Social Technologies:Social Technologies:Supply and DemandSupply and DemandThráinn EggertssonUniversity of IcelandNew York University

overviewoverviewnew 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 definitions: three types of modelsmodelssocial 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 technologiesnew social technologieswhen 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 basethe knowledge basesocial 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 technologiesSocial technologiesthe product of institutionsnecessary complements with

physical technologiesinstitutional policy

◦purpose: to implement social technologies

◦instruments of institutional policy rules: formal and informal enforcement mechanisms social models

power base power base the traditional subject of political

economykey 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: measurementoutcomes: measurementunlike 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, empirics 1: what, when, why?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 depletedbiotech: patents in basic research (Nelson

2008) ◦new technology; high expectations

empirics 2: new social empirics 2: new social modelsmodels

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 empirics 3: tools of institutional policyinstitutional policyairport slots

◦laws, regulations, grandfatheringfisheries

◦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 playersempirics 4: key playersrule-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 empirics 4, cont: key playersplayers

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 pointsempirics 5: flash pointsairport 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 empirics 5, cont: flash pointspointsbiotech

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 empirics 6: measuring outcomesoutcomesairport slots: relatively easy (Riker, Sened

1996)◦safety, costs, capacity utilization, prices,

services for remote communitiesITQs fisheries: complex: multi-collinearity

◦ impact on stocks: uncertain marine biology ◦ impact on costs: ITQs coincided with other

factorsbiotechnology: deep uncertainty

◦static and dynamic efficiency of biotech firms?◦possibility of anti-commons?

conclusionconclusionAspects 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 1references 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

references 2references 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