Episodes of collective invention Peter B. Meyer U.S. Bureau of Labor Statistics 25 March 2004 at ESSHC Outline (1)Definition of collective invention (2)Historical cases Bessemer steel in US Microcomputers (3)Networks and institutions Clubs Professional associations Journals Job turnover (4)Modeling ideas Search for production function Subsidy by hobbyists

Definition of “collective invention” Process in which improvements or experimental findings about a production process or tool are regularly shared. Allen (1983) defined it to apply to profit- seeking firms only, and distinguished collective invention from formal research and development. This is a social learning process, by which people learn about technological opportunities, working collectively, outside hierarchies There is evidence that productivity growth is high during or after collective invention periods.

Cases Previous literature: Cleveland district (Britain) iron makers, 1850s-1870s (Allen 1983) steam engines after 1800 (Nuvolari 2001) free or open-source software Here: Bessemer steel in US microcomputers in 1970s Others: steam engines before 1718 (Thurston 1878) aeronautics in late 1800s (Couch, Jakab)

Networks Networks appeared through which the experimenters communicated. Central figures usually organized any institution. - Organizations -professional associations, like American Institute of Mining Engineers -Bessemer patent pool -clubs, like the Homebrew Computer Club - Journals -AIME’s Transactions -several in aeronautics - Lean’s Reporter in post-1800 steam engines - Job turnover -as in Silicon Valley in the case of personal computers and software -also observed in the steel case

Why model it economically? Economic outcomes pose problems for analysis here: - Time and resources are applied to technology development: who chooses this and why? - Something of value -- a new technology – may be produced. How did it happen? A model might generalize over these cases for predictions and evaluating counterfactuals. –Why didn’t the invention appear somewhere else first? –Could technological development be faster or slower? –Were many alternatives were considered to the design of the modern personal computer, or was the result very path dependent? –How will free and open-source software projects evolve? A model might avoid details of technology –even where path dependence is historically significant. Compatible microeconomic theory is new – Harhoff, Henkel, and von Hippel (2002), Saint-Paul (2003).

Model of search for technology In search models, participants usually sample random information and consider changing behavior, e.g. search for a job, search for an applicant for a job, or search for mate. Search for technology models usually have profit- seeking participants investing optimally in research and expecting useful findings. A search model of collective invention would be different: -- no balanced equilibrium level of searching but rather strategies, perhaps in Nash equilibrium -- positive feedback: more searching produces more success which draws in more searching -- players can exit by starting firms -- collective search may expire and be replaced by an industry -- begins with cooperation, may end in competition Search is for production function y=f(X,T) where y is hoped-for output, X is set of known inputs, but technology design T has unknown dimensions. Players share information through network.

Why did they share? Recognition, prestige, fame (for individual or employer) Employment opportunities Impractical or costly to keep secrets (e.g. job turnover cases) New technology could raise value of assets (e.g. local iron ore in Allen, 1983) Employer’s own technology might improve through paybacks, alliances, or side effects To establish desirable standards (especially in software, for market power or to make a particular feature universal) For employer to evaluate employees Fun, exciting Virtuous

How to model incentives? One structure is “career concerns” –the person wants employment opportunities, recognition, and other private gains –hypothesized in some IO writing about open- source, and makes sense on the Web –but this presumes a superstructure for recognition exists, thus assuming away part of the answer –returns to this activity are often low. some participants are treated as crazy. Another structure: assume the player wants the technology to advance –then players share for the same reason they experiment –the effect they want is to change the environment –historically, some of the experimenters say they want this Modeling idea -- Participants are for private reasons willing to pay to experiment with this technology: “hobbyists”. -- Treat individuals and organizations as the same. Some individuals may then start firms. -- These players subsidize the public search. -- Might they optimally choose to share their findings to advance the technology of the whole network?

Stages in simulations Period t Shall I produce? n y Receive revenue Does Nature give me new tech info? n y Shall I use it? y Shall I share it with other players? n n y Do other players adopt it? y, n Period t-1 If other player offered me tech info, shall I adopt it? Shall I produce? Use decision Sharing decision Adoption decision y, n Period t+1 Production decision Production decision

Hypotheses These help collective invention: –freedom to assemble –freedom of the press –availability of the Web Collective invention declines when profitable enterprises stabilize. Productivity gains can be attributed to the process

Conclusion There is a list of examples in which collective invention by the definition here was significant We can abstract from the certain common elements, and maybe model them: –search –networks for sharing technology –subsidy by experimenters It continues alongside formal R&D –in many free / open-source software projects simultaneously –potentially in other fields where designs can be represented electronically on the Web computer hardware; architecture; mechanical designs; art.