Economics of Ideas, Science, and Innovation - Class 1: Course Overview

2 Why an ‘Economics of Ideas’? 3 4 Why an ‘Economics of Ideas’? The advance of ideas informs central phenomena The path of economic prosperity (income, health; inequality) The dynamics of markets, industries, trade The role of institutions and policy Ideas are a special form of good. [...] The patent system provides patent holder the right to exclude others from using an idea for a fixed period of time in exchange for disclosure of that idea to the public domain. [...] If so, room for institutions and policy interventions But how big are the social returns to innovation? Are markets a little off or way off? Do we really underinvest? The Social Returns to Idea Creation Take 1: Bloom, Schankerman, Van Reenen 2013 How do BSV attempt to calculated the social returns to R&D? What types of spillovers is their method is suited to address? What types of spillo. [...] Consider a “circle of knowledge” with a continuum of knowledge types (indexed by s around circle) where depth of knowledge is D(t) Let educational attainment for innovator born at time t be their breadth (b) times the prevailing depth (D) E(t) b(t)D(t) Let creativity (for an individual) be A A L b A The Burden of Knowledge and Growth Let the depth of knowledge follow the stock of exis. [...] 29 Social Returns and the Spillover Challenge The root measurement challenge is that society-wide gains seem to differ considerably from the private returns to the innovator and are fundamentally hard to trace.