“An innovation commons is a system of rules for cooperation
to facilitate pooling of information in order to maximize the likelihood of
opportunity discovery”. That is how Jason Potts defines innovation commons in
his book of that name.
Hopefully, that brings to mind hobbyists meeting in coffee
shops, somewhere on the internet, or at backyard barbecues where they are
tasting home brews and exchanging information about recipes. If so, you are on
the track toward an understanding of innovation commons. If you have heard
stories of successful entrepreneurs who obtained their most valuable ideas by
interacting in similar ways, you might sense that innovative commons can be
very important.
It might surprise you to learn that until recently few
economists understandood the importance of innovation commons. Of course, those
with an interest in technology would have read at some stage that Steve Jobs
was once a member of the Homebrew Computer Club, and know of similar stories
about other entrepreneurs who started as hobbyists or enthusiasts exchanging
information freely with people with similar interests. However, it is one thing
to know such stories and something quite different to realize that your
professional understanding of the innovation process needs an overhaul.
Economists have thought of innovation in several different ways
that view a single organization or individual as a prime mover. Innovative
firms allocate resources to research and development, which leads to the
launching of new products or adoption of cost-reducing technologies. Joseph
Schumpeter’s bold entrepreneurs play the central role in innovation, leading to
a dynamic process of creative destruction. Israel Kirzner’s innovative entrepreneurs
are alert to profit opportunities. Edmund Phelps’ grassroots innovators are
struck by new ideas, and then become investigators, experimenters and managers
of innovation.
You might think that economists should be excused for
overlooking the importance of innovative commons because they are a relatively
new phenomenon. Jason Potts makes the point that common-pool innovation has
existed since the beginning of market capitalism. He cites discussion of the
Republic of Letters by Joel Mokyr, an economic historian. The Republic of
Letters set up norms and incentives that supported a market place of ideas among
the educated elite in Europe in the latter part of the 17th and early
part of the 18th centuries (for a brief summary see my review of The
Culture of Growth). In The Enlighted Economy, Mokyr makes a strong
case that in Britain during the 18th century the ‘legitimization of
systematic experiment carried over to the realm of technology’. He suggests
that the proliferation of provincial ‘philosophical’ societies discussing
practical and technical issues often served as clearing houses for useful
knowledge between natural philosophers, engineers and entrepreneurs (p 48).
Recent examples of areas of technology where innovation
commons are important include blockchain, civilian drone technology, AI and
gene editing.
Jason Potts’ own innovative contribution has been to develop
an economic framework to explore the collaborative processes through which information
comes to be available in a form that a potential entrepreneur can discern as a
profit opportunity, if sufficiently alert. The framework Jason has developed
contributes to understanding of the knowledge, coordination and governance
problems associated with innovation commons. In developing that framework, he
draws heavily on insights of Friedrich Hayek about the importance of
distributed knowledge, and insights of Elinor Ostrom about governance of
commons.
Innovation involves a knowledge problem because relevant
information is distributed so that each person with relevant expertise can only
know part of the picture, and there is great uncertainty about how that
information might be useful. Innovation commons enable individuals with
expertise to cooperate to pool information and discover opportunities. The
formation of such commons is ad hoc and rules for governance develop
spontaneously to promote cooperation.
Innovation commons tend to be temporary. Once they have created information about entrepreneurial opportunities,
that valuable resource is likely to be exploited by some member who can
effectively capitalize on it. At that point the conventional model of
entrepreneurship comes into its own, and the commons collapses to some other
institutional or organizational form.
Much of the book is taken up by discussion of rules of
innovation commons, institutions such as industry organisations and a critique
of conventional approaches to innovation policy (public investment in
innovation and building infrastructure for innovation).
There is also an interesting discussion of ways to combat an
increasing tendency for enemies of innovation to prevent it, thus contributing
to a slowdown in productivity growth, particularly at the technology frontier. The
enemies of innovation present themselves as having concerns with safety,
sustainability, tradition, fairness, justice etc. even when their intention is
to avoid the losses they are likely to incur from disruption of existing
technology.
Who will engage those enemies? This is a collective action
problem: the costs are borne individually, but the benefits are an
industry-specific public good that accrue to all who follow.
In some instances, the first mover can capture sufficient
benefits to make it worthwhile to engage the enemies of innovation. Uber may
have done that with its ride-sharing technology.
Jason suggests that governments may also help. One role he suggests
is promoting collective learning to demystify a new technology. He mentions
public broadcasting in that context, but public broadcasters seem to have been
more comfortable helping the enemies of innovation. At a more ambitious level,
he suggests that governments should work toward “a social contract, culture and
institutional system that are tolerant of innovation and prepared to engage
with its enemies”. Good luck with that!
Jason also suggests that innovative commons can play a role
in creating a large pool of participatory stakeholders, each with a vested
interest in developing the technology and its institutional (regulatory)
framework. Examples include open-source software and technologies that have
emerged from hackerspaces, such as 3D printing and cryptocurrencies.
Are innovative commons likely to result in a fundamental
change in society?
Jason Potts’ answer:
“The innovation commons—including the adaptive behaviors and
the institutions that compose it—are … a natural part of an open, evolving,
market economy. They are not prima facie evidence of an emerging turn to a new
type of more cooperative economic society.”
That is probably right! Nevertheless, as previously discussed here, it is possible to conceive of circumstances in which
new technologies that are evolving in innovation commons - blockchain
technology and decentralized collaborative organizations – could result in some quite fundamental changes in society.