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The Introduction of a Major New Technology-Externalities and Government Policy

In: The Economics of Relative Prices

Author

Listed:
  • Morris Teubal

    (The Hebrew University)

  • Edward Steinmueller

    (The Hebrew University)

Abstract

The usual justification for government support of innovative activity is that the firms engaged in it generate externalities as a result of the special properties of information (imperfect appropriability, negligible costs of reproduction, etc.). These externalities lead an economy with competitive goods markets to underinvest in R&D (Arrow, 1962). His analysis does not distinguish between the generation of information, its embodiment as a new technology (invention), and its application to production (innovation).2 Such distinctions are implicitly or explicitly made by Barzel in his analysis (Barzel, 1968) of the firm’s decision to introduce a new technology, and by policy oriented research concerning the impact on the economy of the activities of a government agency such as NASA (Robbins et al, 1972; Mathematica, 1975). Barzel concentrates on the timing of introduction of an innovation or technology in cases where the basic knowledge used by the innovation is a public good, while the other works cited attempt to determine whether and how much NASA or other government agencies accelerate the introduction of innovations and sometimes to evaluate the associated economic benefits.

Suggested Citation

  • Morris Teubal & Edward Steinmueller, 1984. "The Introduction of a Major New Technology-Externalities and Government Policy," International Economic Association Series, in: Béla Csikós-Nagy & Douglas Hague & Graham Hall (ed.), The Economics of Relative Prices, chapter 5, pages 117-151, Palgrave Macmillan.
    • Handle: RePEc:pal:intecp:978-1-349-06265-2_5
    DOI: 10.1007/978-1-349-06265-2_5
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