Chris Anderson managed to get an article, and then a book of the article (a pet peeve of mine, but we’ll move on) out of the idea that ‘free’ is a big deal. Better than a low low price, free avoids ‘mental transactions costs’ and is all round a Big New Thing. One thing that I don’t think he mentioned is that the ‘free’ of the internet revives to practical relevance an old insight from textbook economics which was theoretically clear but always of less use than some economists appreciated because of the practical difficulties of implementing it. (Sound familiar?)
There’s always been a ‘textbook’ case for governments to help subsidise from general revenue their own or even other service providers’ fixed costs to make marginal cost pricing (as supported by Economics 101) financially viable. But the incentive perversities and institutional complexities of doing so were usually formidable. If you issue subsidies for fixed costs, how will you get those fixed costs met at lowest cost? How will you prevent various tricks to maximise fixed costs to further lower marginal costs? How do you even define fixed costs in contradistinction to marginal costs – there can be difficulties making the distinction in practice.
Web 2.0 platforms will often provide a much cleaner opportunity to trial these ideas. Take, for example, the Australian firm CultureAmp, which successfully sells browser based employee engagement software to large and small firms whilst also offering a cut down free version. Government could negotiate with CultureAmp and its competitors to fund one of them to supply a full suite of web-based services within a certain jurisdiction for free. (It might make more sense to do this for businesses within a certain size also as larger businesses may well require customisation). Continue reading
In case anyone’s interested I did an interview on ‘my trip’ overseas recently which if you fancy a bit of light and slightly educational entertainment is here.
Anyway, the main burden of my remarks is that we’re losing ground within the leaders group on eGov and Government 2.0 (which I see as somewhat different things). The UK have been stepping up the pace and are now way ahead of us on the digital agenda including the PIMS agenda – personal information management services - which we’ve barely begun to work on.
This year every student studying at MIT will be given their own bitcoin wallet and $100 in bitcoin. Sounds like a fantastic way to kick off an ecosystem to build the internet of money!
We’re not distinguishing ourselves in this area. The UK has had three PMs pushing the digital agenda – Blair, Brown and Cameron. The US has had Silicon Valley pushing things along and Obama driving things with all sorts of highly talented people brought into the administration.
Us? Not so much, from either party.
Amazing that this is such a big deal, that we can administer morphine but not medical marijuana to alleviate pain. The paper is here.
While at least a dozen state legislatures in the United States have
recently considered bills to allow the consumption of marijuana for
medicinal purposes, the federal government is intensifying its
efforts to close medical marijuana dispensaries. Federal officials
contend that the legalization of medical marijuana encourages
teenagers to use marijuana and have targeted dispensaries operating
within 1,000 feet of schools, parks and playgrounds. Using data from
the national and state Youth Risk Behavior Surveys, the National
Longitudinal Survey of Youth 1997 and the Treatment Episode Data Set,
we estimate the relationship between medical marijuana laws and
marijuana use. Our results are not consistent with the hypothesis
that legalization leads to increased use of marijuana by teenagers.
by D. Mark Anderson, Benjamin Hansen, Daniel I. Rees – #20332 (CH HE LE)
In case anyone’s interested, I did an interview on “My Trip” which can be downloaded from this link.
Employee Satisfaction, Labor Market Flexibility, and Stock Returns Around The World
by Alex Edmans, Lucius Li, Chendi Zhang – #20300 (CF LE LS)
We study the relationship between employee satisfaction and abnormal stock returns around the world, using lists of the “Best Companies to Work For” in 14 countries. We show that employee satisfaction is associated with positive abnormal returns in countries with high labor market flexibility, such as the U.S. and U.K., but not in countries with low labor market flexibility, such as Germany. These results are consistent with high employee satisfaction being a valuable tool for recruitment, retention, and motivation in flexible labor markets, where firms face fewer constraints on hiring and firing. In contrast, in regulated labor markets, legislation already provides minimum standards for worker welfare and so additional expenditure may exhibit diminishing returns. The results have implications for the differential profitability of socially responsible investing (“SRI”) strategies around the world. In particular, they emphasize the importance of taking institutional features into account when forming such strategies.
Patents and Cumulative Innovation: Causal Evidence from the Courts
by Alberto Galasso, Mark Schankerman – #20269 (IO PR)
Cumulative innovation is central to economic growth. Do patent rights facilitate or impede follow-on innovation? We study the causal effect of removing patent rights by court invalidation on subsequent research related to the focal patent, as measured by later citations. We exploit random allocation of judges at the U.S. Court of Appeals for the Federal Circuit to control for endogeneity of patent invalidation. Patent invalidation leads to a 50 percent increase in citations to the focal patent, on average, but the impact is heterogeneous and depends on characteristics of the bargaining environment. Patent rights block downstream innovation in computers, electronics and medical instruments, but not in drugs, chemicals or mechanical technologies. Moreover, the effect is entirely driven by invalidation of patents owned by large patentees that triggers more follow-on innovation by small firms.