Economics: In every increasing returns to scale economy some factors of production must be paid less than their marginal products: there is simply not enough money and product to go round. Factors of production that are rival can usually get the government to help their “owners” take care of themselves, as it is soon clear whose use of a factor is elbowing others out of the way. Rivalry in production is thus soon followed by effective excludability as long as the government can learn your address. Non-rival factors have a much harder time. Hence the likelihood of massive underinvestment in them. And the likelihood that what investment is made in and around non-rival factors of production will gravitate toward not boosting productivity but toward creating monopoly market power. This is, I believe, an insoluble problem for a market economy:
Bill Janeway: ‘[Mordecai] Kurz challenges the view that any monopoly based on technology will be necessarily transient, subject to the Schumpeterian process of “creative destruction.” Once market power becomes entrenched, he argues, targeted state interventions become the only means of restoring meaningful competition. Accordingly, Kurz proposes a radical program of reforms to disestablish market power where it exists and minimize the risk of its recurrence…. Investing in innovation means investing in the unknown… technology risk (“When you plug it in, does it light up?”)… market risk (“If it lights up, will anyone care?”). What would motivate a firm to undertake such investments? The prospect of monopoly profits, of course…. In Kurz’s analysis… the crucial insight is that innovation relies on the permanent availability of market power as the needed incentive for investing in R&D in the first place…. The implication is that the state should establish a strict limit on the share of the national R&D stock that any one firm can own… [plus pruning back] competition-destroying “patent thickets” and acquisitions by market leaders of potential competitors…. To say that Kurz’s proposals are currently unrealistic may be missing the point. Such radicalism underscores the power of the techno-economic engine that it analyzes and attacks. Making that power a topic of public debate is the first step toward shifting the Overton window of acceptable government policies and letting in some fresh ai: Mordecai Kurz, The Market Power of Technology: Understanding the Second Gilded Age cup.columbia.edu/book/t…, Columbia University Press, 2023… <project-syndicate.org/o…>
