Timothy Swanson

PESTS, PLAGUES, AND PATENTS

The paper investigates the interaction between dynamic forms of incentive mechanisms (patent systems) and dynamic forms of problems (adaptations of pests and pathogens). Since biological problems recur, the design of the incentive mechanism must take into consideration: a) the need for investments into RD and b) the impact of this impermanence on the anticipated lifespan of any patent awarded for an innovation. The results indicate that patent systems must be carefully tailored to the nature of the problem under consideration. (JEL: C7, H0, H3, Q38) Copyright (c) 2003 The European Economic Association.

The Social Value of Biodiversity for R&D

The value of genetic resources for use in research and development (R&D)activities has been the subject of a literature modelling the activity as onewhere individual firms engage in optimal search. Here we develop a moregeneralised framework in which genetic resources are used in R&D at thebase of an industry that addresses recurring problems of resistance, as inthe pharmaceutical or plant breeding industries. The R&D process is onein which firms are engaging in a continuing contest of innovation againsta background of both creative destruction (Schumpeterian competition) andadaptive destruction (natural selection and adaptation). This frameworkdemonstrates that the search model is conceptually inadequate because itfails to incorporate the important dynamic characteristics of biologicalphenomena. We then demonstrate the important differences between firm-based valuation of genetic resources and the social value of geneticresources for use in this contest of innovation. There are six externalitiesin private patent-based genetic resource valuation, and five of theseindicate that private valuations will under-estimate social values.

The Biodiversity Bargaining Problem

We employ cooperative bargaining theory and Nash’s ‘rational threats’ idea to cast light on the biodiversity bargaining problem. The problem of global environmental negotiations is argued to be of the nature of a bargaining problem, in which bargainers must agree on the distribution of cooperative surplus in order to move to the bargaining frontier. We discuss the importance of both efficiency (bargaining frontier) and fairness (recognition of characteristics of bargainers) in the choice of the appropriate contract. We show that the incremental cost contract, used to resolve the biodiversity bargaining problem, is of the form of an extreme point contract that fails to recognise the contributions of the South to the production of cooperative surplus. A rational response to such a contract is the use of threats of biodiversity destruction. Contracts must evince both efficiency and fairness in order to represent lasting solutions.

Motivation Crowding in Real Consumption Decisions: Who is Messing with My Groceries?

type=main xml:lang=en> We present evidence of crowding out of intrinsic motivation in real purchasing decisions from a field experiment in a large supermarket chain. We compare three instruments, a label, a subsidy, and a neutral price change, in their ability to induce consumers to switch from dirty to clean products. Interestingly, a subsidy framed as an intervention is less effective than either a label or a neutrally framed price change. We argue that this provides a new explanation for crowding behavior: consumers are resistant to having the line of demarcation between public and private decision making moved in either direction. (JEL C93, Q18, Q54, Q58, H23, H41)

GLOBAL POPULATION GROWTH, TECHNOLOGY, AND MALTHUSIAN CONSTRAINTS: A QUANTITATIVE GROWTH THEORETIC PERSPECTIVE

We structurally estimate a two-sector Schumpeterian growth model with endogenous population and finite land reserves to study the long-run evolution of global population, technological progress and the demand for food. The estimated model closely replicates trajectories for world population, GDP, sectoral productivity growth and crop land area from 1960 to 2010. Projections from 2010 onwards show a slowdown of technological progress, and, because it is a key determinant of fertility costs, significant population growth. By 2100 global population reaches 12.4 billion and agricultural production doubles, but the land constraint does not bind because of capital investment and technological progress.

On Biology and Technology: The Economics of Managing Biotechnologies

This paper considers those sectors of the economy that operate under the same regimes of rewarding private innovators as others, but differ in that they face recurring problems of resistance, as occur in the pharmaceutical and agricultural industries. This recurrence originates in the natural processes of selection and evolution among humanity’s biological competitors. The paper examines the capacity for decentralised patent-based incentive mechanisms to result in socially optimal outcomes in these sectors under scale- and speed-dependent evolution of pathogens. It demonstrates that there is a fundamental incompatibility between the dynamics of the patent system and the dynamics of the resistance problem under both types of evolution. Under scale-dependent evolution, the externalities within a patent-based system indicate that decentralised mechanisms will result in systematic underinvestment in R&D that decreases further with an increasing severity of the resistance problem. Under speed-dependent evolution, a patent-based system will fail to target socially optimal innovation size. The overall conclusion is that patent-based incentive mechanisms are incapable of sustaining society against a background of increasing resistance problems. The paper concludes with appropriate policy implications of these results.

The Expansion of Modern Agriculture and Global Biodiversity Decline: An Integrated Assessment

Modern agriculture relies on a small number of highly productive crops and its continued expansion has led to a significant loss of biodiversity. In this paper we consider the macroeconomic consequences of this land conversion process from the perspective of agricultural productivity and food production. We employ a quantitative, structurally estimated model of the global economy in which economic growth, population and food demand, agricultural innovations, and land conversion are jointly determined. We show that even a small impact of global biodiversity on agricultural productivity calls for both a halt in agricultural land conversion and increased agricultural R&D.

Global economic growth and agricultural land conversion under uncertain productivity improvements in agriculture

&NA; We study how stochasticity in the evolution of agricultural productivity interacts with economic and population growth at the global level. We use a two‐sector Schumpeterian model of growth, in which a manufacturing sector produces the traditional consumption good and an agricultural sector produces food to sustain contemporaneous population. Agriculture demands land as an input, itself treated as a scarce form of capital. In our model both population and sectoral technological progress are endogenously determined, and key technological parameters of the model are structurally estimated using 1960‐2010 data on world GDP, population, cropland and technological progress. Introducing random shocks to the evolution of total factor productivity in agriculture, we show that uncertainty optimally requires more land to be converted into agricultural use as a hedge against production shortages, and that it significantly affects both optimal consumption and population trajectories.

Missing Markets and Redundant Reservoirs

This paper uses a two-sector, two-period,spatial model of groundwater usage withstochastic surface water supply to illustratethe potential for the suboptimal management ofthe timing of groundwater uses. A ``timeprofile externality is said to exist when thetiming of groundwater extraction by one set ofusers impacts on the time profile of wateravailability to another set of users. Theexistence of the time of use externalitydepends on the presence of importantdifferences in the preferences between thecontrol and non-control sectors. It alsodepends on the absence of the markets thatwould internalise these differences. Oneimportant implication of the existence of suchexternalities is that they can inducesub-optimal insurance investments in the formof water storage capital, i.e., unnecessarysurface water reservoirs.

Intellectual Property and Biodiversity: When and Where are Property Rights Important?

An important issue in the life sciences industries concerns the nature of the incentive mechanism that should govern the production of innovation within this RD property rights in genetic information alone; or in both? We demonstrate that in a world in which traditional knowledge and genetic information are complements in the production of R&D, a resolution of the property rights failure in genetic information also may resolve the allocation failure in traditional knowledge even in the absence of a distinct property right. The reason is that traditional knowledge of the nature of private information is comparable to a trade secret. Traditional knowledge holders may use this informational advantage to improve their benefit by capturing some informational rent. A new property right is important to enable bargaining and coordination to occur across the industry, but a single property right is probably sufficient to enable coordination between the two agents.