Escolar Documentos
Profissional Documentos
Cultura Documentos
economy
Jan Goossenaerts1
Abstract
The private sector is an important engine of growth and innovation. Yet, a private
sector without an accordingly performant and developed public sector would it
develop? In a thought experiment, let us imagine a market place where all land and
water-surface is privately owned, and where the right of way for consumers and
producers of goods and services must be negotiated with landowners. With all private
individuals seeking maximal utility and minimal risk, decision problems and
transaction costs would prohibit the emergence of an economic system beyond barter
trade among neighbours producing goods within enclosed resource endowments.
Under the conditions in the thought-experiment, mankind's discovery journey
(Boorstin, 1983) would have been precluded, and so would have the agricultural,
industrial and knowledge revolutions. History has taken a different course. Commons
regimes have been gradually complemented with private property regimes, and
subjects and those in power alike have been gradually disciplined by fit institutions.
And indeed, those institutions have had a considerable impact on economic
performance (North, 1990).
Ill-designed institutions may lock-in an economy, and public sector enacted barriers
are rightly feared by reformers. Yet, also private sector principals may derive rents
from positions that act as barriers to others, as recognized by the Essential Facilities
Doctrine. Looking at the knowledge economy and the technology and content uses
that differentiate it from the industrial economy, it is not evident what exactly are the
essential facilities that help or prevent principals exploiting the interdependencies
among the division of labour, competence and market size.
This essay questions the fitness of industrial-age institutions for the globalizing and
knowledge-intensifying economy. Particularly in the software and content sectors it
identifies abuses of essential facilities and proposes enabling environment reforms to
curb these abuses so as to spur learning and private sector development. For some
institutional choice options, a pro-growth cause-effect chain is projected.
1
For details on the author, see http://www.citeulike.org/profile/jago
ingenuity and social capabilities give rise to an unfolding sequence of events in which
positions in the socio-technical landscape. The knowledge economy, and the related
markets of software and content (media) have become contentious during the past
to antitrust (or competition) law. Joseph Stiglitz, former chief economist at the World
Bank, is among the most prominent advocates of improved institutions for knowledge
as a global public good (Stiglitz, 1999). Beyond their role in capital markets, he sees
the provision of knowledge as one of the international public goods that will figure in
the mission of multilateral development banks during the coming decades (Stiglitz,
1998). Yet, in the information economy (Shapiro & Varian, 1999), fit institutions
develop slowly, and so does the competence of creating solutions that respond to local
needs2.
Observing on the one hand the pressing needs of many members of society
and the under-utilization of knowledge, and on the other hand the immense solution
delivery potential of science, technology and education, the Internet, and mobile
infrastructure3 that can coach and enable principals4 in developing their livelihood by
2
Leach & Scoones (2006) contrast the slow race to citizens’ solutions, a race to make investment in
science and technology work for the poor, with the two races that generate most excitement: the race
to global economic success and the race to find a universal fix for the problems of developing countries.
3
An infrastructure is a particular set of resources that meets three demand-side criteria (Frischmann,
2005, p 956): (i) the resource may be consumed non-rivalrously; (ii) social demand for the resource is
driven primarily by downstream productive activity (rather than by consumption) that requires the
resource as an input; and (iii) the resource may be used as an input into a wide range of goods and
services, including private goods, public goods and non-market goods.
risks during their livelihood processes. The knowledge infrastructure would enable
envisioned by many, why has it not been created yet? What knowledge do we lack
systems architect's6 perspective in the debate, so as to spur more effective action. The
guiding vision is that in the global knowledge economy, control over certain essential
reform is beyond the means of a single author, the presentation of the debate and fact-
finding along the phases of the regulative cycle9 provides a structure in which all
4
The term principal is here used to refer to a participant in economic and non-market interactions, who
is disciplined by institutions (accountability), but otherwise free (autonomy).
5
Horizontal methods are fit for transferring tacit knowledge and include apprenticeship, secondments,
imitation, study tours, cross-training, twinning relations and guided learning-by-doing. Vertical
methods are fit for knowledge that can be codified, transmitted to a central repository or library, and
then accessed by interested parties (Stiglitz, 2000).
6
Systems architecting is the discipline that strives for balance and compromise among the tensions of
multiple stakeholder needs and resources, interests and technology (Rechtin & Maier, 1997). Such fit is
achieved from a consideration of the full scope of the system of concern, from strategy to operations,
from product and service functions to technology and market trends.
