Innovation Policy and the Economy
April 8, 2016
Amalia R. Miller, University of Virginia and NBER, and Catherine Tucker, MIT and NBER
This paper argues that due to two unstoppable forces some of the most pressing future questions in health policy will relate to the use of digital technologies to analyze data concerning patient health. The first force is the shift away from a system where patient data was essentially temporary and not intended to be reused or easily accessed again, to a new digital world where patient data is easily transferred and accessed repeatedly. The second force is a fundamental deepening of the nature of patient data that enables increased personalization of healthcare for each individual patient based on not only their detailed medical history but also their likely future medical history that can be projected for their genetic makeup. Miller and Tucker summarize their research investigating the potential consequences of policies in this new world where patient data is both virtually costless to store, share, and individualize. They emphasize that issues of data management and privacy are now at the forefront of health policy considerations.
Joel Waldfogel, University of Minnesota and NBER
Digitization has reduced the costs of production, distribution, and promotion in music, movies, and books, with major consequences for both the number of new products made available as well as the realized quality of the best new products. Cost reductions, along with relaxed gatekeeping constraints, make possible the creation of additional content. Then because of the inherent unpredictability of new product appeal, some of the new products turn out to be surprisingly good. This paper uses new data from a variety of sources to explore the evolution of television quality in the digital era. Waldfogel documents substantial growth in the number of new shows created and distributed, and an increase in the quality of the best work. He finds that new kinds of shows made possible by digitization account for substantial and growing shares of the most successful shows.
Michael Luca, Harvard University
Luca studies how online marketplaces have proliferated over the past decade, evolving far beyond the pioneers such as eBay and Amazon. Specialized platforms such as Airbnb, Uber, and Upwork have created new markets where none existed and pushed a growing fraction of the economy online. In contrast with most offline markets, online marketplaces are designed by organizations whose rules shape market outcomes. Market designers wield considerable power. Their rules determine whether a given platform is better for newcomers or experienced participants, or buyers or sellers, and whether participants abide by or break the law. Over time platforms have become increasingly "social," providing information not only about the products or services being sold but also about buyers and sellers. The sharing of user information can increase trust (one market-design goal), but it may also facilitate discrimination (an unintended side effect). This paper provides an economist's toolkit for designing an online marketplace, focusing on building trust and reputation while avoiding discrimination and inequality.
Marc Rysman, Boston University, and Scott Schuh, Federal Reserve Bank of Boston
Rysman and Schuh discuss prospects for innovation in payments. They discuss recent research into consumer payments and what can be learned about consumer behavior around new payment options. They consider three new innovations in payments: mobile payments, faster payments and digital currencies. For each, the researchers describe prospects and boundaries to adoption.
Timothy F. Bresnahan, Stanford University and NBER, and Pai-Ling Yin, Stanford University