This Response sets out my thoughts on a paper by Michael J. Madison, Brett M. Frischmann, and Katherine J. Strandburg, in which they introduce a framework for investigating arrangements for sharing and pooling various intellectual assets. They propose an adjusted version of the approach that Elinor Ostrom and her colleagues developed to study governance mechanisms for commons with natural assets. In this Response, I link the proposed study to a complementary approach that involves the concepts of incomplete knowledge, mental models, and social technologies. Furthermore, I use recent work by the economic historian Joel Mokyr to discuss the role of useful knowledge in economic progress. The discussion of useful knowledge leads to a comparison of physical and social technologies and their interaction in the production of goods and services and also in the creation and operation of social subsystems or social mechanisms. Following work by Douglass North and John Wallis, I separate productive activity into transformation and transaction functions and discuss how the wider social environment affects these functions. I then present a schema for analyzing institutional policy to explain why persuasion—in addition to new rules and methods of enforcement—is an essential instrument of institutional policy. Finally, I discuss the reluctance of modern economics to carefully measure, classify, and analyze the institutional structure of production, and to apply inductive reasoning. The research program planned by Madison, Frischmann, and Strandburg will provide useful knowledge about social technologies employed by the new knowledge industries at an important juncture in our economic and social development.
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