    5. Tim Swanson & Ben Groom, 2012. "Regulating global biodiversity: what is the problem?," Oxford Review of Economic Policy, Oxford University Press, vol. 28(1), pages 114-138, Spring.
    6. Timothy Swanson & Ben Groom, 2012. "Regulating Biodiversity: What is the Problem?," CIES Research Paper series 08-2012, Centre for International Environmental Studies, The Graduate Institute.

    More about this item

    Keywords

    Biotechnology; R&D; Patents;

    JEL classification:

    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services

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