THE ECONOMICS OF RESEARCH & DEVELOPMENT

By Christopher Freeman

Definitions and Conceptual Framework

Technology Technological Change Techniques Technical Change Inventions Technical Innovations Innovation Diffusion

Applied Research and Development Basic Research Research and Development

A Historical Review
Of Economic Thought on Technical Change

Adam Smith and Classical Economists

Treatment of invention and technical change Wealth Nations Contributions to Economics Optimism

Malthus

Malthusian Controversy Unequivocal statement of his 1st Essay on Population

whereas

human population tends to grow by geometrical progression if unchecked by famine, war & disease, the means of subsistence can increase at best by arithmetic progression.

Could be proved wrong if either or both occurred:

If

human beings learned to regulate population growth and to stabilize it by means other than vice, disease, famine and war. If fast enough technical process in agriculture

Marx

Treated Malthus with contempt Greatest tribute to the achievements of a capitalist economy Competitive Pressure Capital, 1st volume:
historical

transformation of productive techniques in the development of capitalist society recognized the role of product innovations and of scientific discoveries generating new products

Capitalist Economic System Socialist System

Neoclassical Economics

Keynesian Revolution Important assumption:

Continuity

of technical change but it exclusion from the center of the stage

Emphasis on:
market

mechanisms mathematical refinement of laissez faire perfect competition model

Neoclassical Economics

high regard for science and technology and recognized that technological change was the main source of economic progress Keynes remained typical of the neoclassical school in believing that the power of Science and compound interest could lead to an age of prosperity Development of economic models based on longrange historical time series and designed to measure the respective contribution of labor, capital and other factors

Schumpeter

restored innovation and technical change to his theory of economic development Competition based on new technology is more widely recognized as being of greater importance recognized that the nature of the innovative process was changing with the rise of the giant corporations

Economics of Oligopoly and Gailbraith

New interest in studying the behavior of firms in highly concentrated branches of the industry: the economics of imperfect competition and the economics of oligopoly it was recognized that the formal models of firm behavior in conditions of perfect competition could not be used to explain oligopoly situations, and neither cold the models of pure monopoly

 in Gailbraiths work

there is the full recognition that the long-term view towards investment now normally implies a deliberate long-term strategy for the firms own Research & Development

in The Industrial State, there was an elaboration of ideas such as:

conscious

policy toward demand: theory of producer sovereignty and consumer manipulation Automatization of progress: Gailbraiths corporate management Technostructure, planning and launching new products and processes, and increasingly linked to government through the military-industrial complex

Some Recent Empirical Research

Research & Development Statistics and Technological Change The Sources of Invention and Innovation Research, Innovation and Size of the Firm Uncertainty, Management of Innovation and Theory of the Firm Project Evaluation, Cost Benefits, Programming and Technology Assessment

END.
Thank you for listening!