Nobel Econ Award Goes To Two Economists Who Have Greatly Shaped My Thinking On Economics Of Innovation

from the good-to-see dept

Let's get this out of the way upfront: if you're one of those people who pedantically feels the need to sneeringly point out that the economics Nobel is "not a real Nobel Prize," shut up: no one cares.

Now, let's get on to the point: for basically the last decade, I've been specifically waiting for Paul Romer to finally win this prize and each year I've been disappointed when someone else did. Finally, this year he won it and did so with William Nordhous, which is even better, as I'll explain shortly. Both Romer and Nordhous have greatly influenced my thinking on many of the things I write about here at Techdirt, specifically when it comes to the economics of innovation, and, more specifically, the economics of information and so-called "non-rivalrous" goods (I prefer to call them "infinite goods"). I've reference Romer multiple times in the past, specifically in discussing how innovation creates economic growth in powerful ways. One of my favorite Romer quotes is as follows:

Economic growth occurs whenever people take resources and rearrange them in ways that are more valuable. A useful metaphor for production in an economy comes from the kitchen. To create valuable final products, we mix inexpensive ingredients together according to a recipe. The cooking one can do is limited by the supply of ingredients, and most cooking in the economy produces undesirable side effects. If economic growth could be achieved only by doing more and more of the same kind of cooking, we would eventually run out of raw materials and suffer from unacceptable levels of pollution and nuisance. Human history teaches us, however, that economic growth springs from better recipes, not just from more cooking. New recipes generally produce fewer unpleasant side effects and generate more economic value per unit of raw material.

Every generation has perceived the limits to growth that finite resources and undesirable side effects would pose if no new recipes or ideas were discovered. And every generation has underestimated the potential for finding new recipes and ideas. We consistently fail to grasp how many ideas remain to be discovered. The difficulty is the same one we have with compounding. Possibilities do not add up. They multiply.

I have also regularly recommended an absolutely brilliant book by David Warsh, called Knowledge and the Wealth of Nations: A Story of Economic Discovery and I'll do so again here. I've long recommended it to people who are interested in the economics of innovation, because the first half of it is a very entertaining and wonderful history of the economics of information, and the second half is the story of Romer coming up with his own theory of endogenous growth. The book, at times, comes off a bit "hero worshipy" of Romer, but it's totally worth it, as it puts into place an economic model that helps explain so much of why innovation remains so important. My one disappointment with it is that for nearly the entire book I was nodding in agreement with Romer, except for some stuff on intellectual property, where I felt that Romer gets his own model backwards.

Either way it's great -- and doubly so that Nordhaus is similarly rewarded. Warsh's book about Romer also talks about Nordhaus, including a section on Nordhaus' incredible paper on the cost of light throughout human history, which is a stunningly wonderful work of economics that shows just how innovation leads to economic growth. In fact, thanks to Warsh's book about Romer, and its section on Nordhaus -- as well as a few other mentions -- that made me go out and pick up a copy of The Economics of New Goods, which is a collection by the National Bureau of Economic Research (NBER) of some of the absolute best papers on economics and innovation. The two books have sat for years next to each other on my bookshelf, and I have revisited Nordhaus' paper (which is the first in that collection) numerous times in trying to better think through ways to explain the economics of innovation.

So I'm delighted to see Nordhaus and Romer both honored at the same time. And it is doubly timely, seeing as it's happening just at the moment when we're facing so much backlash against technology and innovation, and many people trying to argue that the harms from technology somehow outweigh the gains. Reading and understanding the work of both Romer and Nordhaus hopefully will help people get past that belief, and back to recognizing how much overall good comes from innovation. Congrats to both.

Filed Under: economics, economics nobel, growth theory, infinite goods, innovation, nobel prize, paul romer, william nordhaus

DailyDirt: Winning A Nobel Prize And Thinking Differently

from the urls-we-dig-up dept

A fairly sizable list of Nobel laureates suffer from Nobel disease -- a phenomenon in which respected scientists publicly espouse somewhat crazy ideas. Perhaps just being famous also causes this affliction...? Or maybe there should be more research on this topic, worthy of an Ig Nobel award. In any case, here are a few links on some Nobel prize winners that demonstrate these people are still human.

