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The Economics of Inventive Activity over Fifty Years

The Economics of Inventive Activity over Fifty Years

(p.43) The Economics of Inventive Activity over Fifty Years
The Rate and Direction of Inventive Activity Revisited
Kenneth J. Arrow
University of Chicago Press

The hypothesis that inventions require a distinctive mental effort led to an emphasis in the 1962 volume on the psychological and social characteristics of inventors, reflected in the terms “social” and “nonmarket factors.” The comments crystallized why economists have had such difficulty in clarifying the nature of innovation as an economic good. This chapter highlights the idea that the economics of innovation must confront and incorporate some of the unusual properties of innovation, both in terms of its production—for example, the significant level of uncompensated effort toward inventive effort, in areas ranging from medicine to Wikipedia—and use. It concludes with a note about the genesis of the two volumes. A great deal of attention was paid to the role of government procurement of innovation in the first volume, primarily in relation to defense.

Keywords:   economics, inventive activity, innovation, social characteristics, nonmarket factors

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