The Subjective Political Economy of the Innovation Commons
20 Pages Posted: 22 Nov 2016 Last revised: 22 Mar 2017
Date Written: March 22, 2017
How can private governance in innovation commons (Allen and Potts 2016a, 2016b) be reconciled with the mainstream conception of innovation and entrepreneurship as suffering a market failure requiring state intervention? This paper situates the private collective action governance of entrepreneurial discovery within its political economy context using the methods of new comparative economics. The institutional possibility frontier (IPF) — a framework for understanding comparative institutional choice as a trade-off between the costs of disorder and dictatorship (Djankov et al. 2003; Shleifer 2005) — extended and applied to answer this question. Subjective costs are incorporated into the IPF and thereby into the political economy choice of the governance of innovation resources. The result is a subjective innovation institutional possibility frontier. Placing the findings of this dissertation within this framework implies the potential over-weighting of costs of ‘disorder’ in governing entrepreneurial resources in the innovation commons. This discrepancy also implies that ‘ideas’ and ‘rhetoric’ have a role in developing a robust and effective institutional mix for innovation policy, which is itself a discovery process over subjective costs.
Keywords: Innovation policy, Institutional Possibility Frontier, subjective political economy, Austrian economics
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