Innovation Policy and the Economy.

• Position: Conferences

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

Richard Freeman, Harvard University and NBER, and John Van Reenen, London School of Economics and NBER, "What if Congress Doubled R and D Spending on the Physical Sciences?"

Joseph Farrell, University of California, Berkeley, "Intellectual Property as a Bargaining Environment"

Douglas Lichtman, University of California, Los Angeles, "Pricing Patents"

Alvin Roth, Harvard University and NBER, "What Have We Learned from Market Design?"

Peter Cramton, University of Maryland, "Innovation and Market Design"

Many business, academic, and scientific groups have recommended that the Congress substantially increase R and D spending in the near future. President Bush's American Competitiveness Initiative calls for a doubling of spending over the next decade in selected agencies that deal with the physical sciences, including the National Science Foundation. Freeman and Van Reenen consider the rationale for increased R and D spending in the context of the globalization of economic activity. To assess the likely consequences of a large increase in R and D spending, they examine how the 1998-2003 doubling of the NIH budget affected the bio-medical sciences. They find that the rapid increase and ensuing deceleration in NIH spending created substantial adjustment problems in the market for research, particularly for younger investigators, and failed to address long-standing problems with scientific careers that are likely to deter many young persons from choosing a scientific career. They argue that funding agencies should tilt their awards to younger researchers on the grounds that any research project does two things: it produces knowledge and adds to the human capital of researchers, which has greater value for younger persons because of their longer future career life-spans.

Patent (and other intellectual property) policy anticipates and relies on firms negotiating "in the shadow of the law" when it comes to licensing and using existing patents, and the economics of that process have been studied extensively. But there has been much less study of private agreements that go deeper than that and agree in advance on how future patents, or...