Knowledge as an economic good: Exhaustibility versus appropriability?

The analysis of knowledge as an economic good has paid much attention to its limited appropriability. Lesser attention has been paid to its limited exhaustibility. The implications of the limited exhaustibility of knowledge is most important both for economics and economic policy. The effects of the limited exhaustibility of knowledge may compensate the effects of its limited appropriability. The Arrovian knowledge market failure takes place only when and if the downward shift of the intertemporal derived demand for non-exhaustible knowledge engendered by the limited appropriability of knowledge and the consequent decline of the price of innovated goods is larger than the downward shift of the intertemporal derived demand of standard capital goods engendered by their obsolescence. The appreciation of the joint effects of the limited exhaustibility of knowledge and of the knowledge appropriability trade-off calls for the design of a new knowledge policy.