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Resolving Conflicts Arising from the Privatization of Environmental Data (2001)

Chapter: Economic Characteristics of the Provision of Environmental Information

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Suggested Citation:"Economic Characteristics of the Provision of Environmental Information." National Research Council. 2001. Resolving Conflicts Arising from the Privatization of Environmental Data. Washington, DC: The National Academies Press. doi: 10.17226/10237.
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Page 40
Suggested Citation:"Economic Characteristics of the Provision of Environmental Information." National Research Council. 2001. Resolving Conflicts Arising from the Privatization of Environmental Data. Washington, DC: The National Academies Press. doi: 10.17226/10237.
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Page 41

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POLICY AND ECONOMIC FRAMEWORK FOR PUBLIC-PURPOSE 40 ENVIRONMENTAL INFORMATION SYSTEMS of commercial application.3 Government agencies commonly fund the exploratory stage because the investment cost and risk are high. Once the technology is well understood and reliable (the mature stage), private enterprise is more likely to develop applications and products. Core products of environmental information systems tend to be situated at just such a transition, when prototypes developed with research funds demonstrate a potential for many applications, some clearly public, but others of commercial value. COMPATIBILITY OF OPEN ACCESS WITH A COMPETITIVE MARKET This section presents the rationale for the following conclusions: (1) the trunk and roots of the information tree should be publicly funded to ensure that credible and dependable core products are made available on a full and open basis; (2) information derived from these core products should be distributed through value-added branches by a combination of public and commercial organizations serving different communities of end users; and (3) under certain conditions public-sector purchase of commercially available data and information services may be appropriate. The argument depends on economic considerations (i.e., the conditions under which competitive or monopolistic markets are likely to form) coupled to the particular requirements and realities of shared, public-purpose information systems. Economic Characteristics of the Provision of Environmental Information The provision of environmental information differs from standard production activities in two ways: 1. The marginal cost of distributing a copy of the information is typically very small, sometimes even negligible, compared to the initial cost of collecting and synthesizing the data and producing an information 3G.A.Moore, 1999, Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers. Harperbusiness, New York, NY, 227 pp.

POLICY AND ECONOMIC FRAMEWORK FOR PUBLIC-PURPOSE 41 ENVIRONMENTAL INFORMATION SYSTEMS product. In economic terms this phenomena is referred to as declining average costs. 2. The scientific enterprise requires that basic researchers subject their findings, including a description of the data used and the models and methods of analysis, to peer review. The precise texts of articles and books may be subject to copyright, but the substance of the material must be made available to all parties willing to pay the incremental cost of distribution (e.g., the cost of a subscription or the price of a book). Thus, the production of scientific information is nonexclusionary. Furthermore, scientific information is nonrivalrous because providing the information to one party does not diminish the information available to another party. A public good, such as scientific information, is both nonexclusionary and nonrivalrous. The first (declining average costs) is a property of the technology of producing information products, whereas the second (public-good nature of information) is largely a property of our scientific institutions. Thus, one can imagine another system in which all the products of all scientific research could be copyrighted and patented and the underlying data and analysis kept largely secret.4 However, science would not necessarily flourish under such a system. The declining-average-cost character of the environmental enterprise has the well-known implication that, if the organizations producing the information products are private and for-profit, there will be a tendency to create monopolies, with all their attendant inefficiencies.5 Inefficiencies will also occur if the organizations are not-for-profit but recover all their costs from user fees (e.g., commercialized government agencies in Europe). Consequently, in the United States the primary producers of environmental information are government agencies subsidized by tax dollars and not-for-profit research organizations (e.g., research universities) funded by foundations and government grants. 4Given the ease of copying and transmitting information, keeping scientific secrets and enforcing copyright and patent laws is only partially feasible. 5Not all markets are created equal, and some are much more efficient than others. The ideal benchmark case is the “perfectly competitive market” in which prices are equal to marginal costs and therefore product sales occur at the efficient level. In other words, a market is efficient when all buyers willing to pay at least the marginal cost of a product are actually successful in making their purchases.

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Reliable collections of science-based environmental information are vital for many groups of users and for a number of purposes. For example, electric utility companies predict demand during heat waves, structural engineers design buildings to withstand hurricanes and earthquakes, water managers monitor each winter's snow pack, and farmers plant and harvest crops based on daily weather predictions. Understanding the impact of human activities on climate, water, ecosystems, and species diversity, and assessing how natural systems may respond in the future are becoming increasingly important for public policy decisions.

Environmental information systems gather factual information, transform it into information products, and distribute the products to users. Typical uses of the information require long-term consistency; hence the operation of the information system requires a long-term commitment from an institution, agency, or corporation. The need to keep costs down provides a strong motivation for creating multipurpose information systems that satisfy scientific, commercial and operational requirements, rather than systems that address narrow objectives. Resolving Conflicts Arising from the Privatization of Environmental Data focuses on such shared systems.

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