• Nobel laureate James Watson, famous for eludicating the helical structure of DNA, recently auctioned off his medal for over $4 million. The winning bid came from Russian billionaire Alisher Usmanov who says he'll return the medal to Watson. [url]
• Nobel laureates in Chemistry seem to like giving advice to others. Ada Yonath had some sage advice: "Go into science if you are curious and have passion for it. If not, find something else." [url]
• Kary Mullis, the inventor of PCR who won the Nobel prize in chemistry in 1993, supported research suggesting that AIDS is not caused by HIV. The scientific evidence is overwhelming against the assertion that HIV and AIDS are unrelated, but Mullis isn't convinced. [url]
• Linus Pauling won not just one, but TWO Nobel prizes. However, these credentials didn't prevent him from spouting some crazy unsupported statements, such as asserting that megadoses of vitamin C can prevent colds and death from cancers. [url]

If you'd like to read more awesome and interesting stuff, check out this unrelated (but not entirely random!) Techdirt post via StumbleUpon.

Filed Under: james watson, kary mullis, linus pauling, megadose, nobel disease, nobel prize, vitamin c

DailyDirt: Looking For Love In Some Of The Wrong Places

from the urls-we-dig-up dept

Online dating is by no means a new thing anymore, and by some counts, we're on the third iteration of improvement for internet dating. So that means we should be pretty close to perfecting these services, right? (Third time's the charm?) Matching algorithms will probably get better and better with time, but then so will expectations. Here are just a few interesting links for geeky singles out there.

• Psychologists have pointed out that matching algorithms for long-term relationships are not significantly better than random. Dating algorithms aren't actually so bad at excluding potentially "bad dates" -- but that's not what most online dating services offer. [url]
• The Secret Diamond Club takes advantage of some economic tricks to try to match up rich men with attractive women. The real secret, though, is that it probably doesn't work at all -- and it preys on lonely people with money. [url]
• Recently, the Nobel prize for economics was awarded for work on matching markets. The Gale-Shapely algorithm has been used for matching organ donors and doctors with hospitals, but maybe someday it'll be used for finding romantic partners, too. [url]

If you'd like to read more awesome and interesting stuff, check out this unrelated (but not entirely random!) Techdirt post.

Filed Under: algorithms, economics, gale-shapely, matching markets, nobel prize, online dating, romance

DailyDirt: Fooling Some Of The People Some Of The Time...

from the urls-we-dig-up dept

There's a sucker born every minute -- if you like to believe unverifiable statistics. Usually, if it's too good to be true, it ain't true. But as technology gets better, sometimes it's hard to distinguish sufficiently advanced algorithms from magic. Here are a few scams that successfully fooled some folks for a while.

• A stock-picking robot named Marl convinced thousands of investors that it could identify penny stocks that were about to soar in price. The SEC is looking to impose a fine and force the creators of Marl to repay their duped investors... but with claims on a website like: "The longer Marl is allowed to run on a computer … The More Advanced He Becomes!" How could anyone go wrong? [url]
• Penn and Teller don't usually do pranks, but when it comes to tricking Nobel prize laureate, Arno Penzias, they apparently make exceptions. Creating a fake computer with voice recognition in the late 1980s fooled this brilliant physicist, but nowadays Apple's Siri is in TV ads all the time doing nearly the same routine. [url]
• Baron Wolfgang von Kempelen built a mechanical chess-playing machine (shaped like a Turk...) that gained widespread fame in 1769. This mechanical turk was actually controlled by a hidden human being, but only a few hundred years later, we actually could build a chess playing robot with grandmaster skills. [url]
• To discover more interesting AI-related content, check out what's currently floating around the StumbleUpon universe. [url]  

By the way, StumbleUpon can recommend some good Techdirt articles, too.

