Repugnant Ideas in MUSSE

It never stops. The Melbourne University news or something has just published a piece I wrote on “Are ideas a repugnant good?” in their MUSSE outlet. It is over the fold.

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Are ideas a repugnant good?

by Joshua Gans

This may seem like a ridiculous notion to associate ideas with bad taste but in economics terms that may not be far from the truth. Harvard economist Al Roth has noticed that there are many economic transactions which are simply banned either by law or social custom. A favourite example is kidney sales. Most of us have two kidneys but can make do with just one. There are a few others for whom both kidneys fail. We have the technology to trade here and give a healthy kidney to another person without killing either one. The problem is that despite the apparent over-supply of kidneys, there are long waiting lists. Why? Because while kidneys can be donated, they can’t be sold. The result is a glaring set of inefficiencies. To Al Roth, while economists might lament the whole deal, this illustrates something quite common: sometimes, repugnance is a constraint on the operation of markets.

Scott Stern (of Northwestern University) and I have been researching for many years on the trade in ideas. Our principal focus has been on the agreements that start-up firms make with established ones to license their innovations. But more recently we have become interested in why ideas trading is not widespread. While there are many possible reasons, one hypothesis that we have put forward is that ideas may have more in common with kidneys than other economic goods. Put simply, there may be a reluctance to attach a price to them.

This is, of course, a highly uncontroversial notion within academic institutions. Everything about the norms of science drives us to generate ideas and to disseminate research as widely as possible. We academics are extremely resistant to any commercial like interference in that process even when recognising that the research itself is not free and that sometimes the only people wanting to put up capital are those that don’t share our norms for openness.

But this notion, that attaching a price to ideas is repugnant, crops up in all manner of places. Just ask any teenager who considers it OK to download music (the digitised form of a creative idea) for free. Or ask the majority of Internet users who believe that all web pages should be freely available — including newspapers and videos. There is resistance to paying for ideas.

Of course, we always resist paying for things but what is interesting about ideas is that resistance comes from sellers as well. We academics fall into that class but so do bloggers, twitterers, open source software developers and the thousands who contribute to Wikipedia. These people don’t want payment and as a quid pro quo apparently want to ensure that no one is forced to pay for their ideas. Indeed, it is not a stretch to see that most forms of ideas exchanged have this quality and that a payment is relatively rare.

This research is in its infancy but it already points to explanations for some strange things we see in creative industries. The moves of newspapers towards micropayments fail to recognise that much news is social and payment will be a barrier to sharing. And musicians are working out other ways of making money (e.g., concerts) while being able to provide free music to their fans.

The silver-lining, however, is that by being able to exchange without payment, ideas trading is wonderfully efficient and free of transaction costs by economic standards. And for such an important economic good that is something we can be thankful for. If only kidney donation could work so smoothly.

Joshua Gans’s paper “Is there a market for ideas?” is available at http://works.bepress.com/joshuagans/23/

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3 thoughts on “Repugnant Ideas in MUSSE”

  1. There isn’t a repugnance associated with selling or buying ideas at all. It has nothing to do with kidneys. Ideas are merely a kind of information, and have the same properties of information when it is treated as a commodity – that is, its price *rapidly* drops to zero as it becomes disseminated.
    This is the cause of “free” being the dominant cause in the creative industries. You can’t charge for mp3s* because you can always download them elsewhere. You can’t charge for news, because there is somebody else who will provide it for free – using it as a loss leader for some other business model, most likely. It’s purely competitive pressures that makes people unwilling to pay for information.
    * Technically speaking, of course, you can charge for music as iTunes demonstrates. However, that is simply because an artificial scarcity is imposed by creating a risk of prosecution if mp3s are pirated instead. It also reflects the convenience of iTunes, which, although not *terribly* convenient, does beat bittorrent.

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  2. Actually, far from being repugnant I think most people *agree* with the notion that newspapers should be paid for their content and artists rewarded for their works.
    However, these same people still respond to incentives – where that incentive is “free” vs. “costs money”, even some of the most ardent copyright supporters (supporters in theory) will give in and take the free option.

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