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

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

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

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

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

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

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

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?

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

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

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

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

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

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

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

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?

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

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): ◦ W.H. Riker & I. Sened (1996). “Common Property & Private Property.” Journal of Theoretical Politics 8(4): 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

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):