From: jmcasey@pacific.net.sg
Date: Sun Aug 29 1999 - 02:59:47 MDT
>> No, I'm saying that it is only perfectly, 100% reliable if there are no
>> natural monopolies, and nanotech would get rid of those few situations I
>> can
>> see where a natural monopoly might actually exist. Without nanotech we
>> merely have a system that is 99.9% reliable - local monopolies and cartels
>> can occasionally form around unusual resource scarcities, but tend to be
>> short-lived in the absence of government intervention.
The economist Paul Krugman says in *Peddling Prosperity* that one of the principal ways non-innovating products/services make money above the nominal rate of growth of the money supply is by exploiting a monopoly position, hiwever small-scale. You shop at 7-11 rather than schlepping all the way down to the Piggly Wiggly because 1) you save gas, and/or 2) you can't be bothered. You buy over the internet because 1) it's more convenient, 2) you don't need the product right now, 3) you know how. On the other hand, you buy the same product down at the mall because 1) you don't trust the internet, 2) you need the product now, 3) you don't know how to use the internet.
I'd think that nanotech requires such an enormous upfront outlay of capital, at a relatively high risk of the project failing, that the only way to develop nanotech successfully is to ensure a monopoly, at least for some period following startup.
There's a notion used a lot in utilities financing, known as build-operate-transfer (BOT) that might be applicable. In it, you map out the cashflows and ensure that the guy who steps up to bat gets his required rate of return, but is required as well to turn the whole project over to the government at the end of the specified time frame. The government can then auction off a going concern to the highest bidder. By breaking the task of developing the project into two pieces, the government strips out much of the risk and assumes it -- which is one of the main functions of government as, essentially, the state's largest monopoly.
These days there's a lot of capital floating around; we're in a high-liquidity phase. This means the cost of borrowing is low, and many private-sector entities do in fact attempt to develop nanotech on their own. Hell, the worst that can happen is a project goes sour, and after all it's not the entrepreneur's money anyway. (Want evidence of this? Look at the internet stock market.) But economies don't always function with such a high degree of liquidity, and when they don't, the high-risk projects don't always get financed. I'd venture that we're closer to the onset of a low-liquidity phase than many people would like to believe. If the goal is development of a big-stakes technology, government may prove the only long-term backer. (Never forget that the internet was developed by the Department of Defense.) It therefore behooves us to decide whether we're more committed to the project or to the market mechanism: there will come a time when they stand at odds.
jmc
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