Understanding Social Technologies: Supply and Demand Dynamics

1. Social Technologies:Supply and Demand Thráinn Eggertsson University of Iceland New York University

2. overview • new social mechanisms why/when are they introduced? • dynamics of social change • the knowledge base • role of imperfect knowledge/incomplete models • the power base • role of relative power • policy models and strategies • incorporate: knowledge, power, and preferences • outcomes • measurement: uncertain feedback; trial-and-error

3. definitions: three types of models • social models • “why/how models”: the nature of social systems • social technologies • “how-to models”: knowledge how to use institutions (rules and enforcement mechanisms, social models) to create social mechanisms/systems/organization and corresponding outcomes • policy models • guide strategies and choices by various types of actors, for instance, when new property rights are considered • actor types: rule-makers, right-bearers and duty-bearers

4. new social technologies • when are new social technologies introduced? • traditional efficiency considerations • greater scarcity and the value of resources increases: calls for more efficient forms of organization • changing knowledge base • new physical or social technologies become available • new unexpected information about properties of social systems: side-effects, relative decline • changing power base • changes in relative power of domestic social groups • external pressure or military invasion

5. the knowledge base • social models: positive and normative • the positive properties of social mechanisms • how institutions create incentives, shape organization, form stable expectations, coordinate behavior and create specific social outcomes • the ethical properties of institutions and outcomes • the legitimacy, fairness and justice of particular forms of institutions, organization and behavior

6. Social technologies • the product of institutions • necessary complements with physical technologies • institutional policy • purpose: to implement social technologies • instruments of institutional policy • rules: formal and informal • enforcement mechanisms • social models

7. power base • the traditional subject of political economy • key players during institutional reform • potential right-holders (demand side) • entrepreneurs and anyone who will benefit from new rules and forms of organization and desires them • rule-makers (supply side) • rulers, politicians, officials, courts, leaders of private organizations • rule-makers have superior power and legitimacy • duty-bearers • all those who are assigned the duty to honor new rules

8. outcomes: measurement • unlike physical technologies, for social technologies • usually no laboratory-type experiments • difficult to isolate and study elements of systems • institutions  behavior link relatively uncertain • social models of players intervene, interact with rules • measurement problems common • noisy feedback from institutional reforms • multi-collinearity—many forces at work? • fundamental change in external environment? • is change in performance a blip or long-term dynamics?

9. empirics 1: what, when, why? • privatized airport slots (Riker, Sened 1991) • failure of previous systems: open-skies, scheduling committees • scarcity growing: more traffic because of technology, new entry, high income elasticity • individual transferable quotas (Eggertsson 2005) • perverse cost dynamics of direct control; fish stocks depleted • biotech: patents in basic research (Nelson 2008) • new technology; high expectations

10. empirics 2: new social models • airport slots • privatization of airline industry, privatization of slots • new view of air transport regulation, “open skies” and “communal solutions” • fisheries regulation • social tech innovation: individual transferable quotas • direct-control-of-effort systems: negative feedback • biotechnology • university technology licensing and university patents • lesser faith in traditional social norms of science

11. empirics 3: tools of institutional policy • airport slots • laws, regulations, grandfathering • fisheries • laws, regulations, enforcement, grandfathering • biotechnology • laws (Bayh-Dole Act), internal rules of universities, struggles, new norms of science • in all cases: court rulings, and promotion of new social models

12. empirics 4: key players • rule-makers • airport slots: government, competing officials, courts • fisheries: government, fisheries ministry, courts • bio-genetics: courts, legislature, universities • rights-holders • airport slots: airlines • fisheries: boat owners • bio-genetics: universities, scientists, companies

13. empirics 4, cont: key players • key duty-bearers • airport slots • general aviation • all airlines, including losers from grandfathering • fisheries: • all fishers, including unlicensed boat-owners • fishing towns with few licensed boats • biogenetics • scientists and firms excluded by patents • patients, scientists who provide records, samples

14. empirics 5: flash points • airport slots • government agencies with opposite interests in regulation (FAA defended open skies; OMB wanted private slots, etc ) • general aviation (fear of exclusion; producers of small planes) • ITQs • fishers excluded by grandfather rule • firms and towns losing from economic rationalization • social entrepreneurs objecting to windfall gains • the United Nations Human Rights Commission

15. empirics 5, cont: flash points • biotech • social theorists who see the new social organization of science as a threat to scientific progress, anti-commons problems • scientists, health-sector workers, who see the new system as harming their material interests • social entrepreneurs/scholars who view privatized science as morally wrong and science firms as inefficient • General conclusion • All three cases involves disputes over the nature and legitimacy of social models and effectiveness social technologies

16. empirics 6: measuring outcomes • airport slots: relatively easy (Riker, Sened 1996) • safety, costs, capacity utilization, prices, services for remote communities • ITQs fisheries: complex: multi-collinearity • impact on stocks: uncertain marine biology • impact on costs: ITQs coincided with other factors • biotechnology: deep uncertainty • static and dynamic efficiency of biotech firms? • possibility of anti-commons?

17. conclusion • Aspects of institutional change emphasized • 1) policy models are typically based on incomplete knowledge of social technologies and power relationships • 2) institutional policy deals with uncertain social models of key players and often tries to influence the models • 3) measurement of the impact institutional policy is difficult and frequently incomplete

18. references 1 • Airport slots: • W.H. Riker & I. Sened (1990). “A Political Theory of the Origin of Property Rights: Airport Slots.” American Journal of Political Science, 35(4): 951-69 • W.H. Riker & I. Sened (1996). “Common Property & Private Property.” Journal of Theoretical Politics 8(4): 427-44 • ITQ fisheries: • T. Eggertsson (2005). Chapter 12: The subtle art of major institutional reform. In Imperfect Institutions: Possibilities and Limits of Reform. Michigan University Press

19. references 2 • Communication No. CCPR/C/91/D/1306/2004. United Nations International Covenant on Civil and Political Rights. Issued 14 December 2007 [Judgment: ITQs in Iceland violate basic human rights] • Biotechnology • R.R. Nelson (2008). “What Enables Rapid Economic Progress: What Are the Needed Institutions?” Research Policy. 37(1): 1-11 • General • D.C. North, J.J. Wallis (1994). “Integrating Institutional Change and Technical Change in Economic History. A Transaction Costs Approach.” Journal of Institutional and Theoretical Economics. 150(4): 609-24