Index > Tech. Innovation > 2021-02-09: Innovation and Justifications for Government Intervention
Invention creates a brand-new technology.
Innovation adopts the new technology for commercial use, resulting in new or improved products or processes.
Innovation also includes using old technologies in new ways.
The supply of new ideas and the accumulation of basic knowledge increases technological opportunity.
Basic science and technology creates foundational building blocks.
This is focused on the benefits that will come from a new innovation.
Induced Innovation Hypothesis: The price of “Factors” influence the desirability of innovation
If labor prices rise, the demand for labor-saving innovations rises.
Earthquakes and Floods increase the demand for earthquake and flood-proof technologies.
As energy prices rise, innovation in energy-efficient vehicles is accelerated.
Public policy can influence innovation through both tech-push and demand-pull. But first: Why should the gov. influence innovation? Why not leave it to the market?
Policy is what a gov. intends to do about a problem. It is not the goal, but the strategy.
Policies are most often justified by Market Failures, where the market fails to allocate resources in the “best” way.
These are goods that everyone can benefit from, and nobody can be excluded.
Non-Rival - one person using the good does not exclude another. If I eat some cheese, you cannot have the same cheese. If I listen to the radio, you can still listen to the radio.
Non-Excludable - people cannot be prevented from using the good.
Knowledge is a public good - it can be spread freely without using it up, and it cannot be contained (once released).
I think there are strategies to exclude people from just about anything. Are radio waves still public goods if radio components are free?
Since public goods are difficult to profit off of, they are underprovided by the free market. This isn’t to say they aren’t provided - but there should be more.
This is when invention or innovation in one sector leads to new inventions/innovations/knowledge in other sectors. For example, technologies from NASA’s moon missions now pervade everyday life. (Memory foam, fireproof materials, integrated circuits)
Knowledge Spillover happens through channels:
| Investor | Tech | Science |
|---|---|---|
| Market | Edison: industry-sponsored tech dev. | Pasteur: User-inspired research |
| Gov. | Rickover: Government-sponsored tech dev. | Bohr: Curiosity-inspired research |
The science axis could be called “Quest for Fundamental Understanding”. The gov/market axis could be called “Consideration of Use”, where market is applied and gov is “curiosity”.
Do the Rickover and Bohr quadrants improve our lives? Then isn’t there a free-market incentive to perform them?
There are a lot of agents involved, that all must interact.
If the components do not interact efficiently, then technological innovation could be slowed. This is a systemic failure, rather than an issue with any individual component.
There is a group discussion project this week. Prof. will assign groups via MyCourses, and will send an email with more details.
Index > Tech. Innovation > 2021-02-09: Innovation and Justifications for Government Intervention