What Is the Innovation Problem?

In modern innovation economics, the underlying economic problems are market failure in private investment in new ideas, along with the coordination problems and the disruptive consequences of innovation. Innovation policy addresses the innovation problem with government action. Drawing upon the ideas of McCloskey, Hayek, Williamson and Ostrom, we propose a different conception of the innovation problem that emphasizes institutional governance solutions in solving a collective action problem associated with pooling distributed knowledge and other resources in order to discover the value of a new technology