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Creating a Learning SocietyA New Approach to Growth, Development, and Social Progress$
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Joseph Stiglitz and Bruce Greenwald

Print publication date: 2014

Print ISBN-13: 9780231152143

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231152143.001.0001

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The Welfare Economics of Schumpeterian Competition

The Welfare Economics of Schumpeterian Competition

Chapter:
(p.131) Chapter Six The Welfare Economics of Schumpeterian Competition
Source:
Creating a Learning Society
Author(s):

Joseph E. Stiglitz

Bruce C. Greenwald

Publisher:
Columbia University Press
DOI:10.7312/columbia/9780231152143.003.0006

This chapter describes the ways in which markets fail to allocate resources efficiently toward innovation and, more broadly, fail in creating as dynamic a “learning” society as they might. It first examines the distinctive properties of knowledge—why the production of knowledge is different from the production of steel and why, as a result, while there is some presumption that markets make the “correct” decisions about the level of production of steel, the same is not true for the production of knowledge. It then delves further into several of the key market failures—why social and private returns to learning and R&D are likely to differ markedly. Next, it asks whether innovation is always welfare enhancing and looks at the innovation process in broader, evolutionary terms. The final section makes some more general observations about innovation and the nature of our society.

Keywords:   resource allocation, innovation, knowledge, market failures, knowledge production, evolution

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