Imagine that encryption and related technologies become so advanced that the knowledge produced by research and development are as excludable as any other good, while technology remains nonrival

In a world in which technology is both nonrival and excludable, do the government policies of government spending on R&D, tax incentives for R&D, and patents continue to make sense?

If technology were inherently excludable, patent protections would be redundant. Laws against theft would suffice. Both government spending and tax incentives would be justified, because private businesses would allocate resources to research and development based on profit expectations. Because new ideas are costly to produce, private R&D efforts will focus on ideas for which users will be willing to pay a high price, excluding all other potential users. The result is that available ideas are underutilized, given that the true resource cost of using them once they exist is near zero. The underutilization of ideas leads, as well, to underproduction of ideas, since technology is a key input in its own production.