Jones, Benjamin F., and Lawrence H. Summers (eds), ‘Introduction’, Innovation and Public Policy (Chicago, IL, 2022; online edn, Chicago Scholarship Online, 22 Sept. 2022), https://doi.org/10.7208/chicago/9780226805597.003.0001, accessed 7 Dec. 2023.

1. Introduction by Jones and Summers:

• Argument: Innovation has profoundly impacted society over the past 150 years, more than wars or laws.
• Supporting Facts/Examples: The text cites major innovations like electricity, automobiles, computers, and biotechnology. It notes how since 1870, U.S. income per capita has increased 18-fold and life expectancy has risen by 35 years.

1. Role of Innovation in Economic Growth:

• Argument: Economists recognize innovation as a key driver of economic growth and productivity.
• Supporting Facts/Examples: Studies of economic growth, industrial productivity, sectoral dynamics, and economic history are mentioned (e.g., works of Solow, Griliches, Schumpeter, Mokyr, and Rosenberg).

1. Public Support of Innovation:

• Argument: Public support for innovation is necessary because markets alone are likely to underinvest in it.
• Supporting Facts/Examples: The private sector invests about 2% of GDP in R&D, but the social returns of innovation often exceed the benefits captured by the innovator, justifying public investment.

1. Innovation and Social Returns:
   • Argument: The social returns from innovation are significant, justifying the investment in it.
   • Supporting Facts/Examples: The text highlights how fundamental scientific advances lead to practical innovations with far-reaching impacts, exemplified by the development of ridesharing services like Uber and Lyft, which rely on GPS technology underpinned by Einstein’s theory of relativity. A key statistic mentioned is a conservative estimate that $1 invested in innovation yields at least $5 in social benefits on average, demonstrating the high return on investment from innovation.
2. Innovation and Social Returns:

• Argument: Social returns from innovation are substantial, justifying investment.
• Supporting Facts/Examples: For example, ridesharing apps rely on GPS, which depends on scientific breakthroughs like Einstein’s theory of relativity. The text suggests a conservative estimate where $1 in investment returns at least $5 in benefits.

1. Market Failures in Innovation:

• Argument: Market failures in innovation investment lead to underinvestment, which public policy should address.
• Supporting Facts/Examples: The text argues that large positive spillovers from innovation justify public investment and policy support to rectify market failures.

1. Innovation and Human Capital Policy:

• Argument: Expanding the supply of inventive labor is crucial for accelerating innovation and reducing its costs.
• Supporting Facts/Examples: Early exposure to inventive careers, school-level interventions, and education policies are suggested as ways to increase the innovative labor pool.

1. Role of Immigrants in Innovation:

• Argument: Immigrants play a significant role in U.S. innovation, suggesting the need for immigration policy reforms.
• Supporting Facts/Examples: Immigrants, though 14% of the workforce, account for about a quarter of U.S. patents and startups, and a third of Nobel Prizes won in the U.S.

1. Public Support for Science:

• Argument: Public funding for basic research is crucial due to its unpredictable nature and high social returns.
• Supporting Facts/Examples: The text cites the role of government agencies like NIH and NSF, and the unpredictable but high-impact outcomes of basic research.

1. Tax Incentives for Innovation:

• Argument: Tax policies play a critical role in encouraging innovative activities.
• Supporting Facts/Examples: The effectiveness of R&D tax credits and IP boxes are discussed, along with the impact of income and corporate tax rates on innovation.

1. Government Role in Entrepreneurship:
   • Argument: Governments can enhance the effectiveness of entrepreneurship policies.
   • Supporting Facts/Examples: The text discusses principles like policy independence and private sector matching to ensure high returns on public investment.