Building Effective “Innovation Systems” Versus Dealing with “Market Failures” as Ways of Thinking about Technology Policy

In this essay I compare two different theoretical frameworks in economics for orientinganalysis of issues in technology policy. One is a neoclassical framework that sees appropriatepolicies as dealing with “market failures”. The other framework is provided by an evolutionaryand institutional approach to economic analysis that sees appropriate policies as building ormaintaining an effective “innovation system”. It should be no surprise that I believe the latterframework is the more useful one. I begin by laying out the key general differences betweenthe two broad theoretical frameworks, and how they lead to different perspectives on technology policy....