 |
|
 |
|
10.8.2004
Economic Returns to Innovation
|
The eminent Yale economics professor William Nordhaus has published Schumpeterian Profits in the American Economy: Theory and Measurement, available from the National Bureau of Economic Research for a mere five bucks.
His conclusion is the innovators are rather poorly compensated, collecting only about 2% of the value they create for society as a whole.
The abstract says:
The present study examines the importance of Schumpeterian profits in the United States economy. Schumpeterian profits are defined as those profits that arise when firms are able appropriate the returns from innovative activity. We first show the underlying equations for Schumpeterian profits. We then estimate the value of those profits for the non-farm business economy. We conclude that only a minuscle fraction of the social returns from technological advances over the 1948-2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers. (emphasis added) Don Boudreaux, Chair of the Economics Department of George Mason University, reacts:
The smallness of this figure is astounding. If it is anywhere close to being an accurate estimate, the implication is that "society" pays a paltry $2.20 for every $100 worth of welfare it enjoys from innovating activities. And for a longer commentary, see entrepreneur Tim Worstall at TechCentralStation.
Undoubtedly, the paper is going to be chewed over extensively in the professional literature, but an immediate reaction is that it certainly contradicts a lot of the moaning about the over-protection of and excessive returns to intellectual property. Indeed, it sounds like the goose that lays the golden eggs is actually not getting nearly enough nutrient.
posted by James DeLong : 10/8/2004 11:22:18 AM
|
|
|
|
|
|
