This morning I attended the CRC for Spatial Information (CRC-SI) 2008 Annual Conference. The morning plenary was entitled, “Innovation in Australia” and was chaired by Peter Woodgate, CEO, CRC-SI. The session was opened (via video link) by Senator The Hon Kim Carr, Minister for Innovation, Industry, Science and Research, who noted the increasingly important role of spatial information and who expressed a desire to “restore public good as funding criteria” when the Australian Government is funding research and development.

In this session, I found Dr Nicholas Gruen’s talk on Innovation in Australia especially interesting. My notes from his talk are below. They are a little rough – my apologies.

Dr Nicholas Gruen: Innovation in Australia

Information in the economy

What is the economy?

We used to think of the economy as “a thing which makes things”. But we now understand that there is more to economic policy than that. The economy is a “giant trading machine” – trade is important in our (new) concept of the economy. In economic policy reform over the last 30 years – including competition policy – trade is the basic theme.

But the economy is more than THAT.

It is also a “giant risk management machine” and a “giant information management machine”.

We have a mixed/hybrid economy – an ecology of public and private goods = markets are always this, they are not just private goods.

Firms compete according to standards, which are a public good (language, more, property rights and other laws, technical and trading standards); then firms compete in the private goods that fall within the gaps of the public goods.

“It is silly to talk of the internet as a private thing; it is not.”

Information is special – we need markets to harness distributed information and provide incentives.
Frederik Hayek – one of the more important things of a capitalist economy is its capacity to deal with distributed information

But markets dont handle information ideally either – Arrow, Akerlof, Stigliz – Information is a potential public good (reproduction is often costless) – best way for information to circulate in principle is for nothing (in cost) – standards are crucial to the passage of information (in ways that are much more integral than markets for trading for goods) – and standards themselves are a public good

Top down innovation in Government

We’ve been relatively good at it – e.g. secret ballot; HECS etc
We (here I think Nick is referring to the Innovation Review Panel as “we”?) recommended that we should further extend such innovative platforms – for instance HECS

Bottom up innovation in Government

This is the hard part
We looked at mechanisms to maximize the contribution of all levels of public sector innovation and also from the outside
Bottom up Innovation in the states (Vic) – e.g. Policy Idol – emerged from strategy workshop in the Premier’s Department – policy competition for junior officers – has been a very successful program

Then there’s government facilitating innovation elsewhere – the UK is pioneering various “challenge based” means of seeking to foster innovation

How to promote services innovations? –

The inadequacy of the tax concession

R&D tax concession works badly for services – to make it work you need to broaden the definition of R&D, then what happens is that firms in practice work out how to make their perfectly regular business activities fit within the new definition = not fair

Services innovation is often heavily regulated – finance, health, education – e.g. Rismark International

Permission to innovate?

regulation makes innovation difficult

We need innovation facilitation – we have major projects facilitation – we proposed something similar – Advocate for Government Innovation:

• operate an Enterprise Challenge program
• be a shopfront for “permission to innovate” processes
• be bureaucratic champion for highly innovative firms and projects
• help disseminate information about public sector information
• provide resources to promote more flexible tendering

Innovation is often hard, but freeing up information is harder – e.g. Joshua Gans project to locate public toilets on iPhone – asked Department for permission to use information (which is available online) to make available on iPhone – Department said no because of contractual obligations; copyright issues etc.

The problem of serial veto – information has many hurdles to jump:

• IP;
• Contract;
• permission hurdles;
• “we see IP as a property law rather than some form of economic policy (like we now see competition policy)”;
• compatibility of formats and systems,;
• lawyers professional cultural of risk aversion and control maximization

Fragility in the face of serial veto – e.g. Patents v Open Source; open information v cultural of public service, legal profession and the media

Fragility amongst robust hazards – like trying to coordinating systems within houses: security alarm, lighting, sound, ventilation and air conditioning – we are still not very good at this, still seems like a “futuristic” concept