Thinking About Economic Progress : Arrow and Schumpeter in Time and Space

Although there are several variants of innovation economics at play in the current antitrust literature, the federal judiciary and enforcement agencies as well as a number of Chicago Schoolers have recognized the importance of policy they all associate with the economist Joseph Schumpeter, policy they understand as dependent on the stability and profits of large firms and perhaps even monopoly. At the same time, IPR policy analysts have claimed their own patron saint – the Nobel Laureate Kenneth Arrow, whose analysis of incentives to invest in invention is widely taken to show that competition does a better job than monopoly in producing new knowledge. Notwithstanding these caricatured understandings of both economists' views, neither economist is wholeheartedly committed either to competition or to monopoly as the market structure best suited to promoting progress. And neither economist categorically views open competition or IP monopolies as the best means to achieve economic growth. Rather, each economist developed an analysis that is more complex when understood in the framework of time and space. Indeed, Arrow's landmark paper, published in 1962, concludes with the view that public investment would produce optimal levels of invention, at least in some important circumstances, while Schumpeter sees public ownership as similar, in significant ways, to the research environment of large bureaucratic corporations. This paper explores the landmark writings of Schumpeter and Arrow within the temporal and spatial frameworks they adopted to analyze their conditions for promoting economic progress. In a coda, the paper concludes with some comments about the assumption by both writers that economic progress simply means growth, an assumption questioned in different ways by economists Edward Chamberlin and Brian Arthur