I’m reading Stiglitz’s essay called “Knowledge as a Global Public Good”. Here, he describes knowledge as having the characteristics of a public good in being both nonrival and nonexcludable. Using as example, he describes that by teaching a student a certain theorem or idea, that this does not bar others from use of the concept, nor does it cost anyone else for one additional person to know this concept. There is however the caveat that the transmission of knoweldge- but not knowledge in and of itself- does have a cost, and that some forms of knowledge can be made excludable via these costs as well as through patents and trade secrets.
The neoclassical problem with public goods is that due to their zero marginal cost, markets will under-provide these goods or not provide them at all, therefore collective provision (by the state, etc.) is the efficient solution to this public goods problem. Stiglitz explains though that knowledge is in fact an impure public good, with the benefits of knowledge able to be appropriate to benefit some more than others and often having a cost of transmission (i.e. the cost of providing education). Stiglitz though argues that knowledge is in fact a global public good. Some public goods have limited geographic benefits; these are called local public goods. But a global public good is one in which it is possible to have the benefits accrue to all people in society and around the world, and has no geographic boundaries. As Stiglitz notes, a theorem in one country is still just as useful in another.
The argument then is that if knowledge is in fact a global public good, then the state must play some role in its provision otherwise knowledge will be under-supplied. But, there are two contending public policy decision at hand. One is to create policy that allows the benefits of knowledge to be privately appropriated so that there is a market incentive to provision knowledge- this includes patents, trade secrets, and other means of making knowledge proprietary. Stiglitz suggests that patents with very limited duration could give enough incentive to invest, but also limit the ability for holders of patents to unfairly raise prices or lose incentive for further innovation.
The other route however is for the state to invest in knowledge universally, through public educational and research institutions and direct investment:
The second strategy for dealing with the appropriability problem entails direct government support .If government could costlessly raise revenues for financing the support and if government were effective in discriminating between good and bad research projects,clearly this strategy would dominate that of enhancing intellectual property rights,for the latter strategy entails static distortions (the monopoly prices associated with patent rights result in prices exceeding marginal costs) and the inefficient utilization of knowledge. The static distortions can be thought of as a tax used to finance the research and development;the tax,however,is not an optimal tax. But the patent system provides an effective self-selection mechanism:those who are convince that they have a good idea invest their own money and the money of those whom they can persuade of the attractiveness of their idea. Such selection mechanisms may not only be more effective than, say, government bureaucrats attempting to assess various applications,but the costs of mistakes are borne by those making the misjudgement, not by the public at large.Thus the system provides strong incentives for individuals to engage in due diligence when assessing the merits of alternative research proposals. (312-13)
