Thursday

 Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.

PART 9 The Real Economy in the Long Run
Chapter 25 of 36 Production and Growth
Section 17 of 22
…
Things government can promote and strengthen to increase productivity and living standards include:
1· saving and investment
2· investment from abroad
3· education
4· health and nutrition
5· property rights and political stability
6· free trade
7· research and development
8· population growth
…
7· Research and development
Advancement of technological knowledge is the main reason living standards are higher today than a century ago.
Most technological advances come from firms and individual inventors private efforts and research.
There is a public interest in promoting these efforts.
To a large extent knowledge is a public good.
Once one person makes a discovery it enters society's pool of knowledge and others can use it.
Just as government has a role in providing public goods such as national defense, it also has a role in encouraging research and development of new technologies.
…
The U.S. government a century ago sponsored research about farming methods and advised farmers how to best use their land.
Recently the U.S. government has supported aerospace research and the United States has become a leading producer of rockets and planes.
The government encourages knowledge advances through
· research grants
· tax breaks for firms doing research and development
· the patent system
…
When a firm or person invents a new product, the inventor may apply for a patent.
If the product is judged truly original, the government awards a patent giving the inventor exclusive property rights for a specified number of years, typically 20 years.
A patent makes a new idea a private good.
By government granting a patent and thereby monopoly power to inventors
the inventors can reap economic profits from the invention which enhances the incentive and provides a reward for doing research and development.
…
government grants a patent
seifu ga tokkyo o fuyo suru

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