Information Disclosure and the Economics of Science and Technology

Abstract

Economists understand technology less deeply than some might hope. But they understand the world of technology far better than they do the world of science (see, for example, Rosenberg, 1982, especially chapter 7). Kenneth Arrow’s famous 1962 essay, and the literature it inspired, is in good part to blame for this state of affairs. In ‘Economic Welfare and the Allocation of Resources for Inventions’, Arrow laid the foundations for modern economic analysis of research and development (R&D) activities. On that base, a large, and impressive edifice of research devoted to the economics of technological invention and innovation has since been erected. By absolute as well as comparative standards, the economics of science has remained lamentably underdeveloped. That too is traceable to the 1962 essay.

This essay owes much to the many conversations that each of us has held over the years with Kenneth Arrow. Among these we can pleasurably recall pertinent discussions of economics of information, allocation of resources to the scientific research, and the organization of communities of academic scientists. Although these pages are offered in his honour, and we would ourselves be honoured to have them accepted as an extension of the line of thought represented by his seminal 1962 paper on the allocation of resources for inventions, Arrow himself must not be blamed for the views expressed herein.

A first draft was prepared while Dasgupta was a Visiting Fellow at the Center for Economic Policy Research at Stanford University during the summer of 1984. The present version has benefited from the comments and suggestions made by Bengt Lundvall, R. C. O. Matthews, Roger Noll, Jean-Jacques Salomon, Walter G. Vincenti, and participants in the Technological Innovation Program Workshop in the Department of Economics at Stanford University during Fall Quarter, 1984. Joshua Rosenbloom provided able research assistance.