Whereas macroeconomists using orthodox growth models have had little to say about the nature of innovation, economic historians have offered a wealth of fascinating anecdotes that underscore the fundamental role of uncertainty in technological progress. This emphasis on the extremely unpredictable nature of technlogical advance tends to discourage efforts to analyze the process and suggests a strictly limited role for public policy. Nelson is particularly intrigued by the observation that basic science occurs in corporate as well as university settings and that researchers from rival firms find ways to share the science resulting from their work, to the social good, while keeping its applications proprietary. He also suggests that scientists are often able to predict quite closely the nature of the practical advances permitted by their basic research. Nevertheless, although Nelson advocates that the close links between university and industry found in defense, health, and agriculture be broadened, he warns against asking scientists to make production or commercial decisions they are ill-equipped to handle.
Fruitful cooperation requires recognizing the relative strengths of both types of institution.
The Effect of Patent-Scope Decisions. This essay argues that a broad patent discourages outsiders from participating in subsequent rounds of innovation and thus slows progress. Moreover, if a technology is cumulative or involves a system of components developed independently, then broad patents may create an innovative impasse. Nelson finds broad patents in science-based technologies such as biotechnology and optics especially problematic. Although evolutionary growth theories suggest that technological races in which many inventors see the same goals and use approximately the same means are not very common, they are not unusual in the science-based technologies, which, Nelson believes, are becoming increasingly important.