Public information wants to be free?

So says this FT article, linked to by Marginal Revolution.

Take publicly generated data, the huge and hugely important flow of information produced by government-funded activities - from ordnance survey maps and weather data, to state-produced texts, traffic studies and scientific information. How is this flow of information distributed? The norm turns out to be very different in the US and in Europe.

On one side of the Atlantic, state produced data flows are frequently viewed as potential revenue sources...It is heresy to suggest that the taxpayer has already paid for the production of this data and should not have to do so again. The other side of the Atlantic practices a benign form of information socialism...As for government data, the basic norm is that it should be available at the cost of reproduction alone.

Strangely, it is the US where information is in the public domain. The interesting claim is that giving the information away provides more economic value:

True, the information is initially provided for free, but a thriving private weather industry has sprung up which takes the publicly funded data as its raw material and then adds value to it. The US weather risk management industry, for example, is ten times bigger than the European one, employing more people, producing more valuable products, generating more social wealth. Another study estimates that Europe invests €9.5bn in weather data and gets approximately €68bn back in economic value - in everything from more efficient farming and construction decisions, to better holiday planning - a 7-fold multiplier. The United States, by contrast invests twice as much - €19bn - but gets back a return of €750bn, a 39-fold multiplier. Other studies suggest similar patterns in areas ranging from geo-spatial data to traffic patterns and agriculture. “Free” information flow is better at priming the pump of economic activity.

Does this example challenge the view that private markets generally maximize social benefit? I believe not. First, remember that the producer and seller here is the government. Even if it's charging for something it produces, a public agency just doesn't have the same incentive to increase quality, find customers, serve those customers, and so forth. And second, we're talking about a purely informational good, hence one with very low marginal cost to copy and distribute.

When you combine these, the result is unsurprising. Giving the information away at copying cost lets anyone who derives positive benefit from it use it. Charging high fees means that all those who value it at more than copying cost but less than the price don't get to use it. And (here is the key) the free information is not necessarily of any lower quality than the sold information, because both are just the output of some bureaucracy. The latter is why we can't use the same argument to suggest that every business should be nationalized and then give away its product at cost - because in that case, quality would suffer.

While quality of output is usually tied to personal benefit, it is worth remembering that when they are not, giving something away at cost may be the social optimum. Nor is this such an unrealistic scenario. Consider academia, where personal benefit comes not from charging for one's ideas but having them known and appreciated. Or the work of private charities and the medical research they fund. If their goals truly are knowledge and making the world a better place, giving away the fruits of their labors is a good idea (and often the policy).

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