The institutional economics of sharing biological resources and information

An introduction to the economics of the life science commons

Tom Dedeurwaerdere (FNRS/UCL)

 Director of research atCentre for the Philosophy of

LawProfessor of Philosophy at Université catholique de

Louvain18th may ESNIE Cargèse

1.1. Introducing the concepts Assumptions Role of institutions Static efficiency (transaction cost economics)

Bounded rationality and opportunistic behaviour Preferences are given and known Alignment of the economic coordination structures to the transaction situation

Optimisation of transaction costs through the (ex ante) definition of property rights and (ex post) supervisory mechanisms ensuring cooperative behaviour

Dynamic efficiency (evolutionary economics, evolutionary game theory, etc.)

Bounded rationality and opportunistic behaviour (no fixed cognitive framework on solutions) Evolving distribution of preferences (no fixed preferences) Co-determination of political environment and economic coordination structures

Sustaining the dynamics of innovation and adaptation

acquisition of new knowledge (institutional adjustement) and

enforcement of norms of cooperation (institutional embedding)

in order to maximize the future possibilities of development

1.2. Introducing the field of investigation : global public goods

The intrinsic properties of goods:

a conventional approach to public goods

Excludable

NonrivalRival

PRIVATE GOODS

Examples:

• Milk

• Land

• Education

CLUB GOODS

Examples:

• Noncommercial knowledge (such as the Phytagorean theorem)

• Norms and standards

• Property rights regimes

• Respect for human rights

COMMONS PUBLIC DOMAIN

PURE PUBLIC GOODS

Examples:

• Moonlight

• Peace & security/conflict

• Efficient/inefficient markets

COMMON POOL RESOURCES

Examples:

• Atmosphere

• Wildlife

Nonexcludable

The economics of the life science commonsTom Dedeurwaerdere

2. Dynamic efficiency for biodiversity governance

Focus of this section: critical evaluation of alternative mechanisms of regulation proposed in the ongoing negotiations on ABS

Current mechanism  

Incentive for innovation through intellectual property rights for the users of the genetic resources in the plant breeders and pharmaceutical industry

Protection of the provider’s right through clauses of Prior Informed Consent and Access and Benefit Sharing in the contract

  Hypothesis : Double innovation in the proposed measures

  (reference : Institute of Advanced Studies of United Nations University, 2003)

Developing an action on the innovation potential of the whole production chain

Developing an action on the maximization of future options of development, beyond the question of allocation of existing resources.

The economics of the life science commonsTom Dedeurwaerdere

2. 1. Static efficiency : Reducing opportunistic behaviour through an appropriate institutional environment

(Oliver Williamson, Douglas North)

Example of Merck-InBIO (Costa Rica) 

(-) low direct financial incentives (-) high transaction costs establishing the InBIO research agency (+) helps building dynamics of confidence and reputation, within a nexus of agreements : bio-

prospecting, dept-for nature swaps, reform of park agency in conformity with UNESCO’s man and biosphere program

(+) centralisation of information (InBIO), which facilitates definition of the contractual relation

Governance attributes

Incentive Intensity Administrative Control Contract Law Regime

(Direct incentives) (Indirect incentives) (Indirect incentives)

Governance Structures

Spot Market

Hybrid

Hierarchy

++

+

0 ++

0

+

++

+

0

2.2. Towards dynamic efficiency2.2. Towards dynamic efficiency2.2.1. Documenting the flow of resources through 2.2.1. Documenting the flow of resources through

the entire innovation chainthe entire innovation chain

Product Development

Genetic screening

Local users communities

Ecosystems that produce diversity

2.2.2. Evolutionary character of the biological resourcesTom Dedeurwaerdere

2.2.2. Evolutionary character of the biological resourcesTom Dedeurwaerdere

Susceptibility of Wheat Varieties as a Function of Usetime

AUD

3 02 01 00

1 4 0 0

1 2 0 0

1 0 0 0

8 0 0

6 0 0

4 0 0

2 0 0

0

- 2 0 0

O b s e r v e d

L i n e a r

Source: Singh and Rajaram 1991

Years 10 20 30 Years

2.3. Examples of institutions for enhancing dynamic efficiencyTom Dedeurwaerdere

a. The problems with static efficiency

Autonomous dynamics of natural evolution of the genetic resourcesIncremental character of the decision process

b. The reaction of the law

From a simple adaptation within the existing static conception

shortening the patentsmultiplication of specific regimes for each sector of activity

To a dynamic conception

liability rules (Reichman)conservation funds (Swanson)

The economics of the life science commonsTom Dedeurwaerdere

C. Dynamic efficiency of norms of cooperation

ethical codes of conduct 

MOSAICC : Microorganism Sustainable Use and Access RegulationRoyal Kew Gardens LondonGlaxo Welcome, Novo Nordisk, Xenova, Shaman Pharma, Bristo-Myers Squibb

voluntary mechanisms of benefit sharing  

 

d. Dynamic efficiency of generation of knowledge

International system for the monitoring of the flow of genetic resources

  Harmonisation of procedures of prior informed consent and mutually agreed terms

3. Dynamic efficiency for the life science knowledge commons

Flow of ideas

Example Participation to a global biological information archive

Positive incentives

Visibility, public recognition, instantpublication

Perverse incentives

Under-use

Flow of artefacts

Participation to the exchange of tumour tissue data

Access to first hand high quality info related to the data

Misuse : use of the data for commercial purposes

Facility (info system)

