when does labor scarcity encourage innovation this paper studies whether labor scarcity encourages technological advances that is technology adoption or innovation for example as claimed by habakkuk in the context of nineteenth century united states i define technology as strongly labor saving if technological advances reduce the marginal product of labor and as strongly labor complementary if they increase it i show that labor scarcity encourages technological advances if technology is strongly labor saving and will discourage them if technology is strongly labor complementary i also show that technology can be strongly labor saving in plausible environments but not in many canonical macroeconomic models

the sign and size of option value we adapt the theoretical state preference model to value nonmarket public goods under individual uncertainty about use illustrating with an assessment of willingness to pay to prevent acid rain lake damage in the northeast united states individual

understanding the emergence of open science institutions functionalist economics in historical context this essay exposes the limitations of the logical origins approach that has found favour among economists who seek to understand the workings of institutions in the past present it pursues a different approach applying functionalism in historical context to explain the emergence of the characteristic ethos and institutions of open science the emergence during the late sixteenth and early seventeenth centuries of the idea and practice of open science represented a break from the previously dominant ethos of secrecy in the pursuit of nature s secrets it was a distinctive and vital organizational aspect of the scientific revolution from which crystallized a new set of norms incentives and organizational structures that reinforced scientific researchers commitments to rapid disclosure of new knowledge to understand how this came about it is necessary to examine the economics of patronage and the roles of asymmetric information and reputation in the early modern reorganization of scientific activities the rise of cooperative rivalries in the revelation of new knowledge is seen as a functional response to heightened asymmetric information problems posed for the renaissance system of court patronage of the arts and sciences pre existing informational asymmetries had been exacerbated by increased importance of mathematics and the greater reliance upon sophisticated mathematical techniques in a variety of practical contexts of application analysis of the court patronage system of late renaissance europe within which the new natural philosophers found their support points to the significance of the feudal legacy of fragmented political authority in creating conditions of common agency contracting in substitutes these conditions are shown to have been conducive to more favorable contract terms especially with regard to autonomy and financial support for the agent client members of western europe s nascent scientific communities some lessons may be drawn for contemporary science and technology policy debates in which the open science mode of pursuing knowledge often seems to be viewed a robust concomitant of the power of scientific research techniques whereas it is a fragile cultural legacy of western europe s history upon which rests the ascendancy of modern science as a driver of long term economic growth copyright 2004 oxford university press

after the big bang obstacles to the emergence of the rule of law in post communist societies when russia launched mass privatization it was widely believed that it would create a powerful constituency for the rule of law that didn t happen we present a dynamic equilibrium model of the political demand for the rule of law and show that beneficiaries of mass privatization may fail to demand the rule of law even if it is the pareto efficient rule of the game the reason is that uncertainty about the legal regime can lead to asset stripping and stripping can give agents an interest in prolonging the absence of the rule of law this abstract was borrowed from another version of this item

nordic exceptionalism social democratic egalitarianism in world historic perspective abstract in what respect if any are the nordic economies exceptionally egalitarian when viewed from a world historical perspective our answer is based on archaeological historical and ethnographic as well as contemporary evidence over the past three thousand years the countries exemplifying the nordic model are not exceptionally equal in the ownership of material wealth moreover the advent of social democracy in the nordic nations did not result in a more equal distribution of years of schooling but intergenerational economic and social mobility appears to be exceptional in the nordic nations and by most measures inequalities in living standards in the nordic economies are less than in other advanced economies the closest nordic analogy in our data set is to the egalitarian distribution of well being and limited intergenerational transmission of wealth found in some horticultural and especially forager economies

flexibility learning and irreversibility in environmental decisions a bayesian approach the bayes decision is characterized and studied for a two period decision problem involving a proposed resource development project it is assumed that development is irreversible and that expectations about benefits and costs during the second period vary with experiences resulting from the first period action the amount and types of learning achieved depend upon the particular action taken during the first period flexible sequential decision procedures are compared with fixed once and for all decisions it is shown that under this specification optimal development decisions are not necessarily more conservative when a sequential procedure is used the possibility of reneging on a fixed decision is formally specified and studied

