An ex post reward system solves --- the government is capable of obtaining the necessary information about demand through sales data and it’s comparative to innovators ex ante info

Government's Ability to Obtain Information about the Value of Innovations. As we stressed in the analysis, the government's knowledge about the social value of innovations, embodied in its probability distribution over demand curves, is important to the performance of the reward system and to that of the optional reward system (even though the latter dominates patent no matter how poor the government's knowledge). In fact, one supposes that the government could obtain significant information about demand. Most obviously, the government can base its rewards on sales data, which should be relatively easy to obtain; thus, the version of rewards discussed in Section IIH is the most relevant one to consider. (Note that if rewards are based on sales, the government should not fear that it would be flooded by claimants for rewards with inferior or meaningless innovations--they would not generate products that would pass the market test.) The government could also attempt to measure more about the demand curve than sales at the market price; it could estimate demand elasticities and undertake surveys to determine the character and frequency of use of, for example, computer software, [*542] musical recordings, and cinematic and television productions. As events unfold and information flows to the government, it could appropriately supplement rewards, perhaps on an annual basis. In past proposals for reward systems, payments based on sales and other information that the government receives have sometimes been discussed. 37 It would be a gross mistake to envision the reward as having to be premised on the government's estimate of valuation at the time an innovation is registered.

Government's Information versus Innovators'. We have just mentioned the ability of the government to obtain information about demand, but we have not considered how good innovators' information is and its relation to the government's. In this regard, two comments should be made, which together suggest that the factor of innovators' superiority of information may be less important than it initially appears to be. First, innovators' information will often be substantially imperfect ex ante, at the time when they are deciding on research investment--the crucial period for assessment of innovators' information. Second, the government's information will often be reasonably good ex post, which is the pertinent period for assessment of government information when rewards are based on sales and other indicia of worth. Thus, when rewards are based on ex post data, the informational comparison that bears on the choice between rewards and intellectual property rights is that between innovators' ex ante information and the government's ex post information. (That innovators' ex ante information may be superior to the government's ex ante information would be irrelevant to the choice between rewards and property rights.) This point can be put more sharply. Suppose, as is not implausible, that the government's ex post, sales-related information about demand is as good as innovators' ex ante information, when they are deciding on research investment. Then innovators enjoy no informational advantage that favors intellectual property rights, and mandatory rewards (not just optional rewards) are unambiguously superior to intellectual property rights. 38