Economic growth and economic development 558

Introduction to Modern Economic Growth by Griliches and Schmookler (1963), and most forcefully by Schmookler’s seminal study, Invention and Economic Growth Schmookler writes: “ invention is largely an economic activity which, like other economic activities, is pursued for gain.” (1966, p 206) Moreover, Schmookler argues against the importance of major breakthroughs in science on economic innovation He concludes his analysis of innovations in petroleum refining, papermaking, railroading, and farming by stating that there is no evidence that past breakthroughs have been the major factor in new innovations In particular, he argues: “Instead, in hundreds of cases the stimulus was the recognition of a costly problem to be solved or a potentially profitable opportunity to be seized ” (1966, p 199) Other studies of innovation in particular industries also reach similar conclusions, see, for example, Myers and Marquis (1969) or Langrish et al (1974) A main determinant of profitability of new innovations is the market size for the resulting product or technology A greater market size increases profits and makes innovation and invention more desirable To emphasize this point, Schmookler called two of his chapters “The amount of invention is governed by the extent of the market.” Schmokler’s argument is most clearly illustrated by the example the horseshoe He documented that there was a very high rate of innovation throughout the late nineteenth and early twentieth centuries in the ancient technology of horseshoe making, and no tendency for inventors to run out of additional improvements On the contrary, inventions and patents increased because demand for horseshoes was high Innovations came to an end only when “the steam traction engine and, later, internal combustion engine began to displace the horse ” (1966, p 93) The classic study by Griliches (1957) on the spread of hybrid seed corn in the U.S agriculture also provides support for the view that technological change and technology adoption are closely linked to profitability and market size A variety of more recent papers also reach similar conclusions An interesting paper by Newell, Jaffee and Stavins (1999) shows that between 1960 and 1980, the typical air-conditioner sold at Sears became significantly cheaper, but not much more energy-efficient On the other hand, between 1980 and 1990, there was little change 544