Markets, morals and powers of innovation

Abstract

Why is the technological performance of some industrial economies far superior to that of others? This is the question which underlies this paper and with which it seeks to engage. Two key constituents of innovative capacity are identified as effective supplies of information and skill. Within conventional economic theory the standard reason given for the under-supply of these two peculiar commodities is their shared vulnerability to the problem of ‘market failure’. In the course of the paper we strive to move significantly beyond this market failure position, as concisely stated by Kenneth Arrow, and explore at length the significant role played by politics and moral regulation in the securing of effective powers of innovation. In relation to this latter task, an opportunity arises to place Wolfgang Streeck's neo-industrial vision of Diversified Quality Production under critical scrutiny.