There's something of a crisis in what's called the "zero marginal cost economy", see Paul Mason and Jeremy Rifkin's recent books. Essentially: as an increasing component of price is the fixed component of goods -- writing a book vs. printing it, discovering (and especially testing) a drug vs. producing it, writing software vs. distributing it, and even for many manufactured products, the design of an airframe or engine vs. the fabrication costs, there's an inherent conflict on the market.
Markets like to price goods and services according to marginal costs. That is, the incremental cost of producing another unit. But with fixed costs as a larger component of the actual total lifetime costs of producing a good, the market price undervalues actual costs of production.
At the same time, there are numerous other problems surrounding research, development, manufacturing, and marketing:
1. Counterfeit, unlicensed, pirated, or "knock-off" goods face a different production function -- their manufactures need only recoup marginal, not fixed costs. Original developers suffer.
2. Denied access. Especially for information goods, there are many people, myself included, who'd like access to information which they simply cannot afford. Or, increasingly, would be grossly impractical to store, use, and haul around in physical form. I'm increasingly thinking that it's not information that wants to be free, but instead: Information access wants to be free.
3. Patent wars. While this is hardly a new development -- from steam engines to light bulbs to electric generators to airplanes to radio and television, viscious battles have been fought over patent rights, with products often delayed for years from the market -- trends over the past 20 years, especially in high tech, have been exceptionally disheartening. The situation with copyright is little better. Speaking of which...
4. Increasingly toxic "intellectual property" regimes. Even such hard durable capital goods as automobiles and tractors are now subject to bailment rather than transactions of personal or chattel property. Digital restrictions management systems are installed on computers, VCRs, bookreaders, and other devices. Contract, legal, trial, and other terms almost uniformly favour sellors over buyers, or rather, corporate entities over individuals.
5. Research budgets, especially in public instutions and universities, are being slashed.
6. The joint squeeze of both higher research costs and lower reasearch returns -- in many fields we've been hitting diminishing returns. It seems that birds are intelligent enough to work out opportunistic use of fire to drive insects and small animals out of brush, and similar processes may have lead to early experiments in cooking as the prey failed to entirely escape the fire. Anthropologists date first use of fire to over 500,000 years ago, which would put its use prior to the emergence of homo sapiens ourselves. And yet the economic return on that fundamental discovery has been intense. The $140 billion invested in the International Space Station has returned some intereting Earth science, much beautiful photography, a wealth of information on how humans adapt to space and on building and maintaining structures there, as well as a cool rock video. But that's all somewhat short, for the time being, of the returns of the first smart ape who grabbed a smouldering stick to drive out game, denature their gamey muscle, and warm their own tired bones at night.
7. There's the question of relevance of a great deal of research. Overspecialisation, incestuous assessment processes, a shift from publication-for-dissemination to publication-for-advancemnt, disciplines such as economics in which theoretical foundations are utterly broken for ideological and avaricial reasons, and failure by many within a wide range of fields to understand the basics principles of research, causality, and statistical proof, are troubling.
The thought occurs: what if research and manufacture are fundamentally different activities, to be rewarded as such.
In many ways, this is the model that's become commonplace throughout much of software development, where basic infrastructure -- programming languages, libraries, development tools, operating systems, networking protocols, databases, and even vast portions of end-user space -- are developed by teams of programmers who self-select for the projects they work on, with compensation handled independently of the actual project structure itself. No, not all programmers are compensated, and this is a problem (one some Silicon Valley VC are attempting to address, as I've noted recently).
As the Industrial Revolution began, a series of economic, financial, and legal structures came into being to address the pressing problem of the time: to focus economic wealth to foster the private formation of capital in order to increase efficiencies and scales of production, especially as knowledge on how to make use of a tremendous bounty of free energy in the form of coal, and later oil and gas, emerged, as well as of the further resources these enabled access to.
We're now facing a multitude of problems, including a realisation that we've been underpricing the value of that "free energy" by a factor of 100, if not 1,000,000. There's the impending exhaustion of the more abundant of those resources, the recognition that the exhaust sinks to which we've been piping the resulting fumes are not limitless, or without consequences, and numerous other limits and constraints we're bumping up against.
While there are concerns over how much, and how, increased information and technology can help us, what's increasingly clear is that the best route forward is through shared and relevant information. Private research, privately held, isn't good enough. Shared efforts, properly managed, work far better, though not without their own potential pitfalls -- the perverse incentives to introduce layers of complexity and interdependency which both restrict future flexibility and pose large-scale catastrophic risks, such as systemd, are strong. But even within the open source development world, there are different management models -- sometimes the bazaar seems to work better, at others the cathedral.
If the past 250 years saw concentration of resources to form capital as of principal importance, the challenge now, after directing capital formation to new energy harvesting and storage systems, is to concentrate knowlege. But unlike capital, knowledge isn't a contained entity, and its value increases as it is uncontained. Knowledge as power will have to mean diffuse power -- a public and social sharing rather than a private collecting.
It will mean finding ways to recruit and attract, recognise, and employ able talent. Existing models of venture capital and financial engineering are acting precisely in the opposite manner, diverting talent away from Big Problems and common good, toward rent-seeking, financialisation, NDA-embargoed, activities, and often under conditions far from conducive to creativity in the first place. The market is misallocating badly.
Treating research as a fundamentally non-market activity may well be the first step we've got to take in this direction.
Organising R&D in independent free-standing organisations, independently funded, with either free access or mechanical licensing rights might be one approach. Open-source style development another.
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