Public Policy and the Political Economics of Knowl

PapertobepresentedattheDRUIDSummerConferenceonIndustrialDynamicsoftheNewandOldEconomy-whoisembracingwhom?Copenhagen/Elsinore6-8June2002PublicPolicyandthePoliticalEconomicsofKnowledgeBrianKahin,UniversityofMarylandIntroduction:PolicyDevelopmentandtheKnowledgeEconomyPublicpolicyisanartnotascience.Itgetsmadeunderconditionsofincompleteinformationandconstrictedrationality.Itissusceptibletotherhetoricandmythologyofpolitics,tochauvinismandxenophobia,andtheinvocationofparticulardemonsandposterchildren.However,tobedoneproperlyitmustaccountfortechnologicalchangeandtheeconomicandsocialimplicationsofchange.Itshouldanalyze,synthesize,andextractconclusionswithparsimoniouselegance.Theresultsshouldbelucidandcompelling.Yetthisisrarelythecase.Mostpolicymakersimaginethatinnovatorsliveinadiametricallydifferentcognitivespace.Fromadistantperspective,technologicalinformationisprecise,unambiguous,cumulative,andeasilyverifiedordisproved.Informationaggregatesintoknowledge,andknowledgeaccumulatesadinfinituminorderlytransparentdatabases.InnovationislinearandknowledgeisNewtonian.Ideascreateinventions,whicharepatentedandturnedintoproducts.Patentsandproductstradefreelyonopenmarkets.Fromtheirperspective,nothingisnewaboutinnovation.However,policymakersunderstandthatsomethingnewhashappenedtoinformationbecausetheyseeitintheInternet.Theyrecognizethatinformationisnowglobalandinstantlyaccessible.Theyseetheeaseofmakingperfectcopiesbecausetheirchildrendoit.ComputersandtheInternetmaketheintangible,whetherpornographyorscientificinformation,realandworthyoftheirattention.YetastheInternetboomedandcommandedpublicattentioninthelate1990s,leadingpolicymakersweredecidedlyschizophrenicabouttheirrole.Ontheonehand,theyespousedprinciplesofnonintervention,claimingthatthegovernmentwasillequippedtomakepolicydecisionsundersuchvolatile,technologyandmarket-drivenconditions.Themarqueethemewas“privatesectorleadership,”whichmeantmultinationalprivatesectorleadershipsincetheInternetwasinherentlyglobalandprivatesectorleadershipcouldtranscendnationalboundaries.1Ontheotherhand,therewereexceptions,issuessuchascopyrightandcontrolofpornography,whichgotarguedontheirowntermswithoutapresumptionagainstintervention.Soacynicmightarguethattheprinciplesofgovernmentalrestraintandnoninterventionwerenottrulysubstantiveprinciples,butaposturemasqueradingasprinciple,invoked,perhaps,fortacticalpurposes.Astheoldlawyer’sadageputsit:“Ifthefactsaren'tonyourside,arguethelaw.Ifthelawisn'tonyourside,arguethefacts.”Indeed,theproteannatureoftheInternetmakesitdifficulttocometoconsensusonoperativecontextandfirstprinciples.Ithasbeenportrayedasthenextbesthopefordemocracyorasthevehicleforlibertarianresurgence.TheInternetisatool–andaninformationcommons.Ithasmorphedrepeatedlyoveritsshortlife.Shouldtheoperativecontextchangewhenthebubblebursts?Isitnow,nextyear,ortenyearsfromnow?IntheU.S.,thereisnoinstitutionalhometoformulatethesequestions–andlittlememory.TheClintonAdministrationlaunchedexecutiveinitiativesoninformationinfrastructureandglobalelectroniccommerce,buttheBushAdministrationpreferstohandleInternetissuespiecemeal.InEurope,thereisalong-terminstitutionalizedfocusintheDirectorateGeneralfortheInformationSociety,althoughitlacksscopeanddepthintraditionalpolicycompetencies.InEurope,therehasbeenatop-downefforttounderstandthechangingnatureofknowledgeandinnovation–forwhichthereisnocounterpartintheU.S.TheEuropeanfocusonknowledgeislinkedtothethemesofinnovationandtechnologypolicyand,inparticular,anxietythattheInternetboomandtherelativestrengthoftheU.S.economyinthelate1990sdemonstratedweaknessesinEuropeanpoliciesandinstitutions.Reportsoutofnationalgovernments,theCommission,andtheOECDoutlinedtheproblem,extolledthevirtuesoftheknowledgeeconomy,andscrutinizedtheeconomicsofknowledge,learning,andinnovation.TheUSGovernment,foritspart,focuseditsattentiononevaluatingthe“digitaleconomy”thatitsawemergingfromtheresurgenceoftheITsector,theexplosivegrowthoftheInternet,andtherapiduptakeofITandtheInternetthroughouttheeconomy.Bycontrastwiththevolumeofpolicy-orientedoutputfromEurope,theU.S.embraceofthedigitaleconomyremainedlargelyastraightforwardassessmentcenteredonproductivity(althoughitincorporatedmorecasestudiesthanonemightexpectfromgovernmentreports),andwaspresentedwithsomesatisfactionbytheClintonAdministration.2TheEuropeanstudieshaveemphasizedpositiveaspectsoffundamentalassetsintheknowledgeeconomy:education,humanandsocialcapital,robustcapitalmarkets,andR&Dfunding.Theimportanceofintellectualpropertyisfrequentlystressed,anditiscommonlyarguedthatEuropeanfirms,especiallySMEs,shouldbemorecognizantofandactivelyengagedinpatenting,likeU.S.startups.However,discussionsofintellectualpropertypolicyandcompetitionpolicyaregenerallyperfunctory.Onereport,TheIntangibleEconomy–ImpactandPolicyIssues,fundedbyDGEnterprise,notesagroupconsensusthat“anin-depthrethinkofIPRtheoryandpracticeisrequiredasamatterofurgency….Today,thereisaneedtoshiftthefocusofIPRpolicyawayfromitslegaloriginsandtowardstheeconomicdomain.”3Thisstatementandthediscussionsurroundin