Updated: Apr 12
A Pareto optimum is an economic tool that allows to measure maximization of overall utility of a good or service, and it is achieved only in a situation of pure and perfect quasi-competition. In other words, there are a multitude of Pareto optima some allow to obtain a more optimal overall utility than others. Pareto optimum depends in my opinion on relevant qualified market, type of goods or services. We could make the analogy with tools for measuring innovation such as the patent or copyright / copyleft system, do they always help to measure the maximization of social utility: so as not to exclude economic agents or indirectly? Harm them by barriers to entry or exit. It would reduce competition. A new economic model bringing about the emergence of "decentralized solutions" will increase measurement gaps between empirical survey and classic indicators markers of an innovative economy. What is the link between innovation measurement indicators such as R&D investment effort, density of patent filings, productivity, technology density and economic performance?
Innovation indicators are undergoing a mutation, and they are consequences of our economies transformation into a hybrid model.
A successful innovation meets a societal utility within a territory because it responds to a new need or a created need. Thus, it encounters a market which allows it, through the interplay of supply and demand, to develop an economy. Here are the recent results of the ranking of the most innovative countries.
Innovation indicators are changing
Patent model, for example, is known to be a tool for measuring government innovation. It is also recognized as a compromise between, on the one hand, an incentive to invest in R&D and, on the other hand, a brake on competition and technology diffusion. It is said to be a compromise that allows both return on investment and dissemination of knowledge for economic agents. Regarding copyright and also copyleft of software, it is very easy to access the code of a solution which has not been provided in any R&D effort. In my opinion the brakes are not at this level but have moved upstream of the value chain and downstream with the strategy for certain players to vertically integrate monopolies or oligopolies ... which is supposed to reduce the price in the digital economy under the network effect and economy of scale, but this generates additional entry costs for competitors reducing their chances of development.
Transformation of our economies into a hybrid model.
Economic analyzes show that reality is complex. The link between the indicators varies according to the political situations of the states and in their contexts.
Under these conditions how can the public authorities in the member states of the OECD act on the incentives in order to encourage innovation and therefore improve economic performance in this new model? The overhaul of metrics is essential.
Innovation indicators in classic economic model show that exchanges are not taken into account such as brain movements, clusters, public & private research partnerships, infrastructure sovereignty, data protection, source of capital, financing and they are accentuated in the new economic model ...
System in place, framework as well as the economic efficiency indicators have been designed in such a way as to assess systemic performance, controlled and centralized by a supervisory authority for known exchanges.
Do we need to rethink our existing system, framework as well as performance indicators to better match the reality of the decentralized and hybrid digital world? The new performance lies in traceability, transparency, and capabilities, exchange performance. What kind of metrics will we need to put in place?
Open source blockchain technology is one of the technologies that enables these new applications in these decentralized systems.
To learn more about blockchain, you can read our article: Blockchain: Human logic and cryptography.
And you, what do you think?
Do you have any ideas for new metrics resulting from economic change not taken into account in the model?
Ouarda BOUZIANE, 2021 March 17