7
An essential facility is one in which duplication of a given facility, for instance a railroad, local
telecoms network or oil pipeline, is precluded by the monopolist's inherent ownership advantages, but
without which competitors cannot access the market.
8
Commons is a resource management principle by which a resource is made openly accessible to all
within a community regardless of their identity or intended use (Frischmann, 2005, p 1022). By
providing resources as commons, some degree of inclusivity in the socio-technical system is ensured.
In many cultures, common property regimes have been prevalent for the sustainable management of
natural resources such as forests, watershores, grazing and farm lands (Bromley and Cernea, 1989).
These authors describe how market economists have often over-emphasized the enclosure of certain
commons, under-appreciating or neglecting the sustainable outcomes that many cultures had achieved
with common property regimes.
9
Originating in psychological practice, the regulative cycle (van Strien, 1997) has been extensively
applied also as a methodology of practice, geared towards the "interested" regulation of the behaviour
of groups or organizations in the desired direction. Where principals are engaged with the operations
and improvement of a work system such as a plant, a farm, a hospital or a service system, the cycle
includes the following activities: evaluation (of system operations with respect to an instrument or via
benchmarking), problem identification (selection from a problem mess), diagnosis (of the problem
situation – analysis), plan of action (design), and intervention (implementation).
In what follows, we first describe the current status quo in the knowledge
economy, paying attention to the public sector and private sector attitudes and
sociotechnical transition pathways (Geels & Schot, 2007) serve as a basis for
diagnosing cause-effect chains and setting an initial agenda for broad reform in the
(Jacobs, 2007) we describe reform drivers and factor choices that should be channeled
into a reform strategy. We identify and develop a small number choices and project
the virtuous cause-effect chains and pro-growth conduct they may enable at multiple
levels in the socio-technical landscape. The essay concludes with a concise project
sector principals, of assets that had better remained common. By recognizing the
patterns and agents of the latter barriers, the reformer can articulate those assets for
10
In the sectors addressed here (software, content and learning), several essential facilities are also non-
rivalrous.
rights – enabling people and firms to keep the returns on their investments, make
contracts and resolve disputes –, a regulatory apparatus curbing the worst forms of
exhibiting trust and social cooperation, ... (Rodrik, 1999). These are social
arrangements that economists and engineers usually take for granted. Yet, significant
regulatory reforms have been and are being implemented. Jacobs (1999) describes the
transition from state-led to market-led growth that is still ongoing in many OECD
member countries. (First generation) reforms have yielded major benefits such as
boosting consumer benefits and addressing the lack of flexibility and innovation in the
supply-side of the economy. Benefits have been pursued in network industries such
sectors the past two or three decades have seen a paradigm shift concerning the
organization and regulation. The state has been withdrawing from the ownership and
from intervention in market entry, market exit and pricing. It has been recognized that
not all parts of the vertically integrated monopolies are "natural", and that sectors such
features which would preclude workable competition. Developments have also given
rise to the notion that some natural monopolies may be transient as technical progress
concerning the role of regulation: from a constraint on markets and on the exploitation
owner open his network for use by other firms, is a key tool for this purpose. This tool
is related to the so-called Essential Facilities Doctrine, a doctrine that has also been
velocity and power in their strategies (Child & McGrath, 2001), and it has produced
while withdrawing from ownership in the traditional network industries, are showing
understanding of the technical artefacts and the options they create, dominant
incumbents are free to abuse their control of essential facilities. In specific situations
domain. Yet, such lessons have not been generalized nor have they been fully
11
IEEE 1471-2000 defines architecture as ―the fundamental organization of a system embodied in its
components, their relationships to each other, and to the environment, and the principles guiding its
design and evolution.‖
12
Stiglitz (2004) cites the example of airplane development: the conflicting airplane patents held by
the Wright Brothers and by Curtis impeded the development of the airplane, until in World War I, the
US government forced the pooling of patents. In the automobile sector, a patent granted to Ransom on
"a four wheel self propelled vehicle" was used to try to coordinate a cartel among automobile
producers; the cartel failed only because Ford challenged the patent—and won.
address supply-side tactics in these markets. Demand-side aspects have been largely
patenting (Ransom) has been rightly challenged in the past (Ford, see footnote 12). As
innovations diffuse from a niche to the level of the sociotechnical landscape, their
and it may be used as input to a wide range of goods and services. Though software
applications diffusion has risen to the landscape level, most applications remain silos
would enable users to compose or evolve their preferred desktop functionality, and
standards have been determined by the agendas of dominant principals in the market.
