Innovation Policy and the economy.

• Position: Conferences - NBER's fourth annual Conference on Innovation Policy and the Economy, April 15 2003

The NBER's fourth annual Conference on Innovation Policy and the Economy, organized by Research Associates Adam B. Jaffe of Brandeis University, Joshua Lerner of Harvard Business School, and Faculty Research Fellow Scott Stern of MIT, took place in Washington on April 15. The following papers were discussed:

Manuel Trajtenberg, NBER and Tel Aviv University, "Crafting Defense R and D Policy in the Anti-Terrorist Era"

Adam B. Jaffe; Richard Newell, Resources for the Future; and Robert Stavins, Harvard University, "Technology Policy for Energy and the Environment"

Kathryn Shaw, NBER and Carnegie Mellon University, "The Human Resources Revolution: Is it a Productivity Driver?"

Bronwyn H. Hall and David C. Mowery, NBER and University of California, Berkeley; Stuart J.H. Graham, University of California, Berkeley; and Dietmar Harhoff, Ludwig-Mazimilians-Universitat Munchen, "Prospects for Improving U.S. Patent Quality via Post-grant Opposition"

Jeremy Bulow, NBER and Stanford University, "The Gaming of Pharmaceutical Patents"

Trajtenberg seeks to analyze the nature of the terrorist threat following 9/11, and to explore the implications for defense R and D policy. First he reviews the defining trends of defense R and D since the cold war, and brings in pertinent empirical evidence: during the 1990s, the United States accumulated a defense R and D stock ten times larger than any other country's, and almost thirty times larger than Russia's. Big weapon systems, key during the cold war but of dubious significance since then, still figure prominently, commanding 30 percent of current defense R and D spending, vis-a-vis just about 13 percent for intelligence and antiterrorism. Trajtenberg then examines the nature of the terrorist threat, focusing on the role of uncertainty, the lack of deterrence, and the extent to which security against terrorism is (still) a public good. Drawing from a formal model of terrorism developed elsewhere, he explores these and related issues in detail. Two strategies to confront terrorism are considered: fighting terrorism at its source, and protecting individual targets, which entails a negative externality. Contrary to the traditional case of national defense, security against terrorism becomes a mixed private/public good. A key result of the model is that the government should spend enough on fighting terrorism at its source so as to nullify the incentives of private targets to invest in their own security. Intelligence...