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 coauthored is "Productivity and American Leadership".

• Preface vii CHAPTER 1: Introduction: The Engine of Free-Market Growth 1 PART I: THE CAPITALIST GROWTH MECHANISM CHAPTER 2: The "Somewhat Optimal" Attributes of Capitalist Growth: Oligopolistic Competition and Routinization of Innovation 19 CHAPTER 3: Oligopolistic Rivalry and Routinization to Reduce Uncertainty 30 CHAPTER 4: Oligopolistic Rivalry and Routine Innovation Spending: Theory of the Engine of Unprecedented Capitalist Growth 43 CHAPTER 5: Independent Innovation in History: Productive Entrepreneurship and the Rule of Law 55 CHAPTER 6: Voluntary Dissemination of Proprietary Technology: Private Profit, Social Gain 73 CHAPTER 7: Oligopolistic Rivalry and Markets for Technology Trading 93 CHAPTER 8: Tradeoff: Innovation Incentives versus Benefits to Others (Distributive Externalities) 120 PART II: INTEGRATION OF INNOVATION INTO THE MAINSTREAM OF MICROTHEORY CHAPTER 9: Oligopolistic Competition, Pricing, and Recoupment of Innovation Outlays 151 CHAPTER 10: Microeconomic Theory of Industrial Organization in the "Innovation-Machine" Economy 161 CHAPTER 11: Recouping Innovation Outlays and Pricing Its Products: Continued 183 CHAPTER 12: Models of Optimal Timing of Innovation 199 CHAPTER 13: Licensing for Profit: Efficiency Implications 215 PART III: ON THE MACRODYNAMICS OF CAPITALISM CHAPTER 14: Capitalism's Unique Innovation Machine: Historical Evidence 245 CHAPTER 15: Macroeconomic Models and Relationships That May Limit Growth 262 CHAPTER 16: Feedback: Innovation as a Self-Nourishing Process 284 Bibliography 299 Index 307

Honorable Mention for the 2003 Award for Best Professional/Scholarly Book in Economics, Association of American Publishers "Mr. Baumol's contribution is not to emphasize the impact of innovation but to pinpoint how competition forces companies to make innovation routine... The traditional analysis ... says that capitalism blunders at generating innovation over the long run. Mr. Baumol ... reverses this presumption... [He] tells a tale rich in details about the market's use of collaboration to overcome problems of innovation. Along the way he turns standard analysis upside down."--Michael M. Weinstein, New York Times "A brilliant book... What makes capitalism uniquely successful is the built-in pressure to generate new products and processes. Provided companies are forced to compete, the market will find a way to generate and diffuse an unending stream of innovations."--Martin Wolf, Financial Times "The book could not be more timely."--David Propson, New York Law Journal "Over the past 50 years, William Baumol has made groundbreaking contributions to a wide range of economic fields, including antitrust, the study of productivity, and the nature of growth... 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 "In this fine volume [Baumol] challenges readers to rethink entirely the conventional wisdom concerning the nature and benefits of the capitalist (or free market) system... [It is] readable, challenging, stimulating."--Choice "For managers looking for a big picture view, this is a useful account. And while it deflates the romantic view of the maverick innovative company, the book justly celebrates the positive results of this routinized 'innovation machine'--the unprecedented growth rates we've had under capitalism."--Harvard Business Review "You cannot fault Baumol for being unambitious. In this fine volume he 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 "Professor Baumol is a giant in the field of economics... This book displays both his prodigious intellect and the sweep of his scholarship... [T]his is an important book."--Ashish Arora, Journal of Technology Transfer

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 coauthored is "Productivity and American Leadership".

• Preface vii CHAPTER 1: Introduction: The Engine of Free-Market Growth 1 PART I: THE CAPITALIST GROWTH MECHANISM CHAPTER 2: The "Somewhat Optimal" Attributes of Capitalist Growth: Oligopolistic Competition and Routinization of Innovation 19 CHAPTER 3: Oligopolistic Rivalry and Routinization to Reduce Uncertainty 30 CHAPTER 4: Oligopolistic Rivalry and Routine Innovation Spending: Theory of the Engine of Unprecedented Capitalist Growth 43 CHAPTER 5: Independent Innovation in History: Productive Entrepreneurship and the Rule of Law 55 CHAPTER 6: Voluntary Dissemination of Proprietary Technology: Private Profit, Social Gain 73 CHAPTER 7: Oligopolistic Rivalry and Markets for Technology Trading 93 CHAPTER 8: Tradeoff: Innovation Incentives versus Benefits to Others (Distributive Externalities) 120 PART II: INTEGRATION OF INNOVATION INTO THE MAINSTREAM OF MICROTHEORY CHAPTER 9: Oligopolistic Competition, Pricing, and Recoupment of Innovation Outlays 151 CHAPTER 10: Microeconomic Theory of Industrial Organization in the "Innovation-Machine" Economy 161 CHAPTER 11: Recouping Innovation Outlays and Pricing Its Products: Continued 183 CHAPTER 12: Models of Optimal Timing of Innovation 199 CHAPTER 13: Licensing for Profit: Efficiency Implications 215 PART III: ON THE MACRODYNAMICS OF CAPITALISM CHAPTER 14: Capitalism's Unique Innovation Machine: Historical Evidence 245 CHAPTER 15: Macroeconomic Models and Relationships That May Limit Growth 262 CHAPTER 16: Feedback: Innovation as a Self-Nourishing Process 284 Bibliography 299 Index 307