Filed Under: chess, fraud, marl, nobel prize, penn and teller, sec, siri, statistics

DailyDirt: Science That's Almost Indistinguishable From Magic

from the urls-we-dig-up dept

Technology must really be getting better because Arthur C. Clarke's quote that "any sufficiently advanced technology is indistinguishable from magic" seems to apply to more and more discoveries. Here are just a few examples of some pretty cool science that is real -- but not so easily explained.

• Quantum levitation uses a superconductor, a magnet and some flux pinning -- and makes a neat science demonstration. If only we could find some room temperature superconductors... [url]
• Quasicrystals won the 2011 Nobel prize in chemistry, and scientists used to say these materials weren't possible. Mother nature enjoys messing with symmetry a bit and coming up with patterns that M. C. Escher might have liked. [url]
• Some metallic glasses are microalloys of several different metals -- and can exhibit extraordinary strength and toughness. Too bad these glasses aren't transparent, though. [url]
• To discover more interesting science-related stuff, check out what's currently floating around the StumbleUpon universe. [url]  

By the way, StumbleUpon can recommend some good Techdirt articles, too.

Filed Under: flux pinning, metallic glass, nobel prize, quantum levitation, quasicrystals, superconductor

China Tries To Scrub The Internet Of All Information About Nobel Peace Prize Winner

from the god's-gift-to-china dept

The EFF points out that with Chinese dissident Liu Xiaobo winning the Nobel Peace Prize, Chinese censors have sprung into action trying to block all mentions of or research on either Liu Xiaobo or the Nobel Peace Prize. Apparently doing searches on either term gives you no results -- because I'm sure that's convincing. Separately, it's worth noting that Liu Xiaobo once declared "the internet is God's gift to China." And it's ability to censor the internet is...?

Filed Under: censorship, china, liu xiaobo, nobel prize

Yet Another Nobel Prize Winner Says That Intellectual Property Is Harming Science

from the add-another-one-to-the-list dept

We've discussed in the past how Noble Prize winning economists have been worried about the impact of intellectual property laws, and how at least one Nobel Prize winning physicist is warning that strict intellectual property laws are harming science and innovation. Now we can add a Nobel Prize winning biologist to the list (his Nobel was for medicine). Sir John Sulston has written up a column for The Guardian explaining how intellectual property is "shackling" science:

The myth is that IP rights are as important as our rights in castles, cars and corn oil. IP is supposedly intended to encourage inventors and the investment needed to bring their products to the clinic and marketplace. In reality, patents often suppress invention rather than promote it: drugs are "evergreened" when patents are on the verge of running out -- companies buy up the patents of potential rivals in order to prevent them being turned into products. Moreover, the prices charged, especially for pharmaceuticals, are often grossly in excess of those required to cover costs and make reasonable profits.

He goes on to attack the massive growth in things like gene patents, which has resulted in: "research on certain genes [being] largely restricted to the companies that hold the patents, and tests involving them are marketed at prohibitive prices. We believe that this poses a very real danger to the development of science for the public good." He points to the long history of how scientific advance has come from collaboration and the sharing of knowledge, rather than the hoarding of it, and fears where things are heading now that knowledge is so often locked up:

For science to continue to flourish, it is necessary that the knowledge it generates be made freely and widely available. IP rights have the tendency to stifle access to knowledge and the free exchange of ideas that is essential to science. So, far from stimulating innovation and the dissemination of the benefits of science, IP all too often hampers scientific progress and restricts access to its products.

We keep hearing more and more people who recognize all of this speaking out against what is happening. But the politicians only seem to listen to the lawyers and the lobbyists who have every incentive to ignore the reality around them. How do we change that?

Filed Under: innovation, intellectual property, john sulston, nobel prize, science

Three Economic Nobel Laureates In A Row Recognizing Power Of Infinite Goods

from the this-is-a-good-thing... dept

With the Nobel Prize in Economics being awarded to Elinor Ostrom (as well as Oliver Williamson) this year, plenty of people are noting that Ostrom's seminal work has to do with how the concept of "the tragedy of the commons" isn't really true in many cases, and how that "commons" can often self-regulate itself. And, Ostrom definitely recognizes how this applies to the "commons" that is the public domain. I didn't want to comment right away on this. While I've read Ostrom's work in the past, I wanted to revisit some of it, to refresh myself on it.

