Is there a market for ideas?

Abstract

This paper draws on recent work in market design to evaluate the conditions under which a market for ideas or technology (MfTs) will emerge and operate efficiently. As highlighted by Roth (2007), effective market design must ensure three basic principles: market thickness, lack of congestion, and market safety. Roth also highlight the importance of dealing with “repugnance.” Our analysis identifies the factors that are, in most circumstances, likely to inhibit the allocative efficiency of MfT. We show that key institutional developments such as the development of formalized IP exchanges suggest that effective market design may be possible for some innovation markets. Finally, our analysis suggests that markets for ideas are beset by the “repugnance” problem: from the perspective of market design, Open Science is an institution that places normative value on “free” disclosure and so undermines the ability of ideas producers to earn market-based returns for producing even very valuable “pure” knowledge.