The Australian

By Stephen Matchett

Alexander Tabarrok evangelises for freedom. The free movement of goods, people and ideas around the world increases prosperity, he claims.

And he puts his energy where his economics are, teaching online courses to all comers.

His message is excellent news for all who believe in Australia’s future as a knowledge economy.

Except perhaps for researchers. “It’s no knock on Australians that most of the ideas that have produced their high standard of living were created by foreigners,” he argues.

“For a country such as Australia, 22 million people in a world of seven billion there is a simple answer to the question of where better ideas will come from. Better ideas come from other countries.”

Tabarrok is an economist at George Mason University in Washington DC and with Tyler Cowan the founder of Marginal Revolution University. He is in Australia to speak at a United States Studies Centre and Grattan Institute conference on innovation policy.

But his enthusiasm for research, regardless of origin, does not mean he sees Australia as exclusively an ideas taker rather than maker. For a start, he says, there is a role for researchers in areas where the country has a comparative advantage, notably in mining.

More broadly, the country needs a sufficient research base, “to be part of the club, to know how to use information from the rest of the world. In medical care, for example, you have to be in touch with the cutting edge,” he says.

As for basic research where Australians compete with many more researchers overseas, forget it. “There is no reason why Australia should invest in, for example, quantum physics.”

“Research and development per se is not important. It’s about the ability to adapt and adopt ideas, generally produced elsewhere.”

But what happens if research rich countries cut off our access to ideas? Tabarrok is dismissive, “patent law is more a risk to the free trade in ideas than foreign policy.”

Overall, he argues, Australia does well on the three freedoms. He praises the end of manufacturing protection in the ‘90s, which reduced tariffs to the approximate rates applied in the US, UK and Japan.

And he encourages immigration policies which provide a “free trade in minds”. While he says Australia has done well with its immigration policies, which for skilled workers are better than the US, he warns it must adapt to China’s new policy of “flexible mobility,” encouraging its skilled citizens to come and go.

He also suggests Australia does relatively well on intellectual property, which he says is easily impeded by patents. Describing them as “licences to sue,” he suggests the ten-year innovation patent, which he sees as similar to his idea for three, 10 and 20 year patents, based on the nature of a specific industry and/or sunk development costs.

It all augurs well for Australia in the emerging information based global economy and it explains why he has set up his own online economics education resources where he makes his expertise available for free. “The revenue model for the future is partnership with a bricks and mortar university and sale of books but the basic idea is to teach as many people as possible.”

It is part of what he sees as the future of higher education. While elite universities will stay as they are the growth in student numbers will be on-line with the big changes coming from new players.

And change will likely be fast and vast.

“Imagine what would happen if Apple bought a university and decided to revolutionise education like Amazon has revolutionised retail.”

This article was originally published at The Australian