Knowledge of a public good Flashcards
What are the characteristics of public goods?
Non rival: where the consumption of the good does not reduce its availability to other individuals. While non excludable is where no one can be excluded from consuming it
How can we define public knowledge? Is knowledge a public good? Why?
Ensemble of knowledge, expertise, skills and information. It is non-rival (remains in circulation no matter how many people consume it) and non-excludable -> impure public good because of some level of excludability (e.g. secrecy)
What are the differences between tacit and codified knowledge?
Tacit knowledge: Deeply personalized knowledge by individuals that is impossible to make explicit and to communicate through formal mechanisms, example is represented by knowledge from experienced stuff members. Codified knowledge: Knowledge expressed formally in documents, software, etc.
What are the sources of market failures (in general and in relation to knowledge)?
Indivisibility: distinguish between economic and technical indivisibility. Economic: impossible to exchange and pay for a good in proportion to the exact quantity used. Technical: impossible to divide an exchanged good into amounts which should be used for production or consumption. Leads to a natural monopoly in the production of innovations. From this results uncertainty in whether there will be enough demand for a new product and the results of R&D in relation to the inputs. In the end Market failures and the character of a public good leads to not optimal production of knowledge
What is the marginal cost (MC) of ‘producing’ knowledge (i.e. of supplying it to consumers)? Can knowledge be sold/ bought at MC
The marginal costs of supplying a unit of knowledge to an individual is zero because it is a public good -Knowledge can not be sold at a price of zero because there would be no incentive for the production -> same reason to create a monopoly, so that firms producing knowledge appropriate the returns of their investment
What role do governments and states play in the provision of such global public good?
Governmental intervention is needed to reap all the benefits from producing public goods. Increase the degree of appropriability of returns on R&D (patents, copyright protection) -> dynamic efficiency gains of profits from invention (licenses, charging monopolistic price) lead to production of more knowledge which counterbalance the static inefficiency (underutilized knowledge, underproduction through patents) -> length of the protection is the most important factor. Also Direct government support (financial, tax benefits)