But what comes out in reading through her work is that she recognizes that government intervention -- such as with monopoly rights -- really doesn't make sense in many situations of "public goods." In a recent discussion on this site, people pointed to the concept of a "public good" as something that needs government intervention -- and I noted that more recent economic analysis showed that wasn't true at all. Ostrom's work is much of what kicked off that line of analysis (Coase deserves credit as well...). Her key finding was that in commons situations, the players can often work out perfectly reasonable solutions on their own, that don't involve regulatory efforts to put up fences or restrictions. The idea that a commons will automatically get overrun simply isn't true in practice. And that's exactly what we've seen in areas where there isn't intellectual property protections. The supposed fear of a "tragedy of the commons" never seems to show up. Instead, the markets adjust.

What struck me as really interesting, however, is that this is the second time in three years that the Nobel committee has awarded someone whose research highlights this point. In 2007, the award went to Eric Maskin, who has done work showing why patents can often be harmful (his focus was on software) -- again, suggesting that government intervention can be harmful in cases of "public goods." And, while it's less tied to the reasons why he got his Nobel or his core areas of research, last year's award winner, Paul Krugman, has recently come around to recognizing that "infinite goods" or public goods aren't a problem, but a potential opportunity as a market shifts.

It's nice to see the Nobel committee helping to get these ideas out there -- and highlighting the research that debunks the old wisdom that the answer to any public good is to create a gov't regulated monopoly system, rather than letting the market work out a solution on its own.

Filed Under: commons, economics, elinor ostrom, eric maskin, nobel prize, public goods, tragedy of the commons

Basic Building Blocks Of Life Patented... But Wins A Nobel Prize

from the is-that-good-or-bad? dept

joseph franklin writes in to point out that this year's Nobel Prize in Chemistry was awarded to some researchers who helped uncover some of the basic building blocks of life, ribosomes. Figuring out how to model these was great, but Franklin's concern is that not only did these researchers get a Nobel Prize for it, they got a patent as well:

The patent holders and licensees surely believe that these products will be life-saving, and profitable, and I hate to rain on the Nobel Prize parade. But should research so fundamental to life, such as the ribosome structure, be locked up for commercial gain -- like Dynamite? Should a private institution, such as Yale, have the only say over how ribosomes may be developed into new biomedical technologies?

Filed Under: building blocks, chemistry, nobel prize, patents, ribosomes

Nobel Prize Winning Physicist Explains How Intellectual Property Damages Innovation

from the and-another-one dept

Over the last year or so, there have been a bunch of excellent books that have come out highlighting many of the issues we talk about here on a regular basis. The latest may be The Crime of Reason and the Closing of the Scientific Mind, written by Nobel Prize winning physicist, Robert B. Laughlin. I became aware of the book thanks to the fact that he'll be speaking at the Cato Institute this week about the book, for those of you in the Washington, DC area.

It's funny, because when we point to all the economic research on intellectual property and innovation, we've been told that economists know nothing. In fact, one critic of our site has claimed that even Nobel Prize winning economists aren't worth paying attention to -- and the only Nobel Prize winners who matter are those in the hard sciences. So, I'm sure those critics will be interested in the conclusions of Laughlin, who notes that the strengthening of intellectual property laws has harmed the ability to share knowledge and to innovate. He's quite worried about how it's impacting research and development.

Newly aggressive patent practices are increasingly violating a principle that has been with us since Roman times and is built into our societies at many levels, including our religions: the laws of man flow from the laws of nature and are subservient to them. Patenting nature is transparently immoral. So is patenting reason, since reason and nature are one and the same. Thus, the current problem with patent law is more serious than the bellyaching of a few jaded engineers. It's a crisis of legitimacy.

So, now we can add a Nobel Prize winning physicist to the list of critics of the patent system, along with a few Nobel Prize winning economists.

Filed Under: innovation, intellectual property, nobel prize, patents, physics, robert b. laughlin