Innovation Policy and the Economy, Volume 7

Innovation and Economic Growth

Article Snapshot


Adam B. Jaffe, Josh Lerner and Scott Stern


Volume 7 in NBER Book Series: Innovation Policy and the Economy, eds. Adam B. Jaffe, Josh Lerner, and Scott Stern, MIT Press, Cambridge MA, 2007


Volume 7 of this series discusses policy initiatives that are aimed at encouraging innovation.

Policy Relevance

Inefficient regulation can make drug development unnecessarily expensive.

Main Points

  • The pharmaceutical industry has recently been characterized by increasing research expenditures and lower rates of new drug discoveries. This is the not primarily the consequence of a fall in research productivity, but a rise in research costs and suboptimal regulatory policies.
  • Formal patent use in basic natural science research does not decrease publication rates, but the grant of a patent does seem to slow the spread of a discovery.
  • Midwestern universities educate a disproportionate number of PhDs that go to work in industry, but most of these graduates move out of the state in which they were educated.
  • Marginal cost—how much it costs a firm to produce an additional good—is a fundamental idea in economic analysis. For many digital goods, marginal cost is essentially zero, which makes pricing of digital goods difficult. A new, statistical price system centered on the bundling of digital goods may be more efficient and encourage innovation.
  • Crises test an organization’s capacity for dealing with social network congestion and human error. A formal math model developed by the authors to explore the ability of an organization to respond to a crisis suggests that adaptability and responsiveness are key to crisis performance.


Get The Article

Find the full article online

Search for Full Article