Innovation Commons: The Origin of Economic Growth

ISBN : 9780190937508

Jason Potts
288 Pages
156 x 235 mm
Pub date
Oct 2019
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Innovation is among the most important topics in understanding economic sustained economic growth. Jason Potts argues that the initial stages of innovation require cooperation under uncertainty and draws from insights on the solving of commons problems to shed light on policies and conditions conducive to the creation of new firms and industries. The problems of innovation commons are overcome, Potts shows, when there are governance institutions that incentivize cooperation, thereby facilitating the pooling of distributed information, knowledge, and other inputs.
The entrepreneurial discovery of an economic opportunity is thus an emergent institution resulting from the formation of a cooperative group, under conditions of extreme uncertainty, working toward the mutual purpose of opportunity discovery about a nascent technology or new idea. Among the problems commons address are those of the identity; cooperation; consent; monitoring; punishment; and independence. A commons is efficient compared to the creation of alternative economic institutions that involve extensive contracting and networks, private property rights and price signals, or public goods (i.e. firms, markets, and governments). In other words, the origin of innovation is not entrepreneurial action per se, but the creation of a common pool resource from which entrepreneurs can discover opportunities.
Potts' framework draws on the evolutionary theory of cooperation and institutional theory of the commons. It also has important implications for understanding the origin of firms and industries, and for the design of innovation policy. Beginning with a discussion of problems of knowledge and coordination as well as their implications for common pool environments, the book then explores instances of innovation commons and the lifecycle of innovation, including increased institutionalization and rigidness. Potts also discusses the possible implications of the commons framework for policies to sustain innovation dynamics.


Foreword - Against Prometheus
Chapter 1 We innovate together
1.1 The origin of innovation
1.2 The commons in the innovation commons
What is a commons?
An innovation commons is a knowledge commons
Common-pooling and peer-production in an innovation commons
1.3 Clunkers and Homebrew
1.4 The Republic of Letters
1.5 Why groups, why cooperation, why open?
Overview of book
Chapter 2 The innovation problem
2.1 Trade and new knowledge explain growth
2.2 The innovation problem as economic problem
The Schumpeter-Nelson-Arrow version of the innovation problem
The Hayek version of the innovation problem
2.3 The origin of the innovation trajectory
2.4 The economic problem of innovation
2.5 Innovation problem is a collective action problem
2.6 Innovation happens in groups
Discovery failure
Discovery costs
Chapter 3 Innovation is a knowledge problem
3.1 Innovation problem I - Social contract problem (McCloskey)
3.2 Innovation problem II - Distributed knowledge problem (Hayek)
3.3 Innovation problem III - Idiosyncratic risk (Williamson)
3.4 Innovation problem IV - Rules for cooperation (Ostrom)
Chapter 4 Four theories of the innovation commons
4.1 Two commons
4.2 Evolution of cooperation
4.3 Defense against enclosure
4.4 Institutional uncertainty
Chapter 5 Origin of the innovation trajectory
5.1 The zero-th phase of the innovation trajectory
5.2 The fundamental transformation
5.3 The Proto-Entrepreneur, the Dual-Discovery Problem, and the Two Commons Solution
The Proto-Entrepreneur seeks Non-Price Information
The Proto-Entrepreneur faces a Dual Discovery Problem
The Two Commons Solution
5.4 Modelling the innovation commons
5.5 The innovation commons in institutional space
5.6 The innovation commons as higher-order discovery
Chapter 6 Rules of the Innovation commons
6.1 Cooperation behind the veil of ignorance
6.2 An emergent social order
6.3 The use of society in knowledge
6.4 Problems the innovation commons must solve
Identity, Cooperation, Consent, Monitoring, Punishment and conflict, Independence, Economic problems the rules must solve
6.5 Origin of rules
6.6 Core Design Principles
6.7 Can evolution explain the innovation commons?
Evolution of cooperation
Evolution of cooperation in the commons
Is cooperation for innovation the institutional equivalent of war?
The innovation commons as higher-order discovery
Conclusion - We innovate together
Chapter 7 Lifecycle of an innovation commons
7.1 Institutions of collective innovation
Institutional varieties of collective innovation
Institutional transformations over an innovation trajectory
7.2 Origin of industry
7.3 The standard model of industry associations
7.4 A new model of industry associations
private governance for discovery of public goods
7.5 Industry associations construct niches
7.6 The demic phase of industry associations
Chapter 8 Theory of Innovation Policy
8.1 The innovation commons critique of modern innovation policy
Theory of innovation policy
Mechanisms of innovation policy
Critique of Innovation Policy
Political economy of innovation policy
Rules as policy
Innovation policy as a public and private goods problem
Innovation Policy and its discontents, a summary
8.2 Discovery Failure
8.3 Efficient Institutions of Innovation Policy
The Comparative Institutional Approach
The low social costs (and high private benefits) of innovation commons
8.4 New innovation policy
Diagnosing the innovation problem
Benefits to groups, regions, nations, and the world
This comes from civil society
The innovation economy cannot be planned
Chapter 9 Inclusive Innovation Policy
9.1 Two types of innovation policy
9.2 Innovation seen and unseen
9.3 Against innovation: theory
9.4 A better approach to innovation policy
9.5 Inclusive innovation: A new social contract
Chapter 10 Conclusion
10.1 The institutional origin of innovation
10.2 Implications for economic theory
10.3 The innovation sharing economy
Figures and Tables
Figure 1.1 Economic goods
Figure 2.1 The innovation commons as the zero-th phase of an innovation trajectory
Figure 3.1 Market (choice) versus governance (contracting) models of innovation economics
Figure 3.2 Comparative institutions of innovation contracting
Figure 7.1 Public and private ordering definitions of industry
Figure 8.1 The Institutional Possibility Frontier (source Djankov et al 2003)
Figure 8.2 Institutional possibilities of innovation policy
Figure 9.1 Two innovation policy approaches
Figure 9.2 Why friends of innovation prefer to engage government
Table 2.1 The innovation problem as market failure vs collective action
Table 2.2 Transformation costs, transaction costs and discovery costs
Table 2.3 Taxonomy of discovery costs
Table 6.1 Design rules
Table 7.1 Institutional varieties of Collective Innovation
Table 8.1 Innovation policy ranged between private and public instruments.

About the author: 

Professor of Economics, School of Economics, Finance & Marketing, RMIT University, Melbourne, Australia

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