The Social Efficiency of Fairness

Monday, November 30, 12:30 pm
Berkman Center, 23 Everett Street, second floor
 

Property rights provide incentives to create information but they also provide incentives to hoard it prior to the award of protection. All-or-nothing rights, in particular, limit prior sharing. An unintended consequence is to slow, not hasten, forward progress when innovation hinges on combining disparately owned private ideas. In response, we propose a solution, based on a reward definition of "fairness,'' that unblocks innovation by increasing willingness to share private information.

We present three arguments. First, we show that fairness can increase the rate of innovation. Welfare can improve both in the absolute sense of enabling new projects and in the relative sense of reordering the social sort order of which projects agents prefer to undertake. Second, in contrast to models of "other regarding'' preferences, we show how self-interest alone is sufficient to justify fairness. Third, we argue that liability rather than property rules can be more conducive to innovation based on information reuse and recombination.

About Marshall

Marshall Van Alstyne is an Associate Professor at Boston University and Research Scientist at MIT. He received a BA from Yale, and MS & PhD degrees from MIT. He has made significant contributions to the field of information economics, covering such topics as communications markets, the economics of networks, intellectual property, social effects of technology, and productivity effects of information. He designed and implemented one of the first projects to measure the dollar output of individual information workers.  He coauthored the first proof that a market mechanism could reduce spam and create more value for users than even a perfect filter. As co-developer of the concept of “two sided networks” he has been a major contributor to the theory of network effects. Awards include a patent on a means of preserving communications privacy, National Science Foundation IOC, SGER and Career Awards, and four best paper awards. Articles or commentary have appeared in Science, Nature, Management Science, Harvard Business Review, The New York Times, and The Wall Street Journal.

Links

• Research can be found at http://ssrn.com/author=253298.

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