One of the most thoughtful books in recent years on how innovation drives economic growth is Professor William Baumol’s The Free-Market Innovation Machine. In it, Professor Baumol shows that over the past 150 years, per capita incomes in a typical free market economy have risen at unprecedented levels. He argues that the engine driving this growth is the competitive pressure a well-functioning free market economy places on firms to invest in innovation and to share new technologies with the firms that can use it most efficiently