Common web server for storing images

On line verification of the diagnosis

Pollution : storing redundant information without appropriate checking

Components of the microbiological information commons

Well-defined property rights

• help to reinforce a long term perspective in the management of a resource

• help to stimulate investment in the design of new institutional rules that can cope with these problems

Reference : Schlager and Ostrom, North, Demsetz

3.1. Static approach to intellectual property rights

3.1. Static approach to intellectual property rights

a) Role of property rights regimes

However :

• Well-defined property rights do not necessarily imply full ownership, nor a fortiori private ownership : Bundle of Use and Decision rights

Access

Removal, extraction, withdrawal

Management

Exclusion

Alienation

Use rights

Collective choice rights

• The consequences of a set of property rights will depend on the cost and the availability of institutional arrangement that specify the exercise of the rights

PROPERTY RIGHT REGIME

+

INSTITUTIONAL ARRANGEMENT

(Contracts, legal rules,

administrative control)

PROPERTY RIGHT REGIME

+

INSTITUTIONAL ARRANGEMENT

(Contracts, legal rules,

administrative control)

OUTCOMES

a) Institutions for data sharing : from the GBIF model…

Other open science users

Data Providers and Data Participants

Data User Agreement

GBIF Collaborative database

Data Sharing Agreement

b) to a two tiered system I :based on the transfer of property to a collective licensing organization (GBIF model and Free software model)

c) or a two tiered system II : based on a multilateral agreement on contractual templates (proposed in Reichman and Uhlir, 2003)

Licensing negotiation

Copyleft license

Ex ante negotiation of the contractual template

Third party

Other open science users

Commercial licenseCommercial

firm

Proprietary R&D

KeyData

• static conception of efficiency : optimal allocation of existing institutional resources under given transaction situation (e.g. uncertainty, frequency of transactions)

• dynamic conception of efficiency : acquisition of new knowledge and enforcement of norms of cooperation in order to maximize the future possibilities of development– design rules for creating a dynamic decision space : focus on

enforcing informal norms as relational networks (Elinor Ostrom)– identifying deadlocks for creating permanent learning processes :

focus on the organisation of a dynamic interaction between rules and beliefs (Douglas North, Peter Haas)

3.2.. Towards a dynamic framework

3.2.. Towards a dynamic framework

Comparing configurations of rules, norms and outcomes

 Case study on: * The Free Software Foundation (FSF) and  *The Creative Commons (CC)

 

3.2.1. Dynamic efficiency of cooperative norms as relational networks

I. Rules

Case of FSF : (1) The intellectual property is transferred to a collective actor (the free software foundation) or remains with the author (2) There is a restricted set of some agreed upon licenses that are used by the FSF or the author of the free software (mainly variants upon the GNU General Public License)

Case of CC : (1) a menu of license provisions, the copyright remaining with the authors (2) goes beyond current property rights practice, providing restrictions of use, not providing positive prescriptions, such as the share alike provision

II. Norms

Case of FSF : (1) a homogeneous group (2) a collaborative project creating a sense of community (through motivation) ; so reducing attempts to abuse and encouraging collaboration in enforcement reports

Case of CC: (2) a heterogeneous group (p. 61) (2) a social statement, but no sense of community using in a certain way a creative work

III. Outcomes

Case of FSF : (1) widespread international adoption (2) law suits already took place

Case of CC : (1) difficult to translate to the different national contexts (2) no legal enforcement up till now

Reference : Research Libraries Group and the Online Computer Library Center report (2001)

 

(1) audibility, security, and communication;

(2) compliance and conscientiousness;

(3) certification, copying controls, and following rules;

(4) backup policies and avoiding, detecting, and restoring

lost/corrupted information;

(5) reputation and performance;

IV. Towards the definition of design rules for data sharing

(6) agreements between creators and providers;

(7) open sharing of information about what it is preserving and for whom;

(8) balanced risk, benefit, and cost;

(9) complementarity, cost-effectiveness, scalability, and confidence; and

(10) evaluation of system components.

Comparing interaction processes between rules and beliefs

Case study on:

 

*The Global Biodiversity Information Facility (GBIF) and

*The Global Taxonomy Initiative (GTI)

3.2.2. Dynamic efficiency of knowledge generation

I. Interaction between rules and beliefs

Case of GBIF (1) Developed common concepts amongst the bio-informatics and conservation community (2) Institutional mandate to the GBIF secretariat to elaborate new working programs (3) GBIF secretariat as an autonomous legal entity

Case of GTI (1) ad hoc learning process, no mandate for an overall evaluation of the new stakes (2) depends on the CBD secretariat

 

II. Outcomes

  Case of GBIF (1) implementation of different action

plans (2) enlargement of the type of actors : communicating data on bird counting in New-York and Berlin through GBIF

Case of GTI (1) no action plan has been defined (2) deadlocks of negotiations

Bottlenecks (Peter Haas, Douglas North)

• Absence of an institutional mandate for a learning process

• Dependency of the learning community from the policy making community

• Capture off the learning process by vested interests

III. Towards the identification of deadlocks of the learning process

4. Conclusion : Towards a “two pillar” model:

4. Conclusion : Towards a “two pillar” model:

Enhanced data sharing in the microbiological commons

Implementing optimal institutions in a static

framework (allocative efficiency)

Maximising future possibilities in a

dynamic framework (dynamic efficiency)

EBRI : Institutional framing for information sharing in Microbiology

Epistemic communitymandate

reporting

Operational outcomes

• Project proposals

• Input to the policy process

• External collaborative schemes

Stock taking

Institutional analysis

Stakeholder evaluation

Reflexive outcomes

•Common knowledge base

•New concepts

•Enhanced capacity for self-governance

…

IUAP V/23