helping infant economies grow foundations of trade policies for developing countries conventional wisdom has it that trade enhances economic efficiency and thus promotes growth at least since robert m solow s 1957 pioneering work however technological progress has been recognized as the dominant factor in determining the rate of growth this is presumably even more true for developing countries for which the possibilities of closing the knowledge gap with advanced industrial countries offers especially large growth potential we examine the impact of trade restrictions in economies in which technological spillovers within countries and across industries are fundamental to the process of growth see kenneth j arrow 1962a 1962b paul m romer 1986 stiglitz 1987 since that work it has been clear that markets by themselves do not necessarily or in general lead to overall dynamic efficiency and that there are often trade offs between static inefficiencies e g associated with patent protection and long term growth we find here in particular that the dynamic benefits of broad trade restrictions may outweigh their static costs our analysis provides the basis of an infant economy as opposed to an infant industry argument for protection this paper develops a simple two sector model with an industrial modern and a traditional craft or agricultural sector there are four key features to the model a there are spillovers from the industrial sector to the craft sector for which firms in the industrial sector are not compensated b such spillovers are geographically based that is it is only productivity increases in the industrial sector in the developing countries that affect productivity increases in the traditional sector c innovations are concentrated in the industrial sector and d size is among the important determinants of the pace of innovation in the industrial sector earlier critiques of trade policies encouraging the development of the industrial sector in developing countries ignored these spillovers they argued in effect that korea would always have a comparative advantage in growing rice therefore it was foolish for it to try to restrict imports of industrial goods even if by so doing productivity in the industrial goods sector was increased it could never catch up so the protection would have to be permanent year after year the country would have been better off if it simply specialized in its own comparative advantage growing rice korea could and did catch up however at least in certain areas if catch up is possible then dynamic comparative advantage differs from static comparative advantage but even if korea s comparative advantage remained in agriculture industrial protection might be desirable because by supporting it one might have a more dynamic agricultural traditional sector trade restrictions enhance the size of the industrial sector the benefits spill over to the rural sector and national income grows at a possibly far faster pace after presenting the model we explain why the underlying hypotheses are plausible and argue that the model is broadly consistent with historical experience and empirical evidence

how much should society fuel the greed of innovators on the relations between appropriability opportunities and rates of innovation the paper attempts a critical assessment of both the theory and the empirical evidence on the role of appropriability and in particular of intellectual property rights iprs as incentives for technological innovation we start with a critical discussion of the standard justification of the attribution of ipr in terms of market failures in knowledge generation such an approach we argue misses important features of technological knowledge and also neglects the importance of non market institutions in the innovation process next we examine the recent changes in the ipr regimes and their influence upon both rates of patenting and underlying rates of innovation the evidence broadly suggests that first iprs are not the most important device apt to profit from innovation and second they have at best no impact or possibly even a negative impact on the underlying rates of innovation rather we argue technology and industry specific patterns of innovation are primarily driven by the opportunities associated with each technological paradigm conversely firm specific abilities to seize them and profit from innovation depend partly on adequacy of the strategic combinations identified by the taxonomy of teece d 1986 profiting from technological innovation implications for integration collaboration licensing and public policy research policy 15 285 305 and partly on idiosyncratic capabilities embodied in the various firms

leaders and followers perspectives on the nordic model and the economics of innovation abstract what kinds of social and economic systems are most conducive to innovation we formulate a simple model in which countries can close the gap with the technological leader but where the cost of doing so may be so high that the country chooses to remain laggards observed disparities in productivity may be the result of a recognition that the cost of closing the gap exceeds benefit and there may therefore exist an international equilibrium in which there are leaders and followers even if it is granted that the united states is the leader and scandinavia are followers there are theoretical grounds for arguing that the nordic model may in fact be better for innovation suggesting that if the us adopted some of the nordic institutions innovations would be higher and societal welfare would be improved even more

a note on option value and the expected value of consumer s surplus abstract in roughly contemporaneous papers cicchetti and freeman quart j econ 1971 and schmalensee amer econ rev 1972 reached apparently conflicting conclusions about the sign taken by option value cicchetti and freeman conclude that option value is always non negative schmalensee concludes that option value may be either positive or negative depending upon the circumstances this paper reconciles these seemingly contradictory conclusions it is demonstrated that cicchetti and freeman s unambiguous conclusions concerning the sign of option value are the result of two special strong assumptions not imposed by schmalensee