Honorable Mention for the 2003 Award for Best Professional/Scholarly Book in Economics, Association of American Publishers "Mr. Baumol's contribution is not to emphasize the impact of innovation but to pinpoint how competition forces companies to make innovation routine... The traditional analysis ... says that capitalism blunders at generating innovation over the long run. Mr. Baumol ... reverses this presumption... [He] tells a tale rich in details about the market's use of collaboration to overcome problems of innovation. Along the way he turns standard analysis upside down."--Michael M. Weinstein, New York Times "A brilliant book... What makes capitalism uniquely successful is the built-in pressure to generate new products and processes. Provided companies are forced to compete, the market will find a way to generate and diffuse an unending stream of innovations."--Martin Wolf, Financial Times "The book could not be more timely."--David Propson, New York Law Journal "Over the past 50 years, William Baumol has made groundbreaking contributions to a wide range of economic fields, including antitrust, the study of productivity, and the nature of growth... 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 "In this fine volume [Baumol] challenges readers to rethink entirely the conventional wisdom concerning the nature and benefits of the capitalist (or free market) system... [It is] readable, challenging, stimulating."--Choice "For managers looking for a big picture view, this is a useful account. And while it deflates the romantic view of the maverick innovative company, the book justly celebrates the positive results of this routinized 'innovation machine'--the unprecedented growth rates we've had under capitalism."--Harvard Business Review "You cannot fault Baumol for being unambitious. In this fine volume he 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 "Professor Baumol is a giant in the field of economics... This book displays both his prodigious intellect and the sweep of his scholarship... [T]his is an important book."--Ashish Arora, Journal of Technology Transfer

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 coauthored is "Productivity and American Leadership".

• Preface vii CHAPTER 1: Introduction: The Engine of Free-Market Growth 1 PART I: THE CAPITALIST GROWTH MECHANISM CHAPTER 2: The "Somewhat Optimal" Attributes of Capitalist Growth: Oligopolistic Competition and Routinization of Innovation 19 CHAPTER 3: Oligopolistic Rivalry and Routinization to Reduce Uncertainty 30 CHAPTER 4: Oligopolistic Rivalry and Routine Innovation Spending: Theory of the Engine of Unprecedented Capitalist Growth 43 CHAPTER 5: Independent Innovation in History: Productive Entrepreneurship and the Rule of Law 55 CHAPTER 6: Voluntary Dissemination of Proprietary Technology: Private Profit, Social Gain 73 CHAPTER 7: Oligopolistic Rivalry and Markets for Technology Trading 93 CHAPTER 8: Tradeoff: Innovation Incentives versus Benefits to Others (Distributive Externalities) 120 PART II: INTEGRATION OF INNOVATION INTO THE MAINSTREAM OF MICROTHEORY CHAPTER 9: Oligopolistic Competition, Pricing, and Recoupment of Innovation Outlays 151 CHAPTER 10: Microeconomic Theory of Industrial Organization in the "Innovation-Machine" Economy 161 CHAPTER 11: Recouping Innovation Outlays and Pricing Its Products: Continued 183 CHAPTER 12: Models of Optimal Timing of Innovation 199 CHAPTER 13: Licensing for Profit: Efficiency Implications 215 PART III: ON THE MACRODYNAMICS OF CAPITALISM CHAPTER 14: Capitalism's Unique Innovation Machine: Historical Evidence 245 CHAPTER 15: Macroeconomic Models and Relationships That May Limit Growth 262 CHAPTER 16: Feedback: Innovation as a Self-Nourishing Process 284 Bibliography 299 Index 307

Honorable Mention for the 2003 Award for Best Professional/Scholarly Book in Economics, Association of American Publishers "Mr. Baumol's contribution is not to emphasize the impact of innovation but to pinpoint how competition forces companies to make innovation routine... The traditional analysis ... says that capitalism blunders at generating innovation over the long run. Mr. Baumol ... reverses this presumption... [He] tells a tale rich in details about the market's use of collaboration to overcome problems of innovation. Along the way he turns standard analysis upside down."--Michael M. Weinstein, New York Times "A brilliant book... What makes capitalism uniquely successful is the built-in pressure to generate new products and processes. Provided companies are forced to compete, the market will find a way to generate and diffuse an unending stream of innovations."--Martin Wolf, Financial Times "The book could not be more timely."--David Propson, New York Law Journal "Over the past 50 years, William Baumol has made groundbreaking contributions to a wide range of economic fields, including antitrust, the study of productivity, and the nature of growth... 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 "In this fine volume [Baumol] challenges readers to rethink entirely the conventional wisdom concerning the nature and benefits of the capitalist (or free market) system... [It is] readable, challenging, stimulating."--Choice "For managers looking for a big picture view, this is a useful account. And while it deflates the romantic view of the maverick innovative company, the book justly celebrates the positive results of this routinized 'innovation machine'--the unprecedented growth rates we've had under capitalism."--Harvard Business Review "You cannot fault Baumol for being unambitious. In this fine volume he 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 "Professor Baumol is a giant in the field of economics... This book displays both his prodigious intellect and the sweep of his scholarship... [T]his is an important book."--Ashish Arora, Journal of Technology Transfer