Economics 354

Course Content

This course examines the effects of science and technology on the economic system, and the economic incentives underlying scientific research and technological development. The focus is on economic innovation: the application of new production methods to economic activity and the introduction of new products. The subject matter of this course is closely related to that of Economics 454: Economic Growth. The growth course emphasizes the macroeconomic implications of technological progress resulting from innovation; this course looks at the microeconomic underpinnings of the innovation process. The growth course relies extensively on formal mathematical modeling. Analysis of the theories we study in this course uses mathematics incidentally, but most of the reading involves little or no mathematics.

Class Format

This class will meet for three 50-minute sessions per week, Mondays, Wednesdays, and Fridays at 12:00 noon in Vollum 120. Class sessions will usually be conducted as conferences. Extensive student participation is expected. We may have occasional guest speakers (scientists and managers) from the science and technology community, who will talk about their roles in technological innovation. Depending on availability, one or more of these talks may be scheduled in the evening.

Prerequisites

The only prerequisite is Economics 201: Introduction to Economic Analysis. We will use mathematical analysis infrequently in this class. When mathematical models are analyzed, students lacking the calculus tools used in the readings are encouraged to read "between the equations" to develop an understanding of the economic points the author is making.

Office Hours

The instructor will hold formal office hours in Vollum 229 (telephone extension 7308) on Mondays and Wednesdays from 1:30 to 3:00. Feel free to make an appointment or to drop in at other times if these hours are not convenient for you. If you drop in at a bad time, we can schedule an appointment for later. The best way to communicate with the instructor outside of class is via electronic mail. Send email to parker@reed.edu. [Note: Do not send email to jparker or parkerj, these go to other people!

Required Work

Homework and Short Essays: There will be occasional short assignments (perhaps three during the semester) related to the material that we are covering. These may either be problem sets or short essays.

Exams: There will be a mid-term exam and a final exam for this course. Both exams will be essay-oriented and may be partially or wholly take-home. The final exam is tentatively scheduled for the morning of Tuesday, December 16.

Daily Class Preparation and Summaries: As you read the assigned material for each class session, you are to prepare a brief set of questions or issues that you found (1) important, (2) interesting, (3) controversial, or (4) difficult in the reading. These need not be long; they can range from a handful of one-sentence bullet points to a page-long list of issues with short descriptions. These summaries are to be sent to me by email (as an email message or a Word or text attachment) before the class in which the material is discussed. I will review at least some of your submissions before class and may try to steer the class discussion toward common points of interest or confusion. As the discussion proceeds, I will often ask students from the class to raise points for discussion from their lists. 

In an ideal world, every students would read all of the readings for every class. While Reed approaches this ideal world more closely than most colleges and universities, I recognize that there will be times when some students are unable to complete all of the reading. It is acceptable to miss occasional submissions or to occasionally submit incomplete ones (that cover only part of the reading). However, if the frequency of missing approaches one-third to one-half of the class sessions, you are not fulfilling your obligation on this component of the course and this will be reflected in your grade.

In preparing for class, I suggest that you follow the recommendations in the instructor's guide to reading economics papers. This will help you focus on what is important in your reading and preparation.

Simulation Experiment: All students will participate in an extended simulation experiment on technological innovation outside of class. Participation involves making decisions about R&D policy for a hypothetical firm that you manage. Each day before noon, you will receive an update via electronic mail. You will be asked to respond to this information by making decisions about your R&D policies for the next period. These decisions must be submitted electronically by 6am the following day. (Weekends will count as a single day: decisions are due by 6am, Monday through Saturday, with information sent out by noon that day.) Failing to respond will not be penalized directly, but will be interpreted as undertaking no new actions in the period, which may be a risky innovation strategy. The experiment will continue for at least several weeks. There will be a short written assignment or perhaps an exam question relating to the experiment.

Grading

Grades will be based on all information the instructor has about your level of understanding of the subject matter. This includes evidence from exams, assignments, daily summaries, class and experiment participation, and individual discussions.

Assigned Readings

We will read a fairly large amount of material from a variety of sources. Much of the reading is from books. We will read multiple chapters from each of the following books:

• Baumol, William J. 2010. The Microtheory of Innovative Entrepreneurship. Princeton, N.J.: Princeton University Press.
• Freeman, Chris, and Luc Soete. 1997. The Economics of Industrial Innovation, 3rd ed. Cambridge, Mass.: MIT Press.
• Scotchmer, Suzanne. 2004. Innovation and Incentives. Cambridge, Mass.: MIT Press.
• Jaffe, Adam B., and Josh Lerner. 2004. Innovation and Its Discontents: How Our Broken Patent System Is Endangering Innovation and Progress, and What to Do about It," Princeton, N.J.: Princeton University Press.
• Mokyr, Joel. 1990. The Lever of Riches: Technological Creativity and Economic Progress, New York: Oxford University Press.
• von Hippel, Eric. 1988. The Sources of Innovation. Oxford and New York: Oxford University Press.
• Foray, Dominique. 2004. The Economics of Knowledge. Cambridge, Mass.: MIT Press.
• Gompers, Paul A., and Josh Lerner. 2001. The Money of Invention: How Venture Capital Creates New Wealth. Cambridge: Mass.: Harvard Business School Press.
• Mowery, David C., and Nathan Rosenberg. 1998. Paths of Innovation: Technological Change in 20th-Century America, Cambridge and New York: Cambridge University Press.
• Rosenberg, Nathan. 1982. Inside the Black Box: Technology and Economics. Cambridge and New York: Cambridge University Press.
• Goldin, Claudia, and Lawrence F. Katz. 2008. The Race Between Education and Technology. Cambridge, Mass.: Belknap Press of Harvard University Press.
• Lester, Richard K., and Michael J. Piore. 2004. Innovation, The Missing Dimension. Cambridge, Mass.: Harvard University Press.

Any of these books can be ordered from the Reed Bookstore or from online sources if you want your own copy;. Most cost less than $50 (new) and some are under $30. Multiple copies of all of these books will be on reserve in the Reed Library.

Beyond these books, there are many other readings from books and journals that are either assigned or recommended. All of these will be available in printed form through library reserves. Some readings are available through online sources and have links from the reading list.