the case against patents evidence that they serve to increase innovation and productivity unless productivity is identifi ed with the number of patents awarded which as productivity is identifi ed with the number of patents awarded which as evidence shows has no correlation with measured productivity this disconnect is evidence shows has no correlation with measured productivity this disconnect is at the root of what is called the patent puzzle in spite of the enormous increase in at the root of what is called the patent puzzle in spite of the enormous increase in the number of patents and in the strength of their legal protection the us economy the number of patents and in the strength of their legal protection the us economy has seen neither a dramatic acceleration in the rate of technological progress nor a has seen neither a dramatic acceleration in the rate of technological progress nor a major increase in the levels of research and development expenditure major increase in the levels of research and development expenditure both theory and evidence suggest that while patents can have a partial equiboth theory and evidence suggest that while patents can have a partial equilibrium effect of improving incentives to invent the general equilibrium effect on librium effect of improving incentives to invent the general equilibrium effect on innovation can be negative the historical and international evidence suggests that innovation can be negative the historical and international evidence suggests that while weak patent systems may mildly increase innovation with limited side effects while weak patent systems may mildly increase innovation with limited side effects strong patent systems retard innovation with many negative side effects more generstrong patent systems retard innovation with many negative side effects more generally the initial eruption of innovations leading to the creation of a new industry from ally the initial eruption of innovations leading to the creation of a new industry from chemicals to cars from radio and television to personal computers and investment chemicals to cars from radio and television to personal computers and investment banking is seldom if ever born out of patent protection and is instead the fruit of a banking is seldom if ever born out of patent protection and is instead the fruit of a competitive environment it is only after the initial stage of rampant growth ends that competitive environment it is only after the initial stage of rampant growth ends that mature industries turn toward the legal protection of patents usually because their mature industries turn toward the legal protection of patents usually because their internal growth potential diminishes and they become more concentrated these internal growth potential diminishes and they become more concentrated these observations supported by a steadily increasing body of evidence are consistent with observations supported by a steadily increasing body of evidence are consistent with

preemptive patenting and the persistence of monopoly this article takes a different tack and inquires whether institutions such as the patent system create opportunities for firms with monopoly power to maintain their monopoly power the results apply to other situations such as brand identification spatial location and capacity expansion which share the characteristic that early or preemptive actions may lower the returns to potential competitors

nudging hotel guests to reduce food waste as a win win environmental measure we show that two simple and nonintrusive nudges reducing plate size and providing social cues reduce the amount of food waste in hotel restaurants by around 20 the results are statistically significant they are also environmentally substantial as food waste is a major contributor to climate change and other forms of environmental degradation given the magnitude of the contribution of food waste to global environmental change it is surprising that this issue has not received greater attention the measures reduce the amount of food the restaurants need to purchase and there is no change in guest satisfaction making it likely that profits will increase the measures thus constitute potential win win opportunities

option value a conceptual overview the importance of nonuser benefits to the process of efficiently allocating natural environments was first emphasized by krutilla 15 a decade and a half ago one of the components of these nonuser benefits is option value originally introduced by weisbrod 23 as relevant for assets that might be difficult to reproduce option value has been the subject of considerable debate perhaps the simplest approach to explaining the meaning of option value is to use an example consider an individual who is uncertain whether he or she will consume the services of a particular asset in the future furthermore assume this individual is also uncertain whether the asset will be available in the future should he

the national system of innovation in historical perspective contrary to some recent work on so called globalisation this paper argues that national and regional systems of innovation remain an essential domain of economic analysis their importance derives from the networks of relationships which are necessary for any firm to innovate whilst external international connections are certainly of growing importance the influence of the national education system industrial relations technical and scientific institutions government policies cul tural traditions and many other national institutions is fundamental the historical examples of germany japan and the former ussr illustrate this point as well as the more recent contrast between east asian and latin american countries introduction the national system of friedrich list according to this author s recollections the first person to use the expression national system of innovation was bengt ake lundvall and he is also the editor of a highly original and thought provoking book 1992 on this subject however as he and his colleagues would be the first to agree and as lundvall himself points out the idea actually goes back at least to friedrich list s conception of the national system of political economy 1841 which might just as well have been called the national system of innovation the main concern of list was with the problem of germany overtaking england and for underdeveloped countries as germany then was in relation to england he advocated not only protection of infant industries but a broad range of policies designed to accelerate or to make possible industrialisation and economic growth most of these policies were concerned with learning about new technology and applying it the racialist and colonialist overtones of the book were in strong contrast to the inter nationalist cosmopolitan approach of the classical free trade economists and list s belief that holland and denmark should join the german bund and acquire german nationality because of their descent and whole character reads somewhat strangely in the european community of today nevertheless despite these unattractive features of his outlook he clearly anticipated many contemporary theories after reviewing the changing ideas of economists about development in the years since the second world war the world bank 1991 concludes that it is intangible investment in knowledge accumulation which is decisive rather than physical capital investment as was at one time believed pages 33 35 the report cites the new growth theory

patents and innovation evidence from economic history abstract what is the optimal system of intellectual property rights to encourage innovation empirical evidence from economic history can help to inform important policy questions that have been di

option value an exposition and extension this article examines the role of the discount rate in making decisions that will have significant implications for the environment the authors begin by providing a rationale for discounting in general and by describing the main factors that determine

