Education for Innovation: Entrepreneurial Breakthroughs vs. Corporate Incremental Improvements

This paper explores the following hypotheses on the appropriate education for innovating entrepreneurship: a) breakthrough inventions are contributed disproportionately by independent inventors and entrepreneurs, while large firms focus on cumulative, incremental (and often invaluable) improvements; b) education for mastery of scientific knowledge and methods is enormously valuable for innovation and growth, but can impede heterodox thinking and imagination; c) large-firm R&D requires personnel who are highly educated in extant information and analytic methods, while successful independent entrepreneurs and inventors often lack such preparation; d) while procedures for teaching current knowledge and methods in science and engineering are effective, we know little about training for the critical task of breakthrough innovation.

"Side Effects of Progress, How Technological Change Increases the Duration of Unemployment"

Why does a dynamic growing economy have a persistent long-term unemployment problem? Research Associates William J. Baumol and Edward N. Wolff have isolated one cause. Although technological change, the engine of growth and economic progress, may not affect or may even increase the total number of jobs available, the fact that it creates a demand for new skills and makes other skills obsolete can cause an increase in the overall rate of unemployment and the length of time during which an unemployed worker is between jobs. It goes without saying that society will not choose to slow technical innovation, but the task for policy is to find ways to offset the problems caused by this rising level and duration of unemployment.

Entrepreneurship, Innovation and Growth: The David-Goliath Symbiosis

Investment in innovation in industrialized economies increasingly is taken over by large firms that operate their own R&D divisions and transform technological change into a routine bureaucratized process. Powerful competitive forces require firms to do this for survival. But such routinized innovation has not replaced the individual independent innovator, the traditional source of technical change. The latter have tended to provide the more revolutionary breakthroughs, to which corporate research has added reliability, enhanced power and ease of utilization. Thus, both make a vital contribution to growth. While the results of big business research are often less spectacular, they have typically added up to very substantial improvements

Does the Constitution Require That We Kill the Competitive Goose? Pricing Local Phone Services to Rivals

This Article concludes a series by these authors and Professors J. Gregory Sidak and Daniel F. Spulber, published last year in this journal. Here, Professors Baumol and Merrill address the issues surrounding the pricing of local phone services to long distance rivals, clarifying their points of agreement and disagreement with Sidak and Spulber. In their previous articles, Sidak and Spulber argued that the movement toward competition in local telephone service should be accompanied by substantial compensation to existing local telephone carriers, a view that Baumol and Merrill do not share. Rather, they note three points of disagreement between Sidak and Spulber and themselves. First, they maintain that Sidak and Spulber use an incorrect formula to determine whether the transition from regulated monopoly to competition requires compensation. Second, they argue that neither the Compensation Clause nor the regulatory contract requires compensation to take place ex ante. Finally, they do not believe that the magnitude of fixed and common costs will be significant in local telephony

Deregulatory Takings, Breach of the Regulatory Contract, and the Telecommunications Act of 1996

Professors Baumol and Merrill reply to Deregulatory Takings and Breach of the Regulatory Contract, published last year in this Review, which argued that the price incumbents may charge potential competitors for bottleneck facilities under the Telecommunications Act of 1996 should be based not on forward-looking costs but on historical costs. Professors Baumol and Merrill contend that pricing with reference to historical costs would depart from the principles called for by economic analysis for efficient pricing and they further argue that neither the Takings Clause nor the regulatory contract precludes the use of forward-looking costs in setting prices. If a taking or regulatory breach does occur, they suggest that the proper remedy is not to interfere with the pricing decisions readied by regulators but to make the appropriate compensation, if any, after those decisions have been put into effect. Support for these legal observations is reinforced with the economic contentions that the competition introduced by the Act will have minimal effect upon incumbents which will generally receive a very valuable quid pro quo for any damage to their legitimate interests. Finally, they argue that compensating any firm for the loss of monopolistic prices threatens to undermine the most basic purpose of the Act; which is to bring the benefits of competition and competitive pricing to all electronic communications markets