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Understanding Innovation Economics: What Government Interventions Should (not) Be Taken?

7 Juli 2023   18:46 Diperbarui: 7 Juli 2023   18:49 614
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Figure 3. The comparison between centralized and decentralized innovation (Source: Haskel's Lecture Video at the Institute for Policy Research)

The Wright's first aeroplane from ground to air took off 

A machine that was much, much heavier than air 

To the cheers of the crowd, up and airborne became...

- The Wright Brothers by Pacific Hernandez

Hold on a minute! What you've just read above is the common oversimplification about the concept of innovation, yet still a beautiful poem. To grasp the concept of innovation, we must first let go of the idea of a genius inventor who works alone, invents something amazing, and becomes wealthy from it. Innovation is not just a single moment of brilliance. Instead, innovation is:

  • A process. It plays a fundamental role in bringing about new developments and advancements, and it is a concept that is continuously evolving.

  • Also Systemic. Just like the 828 passengers from Netflix's Manifest expressed, "It's all connected!" innovation follows the same principle. It consists of networks of users, private firms, individuals, and government bodies.

Rather than turning the innovation narrative into a fantastical superhero story with simplified moments of sudden revelation and a perfect ending, the truth is that a host of problems often arise afterwards, as evidenced below.

Back in 1998, 39 multinational pharmaceutical companies, including Bristol-Myers Squibb and Merck, filed a lawsuit against the South African government -- which at that time had the highest HIV rates at around 5 million people (1 in 10 of the South Africans were HIV positive). Their aim was to prevent the country from importing affordable generic AIDS drugs from various sources worldwide. This action sparked widespread street protests in South Africa, with AIDS activists confronting then-US Vice President Al Gore, who had been involved in negotiations favoring the pharmaceutical companies. Chanting "Gore's greed kills!", the activists voiced their discontent. However, in September 1999, the US government, which previously had been big pharma's strongest ally, stated that it would not impose sanctions on impoverished countries affected by the HIV epidemic, even if these countries violated US patent laws, as long as they complied with international treaties. The pharmaceutical giants countered this by deploying numerous intellectual property rights lawyers to advocate for their cases. As a result, they took drastic measures such as closing factories in South Africa and canceling planned investments.

Innovation At A Glance: Basic Concepts

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