does amd spur intel to innovate more we estimate an equilibrium model of dynamic oligopoly with durable goods and endogenous innovation to examine the effect of competition on innovation in the personal computer microprocessor industry firms make dynamic pricing and investment decisions while consumers make dynamic upgrade decisions anticipating product improvements and price declines consistent with schumpeter we find that the rate of innovation in product quality would be 4 2 percent higher without amd present though higher prices would reduce consumer surplus by 12 billion per year comparative statics illustrate the role of product durability and provide implications of the model for other industries

political reinforcement how rising inequality curbs manifested welfare generosity we propose a political reinforcement hypothesis suggesting that rising inequality moves party politics on welfare state issues to the right strengthening rather than modifying the impact of inequality we model policy platforms by incorporating ideology and opportunism of party members and interests and sympathies of voters if welfare spending is a normal good within income classes a majority of voters moves rightward when inequality increases as a response the left in particular shift their welfare policy platform toward less generosity we find support for our arguments using data on the welfare policy platforms of political parties in 22 oecd countries

time series minimum wage studies a meta analysis time series minimum wage studies a meta analysis author s david card and alan b krueger reviewed work s source the american economic review vol 85 no 2 papers and proceedings of the hundredth and seventh annual meeting of the american economic association washington dc january 6 8 1995 may 1995 pp 238 243 published by american economic association stable url http www jstor org stable 2117925 accessed 04 11 2011 15 46

potential competition actual competition and economic welfare though the origins of anti trust legislation at least in the united states undoubtedly lie in late nineteenth century populist sentiments its current intellectual foundations rest on modern welfare economics these intellectual foundations provide more than just rhetoric as courts have increasingly relied on the testimony of economists to interpret and reinterpret the inevitably vague language of the legislation the reliance on modern welfare economics is somewhat paradoxical for the assumptions underlying the fundamental theorem of welfare economics are peculiarly ill suited to deal with competition in the central area to which anti trust is applied the industrial sectors of modern economies these sectors are characterized by important non convexities which admittedly present inherent problems for competition the competition that does take place is as likely to take the form of product and r d competition rather than price competition product competition plays no role in the conventional welfare paradigm which assumes a complete set of commodities and it is not that arrow and debreu simply forgot to include technical change in their formulations the natural assumptions underlying the analysis of the production marketing and utilization of knowledge are basically inconsistent with those underlying the arrow debreu model invited paper european economic association meetings copenhagen august 1987 financtal support from the national science foundation and the hoover institution is gratefully acknowledged the presence of non convexittes in production is central in explaining why only a ftnite subset of the set of possible commodities is in fact produced techmcal change is characterized by non convexities in its production radner and stiglitz 1984 if technology exhibits say constant returns to scale at a fixed technology when inputs devoted to r d are included it exhibits non convexities the value or information may increuse with the scale of production while conventional theory focuses on markets for homogeneous commodities each piece of new knowledge must be dinerent from previously produced knowledge knowledge has many of the properties of public goods it being both dificult and undesirable to exclude markets for knowledge are at best imperfect and as we have argued

mobility constraints productivity trends and extended crises abstract in this paper we propose an interpretation of the current global financial crisis which emphasizes sectoral dislocation following localized technical change in the presence of barriers to labor mobility this tale is reminiscent of a similar tale concerning the great depression in the 30s technical change was localized in agriculture where income fell because rising productivity could not be offset by a shrinking labor force due to the costs of moving out of agriculture for unemployed workers inelastic demand for agricultural output meant that as output increased income declined as individual incomes fell below the level necessary to finance the transition to manufacturing excess labor became trapped in agriculture reducing wages and exacerbating the rise in output shrinking incomes in agriculture reverberated on the other sectors mainly manufacturing causing a large depression nowadays it is manufacturing that plays the role of epicenter of technical change falling incomes in manufacturing yield a lack of demand for goods produced in the rest of the economy namely the service sector this may be the deep rooted cause of the long lasting slump and the painfully slow recovery

trade accumulation and uneven development abstract this paper develops a two country model of capital accumulation and growth where the industrial sector exhibits increasing returns to scale it shows that uneven development is a necessary outcome in such a model an initial discrepancy in capital labor ratios between the two countries will cumulate over time leading to the division of the world into a capital rich industrial region and capital poor agricultural region which region takes on which role depends on primative accumulation that is on which region starts with more capital if capital is mobile internationally the model can given rise to a two stage pattern of development a first stage where trade is the engine of growth in the leading country and a second in which foreign investment takes on that role which is reminiscent of the hobson lenin theory of imperialism