In software and related patents, the architecture is often part of the claims of
encoding are the backbone of the dominant positions, globally and in niches.
side misses (a long tail of) improvements due to the prevailing silo-architecture of
software applications that work with proprietary content encodings. The supply-side
13
An example is the control by Microsoft and Intel of the architectural standards of Personal
Computers. Adopting an open but owned standards strategy Microsoft and Intel maintained a subtle
balance between aggressive diffusion and limited licensing of architectural standards (Borrus and
Zysman, 1997).
parts of the outcome of scientific research, often funded by the public sector, is free-
rided by publishers and authors. For instance for textbooks, the copyright is managed
for the authored work as a whole. Usually the content builds upon a lot of knowledge,
cases and problems that have been developed by a large number of scholars in the
discipline. Authors of (good) textbooks become the champions of the discipline, and
the gatekeepers for innovation in its teaching. Mutually, the textbooks must be
consolidation and open access to consensus-knowledge that has long been in the
public domain are neglected. Dominant incumbents focus on the most profitable
segments of the market, which they serve with blockbuster-like author-branded books.
Textbooks loose their value even more quickly than would be justified by the progress
there is no means in the work to distinguish the essential facility of science from the
original creativity of the author. Though the creativity of the author was in focus as
principals in the knowledge economy, what kind of reform could discipline these
regulation approach, yet as the technology stabilizes and/or the polarization increases
between demand- and supply-side, there is ground for government to step in Grajzl &
Murrell, 2007). As was the case in post-Civil War United States14 scale-increase, now
and because of its barrier-removing effects, such reform will also benefit private
of private sector development where the public sector, informed by suitable growth
theories, can invest in specific assets. Drawing upon the multi-level conceptualization
of socio-technical change processes and faced with the global sustainability challenge,
pull and institutional design. Figure 1 instantiates Morioka's framework for demand-
14
Djankov et al (2003) and Glaeser and Shleifer (2003) attribute the rise of the regulatory state in post-
Civil War United States to a response to the increased disorder caused by railroads and large firms:
industrialization and commercialization of the American economy undermined the pre-1900 courts as
the sole institution securing property rights.
facilities.
supply of software,
content and services
Given its ubiquitous appearance, the expansion of the socio-technical landscape with
software, content and derived services seems to call for an institutional intervention
that Jacobs (1999) would classify as a second generation reform: a structural reform
that must secure a longer-term, comprehensive alignment of state, market, and civil
Hess & Ostrom (2007) explore institution analysis and design for the knowledge
commons; The Open Source Movement (Lerner & Tirole, 2001) challenges the rents
15
While the focus in this paper is on the institutional gap for the knowledge economy (it needs
dedicated institutions as it unfolds in a material economy), a similar need for differential institutions
may distinguish the industrial era and the agricultural era.
organize the issues that come with the multiple stakeholders. The impact expectations
various stakeholders involved. Hence Table 1 addresses agency, scope and design
knowledge sources for each of the levels in the socio-technical landscape. Each
stakeholder is engaged in the value-risk constellation around his or her livelihood with
its resource endowment and factor choices. By institutional design and innovation in
constrained. For each principal, the regulative cycle allows to make changes traceable
environment within which more aggregate, yet disciplined, principals determine the
rules or control the resources. At all times and all levels, autonomous persons as pico-
level principals, in group or as individuals make the choices in roles defined in the
institutions and organizations. The use of the terms sub or super indicates that for
some choices in his or her interactions, the principal in the sub-position abides by the
depicts the factor built-up for the members of an economy as institutions fail to
among resource endowments (right to left along the row of the real site work systems
in Table 1) determines how factor choices or gaps of the public sector (macro and
meso) drive exogeneous factors for the private sector (micro and pico), as described in
Table 3.
