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Description of The Free-Market Innovation Machine

Why has capitalism produced economic growth that so vastly dwarfs the growth record of other economic systems, past and present? Why have living standards in countries from America to Germany to Japan risen exponentially over the past century? William Baumol rejects the conventional view that capitalism benefits society through price competition - that is, products and services become less costly as firms vie for consumers. Where most others have seen this as the driving force behind growth, he sees something different - a compound of systematic innovation activity within the firm, an arms race in which no firm in an innovating industry dares to fall behind the others in new products and processes, and inter-firm collaboration in the creation and use of innovations. While giving price competition due credit, Baumol stresses that large firms use innovation as a prime competitive weapon. However, as he explains it, firms do not wish to risk too much innovation, because it is costly, and can be made obsolete by rival innovation.
So firms have split the difference through the sale of technology licenses and participation in technology-sharing compacts that pay huge dividends to the economy as a whole - and thereby made innovation a routine feature of economic life. This process, in Baumol's view, accounts for the unparalleled growth of modern capitalist economies. Drawing on extensive research and years of consulting work for many large global firms, Baumol shows in this original work that the capitalist growth process, at least in societies where the rule of law prevails, comes far closer to the requirements of economic efficiency than is typically understood. Resounding with rare intellectual force, this book marks a milestone in the comprehension of the accomplishments of our free-market economic system - a new understanding that, suggests the author, promises to benefit many countries that lack the advantages of this immense innovation machine.

Title Information

ISBN:

9780691096155

Pages:

336 pages

Format:

Hardback

Product Code:

149550

Publisher:

Princeton University Press

Published:

01/04/2002

Edition:

illustrated edition

Press and Industry Reviews

The book could not be more timely. -- David Propson New York Law Journal A brilliant book. -- Martin Wolf Financial Times At 80, and still going strong, he is among the last working members of the great generation of post-World War II economists. Business Week [A] fine volume... [It is] readable, challenging, stimulating. Choice While it deflates the romantic view of the maverick innovative company, the book justly celebrates ... the unprecedented growth rates [of] capitalism. Harvard Business Review [Baumol] challenges readers to rethink entirely the conventional wisdom concerning the nature and benefits of the capitalist (or free market) system... Readable, challenging, stimulating. Choice An important new book. -- David Crane Toronto Star This book displays both [Baumol's] prodigious intellect and the sweep of his scholarship... [T]his is an important book. -- Ashish Arora Journal of Technology Transfer;

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About William J. Baumol

William J. Baumol is Senior Research Economist and Professor of Economics, Emeritus, at Princeton University and Professor of Economics at New York University. The author, coauthor, or editor of more than thirty books, with translations into more than a dozen languages, Baumol has consulted for some of America's best-known firms. His books include Microeconomics, Superfairness, and Entrepreneurship, Management and the Structure of Payoffs; among the books he has coedited is Productivity and American Leadership.