On the notion of innovation and policies for innovation, I stand with Phelps1 and not with Shumpeter. Thus, I do not see innovation as a mechanical application of a new ‘exogenous’ technology, with foreseeable results, by an ‘enterpreneur’ with sufficient technical skills, but as spontaneous blooming of ideas with commercial value by many players willing to take the risk and venture into the unknown, in a cultural and institutional environment encouraging risk taking. This distinction between the two views of innovation is critical for the interpretation of reality, and therefore for proper policy design.
The starting point is that advances in science, or lack thereof, cannot by themselves explain the acceleration and slowdown of productivity and standards of living; quite to the contrary, most often it is business innovators that demand and promote the advances of science that may support their innovative ideas. Continue reading here.
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