At this point, and adopting the multi-level perspective (Schot et al, 1994), it is
consolidation. Having been present throughout the crafts era, in the industrial society,
16
TRIPS, Agreement on Trade-Related Aspects of Intellectual Property Rights,
http://www.wto.org/english/docs_e/legal_e/27-trips.pdf
designs that (to a large extent) are shared in an industry. In the knowledge economy
the meso-level sectoral entities are usually weak or absent. This is considered part of
economy
polarized
competition)
product/service development (winner-takes-it-all)
innovation market for software, content, learning and
high entry barriers, highly priced, low variety/low
knowledge economy;
weak national institutions vis-a-vis global dominant incumbents in the
The public sector neglects its evidence basedness and its scope: it fails to recognize
essential facilities in the knowledge economy and exhibits laissez-faire vis-à-vis the
barriers for competitors, high prices and high switching costs for their customers, and
low innovation pressures for themselves. As a result only a fraction of the potential
innovation and value construction takes place. Many innovators and potential
this causes inertia including the failure to produce content, services and products that
work for the poor. Whereas a knowledge infrastructure could at much lower cost
regulative cycles that recognize the multi-level character of transition challenges. The
first section describes for the cause-effect dependencies identified in Table 2, factor
choices that could lead to a more inclusive economy. The second section evaluates the
reform design. The third section lists the main drivers of reform and their application
the knowledge economy are recognized, commons regimes are defined for them, and
suitable sectoral entities take charge of open architectures, open content encoding and
17
Frischmann (2005) broadens the commons versus private control debate to infrastructures such as
those for transportation and communication. These resources are an input to a wide range of goods and
services. Hence the value of the resource shows a high variability, making a commons-based approach
to providing them immensely valuable (Benkler, 2001).
18
Jacobs (2007) has outlined such a pattern that maximizes the chances of genuine and durable success
in environments resistant to reform.
economy
Inclusive
product/service development
market for authoring, learning and
Low hurdle, fairly priced, high variety
choices by super-principals are given in the vertical columns drawn from the right
hand side of the table. For the private sector, qualities of the exogeneous factors are
included as well. In all cases where private sector activity is constrained, encouraged
19
See Reference Model for Technical Integration in INTEROP D9.1 (page 24) (Berre et al., 2004).
levels the consistency among the institutions is a critical design criterion. Linking the
macro- and meso-level on the one hand, and the micro- and pico-level on the other
hand are the means for enforcement and compliance and the related information needs.
basis for the eventual replacement of the institutional patchwork and private essential
facilities holdings that currently prevail. Below, the impact of the choices is assessed
dominant incumbents in the knowledge economy. The small differences indicate that
in the current status quo only (minor) niche innovations are required, and that the
proposed knowledge economy reform can indeed channel the landscape pressures into
a coherent reform.
software world. Incumbents that have acquired dominant positions in (large) niche
upon the platforms (technology stacks) controlled by different suppliers – must inter-
at the sectoral level an open multi-tier component based reference architecture such as
the one proposed by Berre et al. (2004), component markets can emerge and the silos
favoured by dominant incumbents can be wrapped first and then gradually be replaced
for which copyright is managed. By doing this, text-book publishers and authors will
works. Where the granularity of the book and the (archival) journal was suitable for
the age of the printing press, the web allows rights management, authoring, peer
review, royalty disbursement, and service composition on the basis of much smaller
content-chunks. Enabling this will allow the educators in niche markets to author their
own cases within peer-reviewed platforms so as to establish for their audience the
optimal learning content. These authors will also obtain (micro) royalties as their
cases or theory chapters are used by others in the market. In the near future, learning
services can sequence cases and problems for self-propelled (life-long) learners. As
present it in the language of the viewer, it will become feasible to produce learning
content in one language and present it or include in the learning curriculum in any
vertical methods that are fit for knowledge that can be codified, transmitted to a
businesses require improved support for horizontal methods that are fit for
20
See Universal Networking Digital Language Foundation. (www.undl.org) for the technology and
current language resources. See d Almost All Questions Answered, AAQUA. (www.aaqua.org) for a
running application.
concept of learning paths is borrowed from the educational theory; it encompasses the
prerequisite for learning from past experience is that learner and coach both have
insight into past performance of the former. Clear criteria for assessment of
competencies (end level and interim levels) must be used. So, an educational program
based on learning paths calls for a monitoring system that both facilitates learning and
learners have to collect 'evidence', so they can prove they have achieved competencies
to a certain level. The aim of the portfolio is that learners actively engage in their own
consultations with a coach are a prerequisite for the success of portfolio learning.
Because portfolio learning is new, and as procedures have not been optimized, it risks
learning paths presuppose the cooperation of coaches; they have to align their
activities, adjust assessment criteria etc. Mobility of both learner's and coaches
become possible as standardized processes are enacted, and coaches use standardized
criteria and forms for the assessment of competencies and capabilities. These must be
built upon software and content platforms that facilitate fair mechanisms both
regarding the recognition of essential facilities and commons and regarding the
incentives that will encourage coaches and learners to apply knowledge and create
Knowledge economy reform will have to overcome vested interests in public and
private sectors, fears of the consequences of change, low skill levels, lingering anti-
market sentiments, and the complexity and uncertainty of reform in a complex and
Jacobs (2007) lists, reviews and illustrates the seven key drivers of reform that
have been identified in the academic debate and the development literature. Table 4
lists these drivers and their meaning. For each driver its pertinence to the knowledge
economy is added in the third column. One key driver must be broadened to reflect
the ferment in the knowledge economy: unfolding innovation drives the need for
unfolding reform. Ongoing innovation challenges the institution designer. The trade-
institutional as much as technological phenomena, and ... the contest between business
outcomes: small changes in competition policy and public procurement could easily
tip the world toward a free software model, or could shore up the proprietary software
monopolies."
landscape. In the past, scale-enlarging shifts have been triggers both for extreme
dominant principals have had the time to show how to shirk in the knowledge
economy, time has come to respond. With new institutional designs in place,
organizational redesigns will come to reflect them (Meyer and Rowan, 1978), leading
21
WTO, World Trade Organization, see http://www.wto.org/index.htm
22
WIPO, World Intellectual Property Organization, see http://www.wipo.int/portal/index.html.en
Making better use of ICT23 and knowledge (as a global public good), mankind
will be armed to achieve bold targets, including beyond those of the Millenium
Development Goals and the Kyoto Protocol. To these ends, society must engage all
its principals at the pico to macro scales where the carrying capacity of natural,
6. References
1. Bekkers, R., B. Verspagen, & Smits, J. (2002) Intellectual Property Rights and Standardization: the
case of GSM. Telecommunications Policy, 26 (3/4)
2. Benkler, Y. (2001) Property, Commons and the First Amendment: Towards a Core Common
Infrastructure, White Paper for the First Amendment Program, Brennan Center for Justice at NYU
Law School, available at http://www.benkler.org/WhitePaper.pdf
3. Berre, A.-J., A. Hahn, D. Akehurst, J. Bezivin, A. Tsalgatidou, F. Vermaut, L. Kutvonen, P. F.
Linington (2004) INTEROP Deliverable D9.1 “State-of-the art for Interoperability architecture
approaches - Model driven and dynamic, federated enterprise interoperability architectures and
interoperability for non-functional aspects. http://interop-vlab.eu/deliv/dap-domain-architecture-and-
platforms/D91/
4. Boorstin, Daniel J. (1983) The Discoverers – A history of man's search to know his world and
himself, Vintage Books, New York.
5. Borrus, M. and John Zysman (1997) Globalization with borders: The Rise of Wintelism as the future
of Global Competition. Industry and Innovation 4(2).
6. Bromley, D.W. and Cernea, M.M. (1989) The management of common property natural resources:
some conceptual and operational fallacies. World Bank Discussion Paper, Vol. 57, Washington
D.C., The International Bank for Reconstruction and Development / The World Bank.
7. Child, J. & R. G. McGrath (2001) Organizations unfettered: Organizational form in an information-
intensive economy. Academy of Management Journal; 44(6), pp. 1135-1148
8. Djankov, S., Glaeser, E., La Porta, R., Lopez-de-Silanes, F., Shleifer, A. (2003) The New
Comparative Economics. Journal of Comparative Economics 31, pp. 595-619.
9. Frischmann, B.M. (2005) An economic theory of infrastructure and commons management,
Minnesota Law Review, 89, pp. 917-1030.
10.Geels, F.W. & J. Schot (2007) Typology of sociotechnical transition pathways. Research Policy 36,
pp 399-417
11.Grajzl, P. and P. Murrell (2007) Allocating lawmaking powers: Self-regulation vs government
regulation, Journal of Comparative Economics, 35, pp 520-545
12.Guy, F. (2007) Strategic bundling: Information products, market power, and the future of
globalization. Review of International Political Economy 14(1) 26-48
13.Hess, C. & E. Ostrom (eds) (2007) Understanding Knowledge as a Commons – From Theory to
Practice, The MIT Press, Cambridge, Massachusetts.
14.IEEE 1471-2000. IEEE Recommended Practice for Architectural Description of Software-Intensive
Systems, IEEE Std 1471-2000.
15.Jacobs, S. H. (1999) The Second Generation of Regulatory Reforms, Proc. IMF Conference on
Second Generation Regulatory Reforms, November 8-9, 1999. Washington D.C. url:
www.imf.org/external/pubs/ft/seminar/1999/reforms/jacobs.htm
16.Jacobs, Scott (2007) How Broad-based Reforms Succeed in Changing the Business Environment:
The Strategic Use of Drivers of Change, Jacobs & Associates, Washington DC.
23
ICT is the abbreviation for Information and Communications Technology