To what extent do market failures result in a similar optimal allocation of resources to the innovation process Essay Example

To what extent do market failures result in a similar optimal allocation of resources to the innovation process Essay Innovation has a crucial impact on the standards of living in particular economy. It is generally agreed that research and innovation are the main sources of growth and job creation in market economies. i. e. output is increased through greater acquisition of knowledge. Subsequently, 2 things matter for economic growth: savings and the state of the productive knowledge (i. e. shows how productivity the extra capital will be used). The production function diagram below can illustrate this Where labour productivity per worker experiences diminishing marginal returns This diagram shows how economic growth can be realised by accumulation of capital and/or higher levels of knowledge. It should be noted that productivity growth is the difference between the growth of inputs and the growth of outputs and that technological progress is measured as residual-so that any problems with measuring inputs or outputs, will be transferred onto measuring technological progress. There are 2 movements on the diagram: a to b due to the accumulation of capital and b to c due to the growth of productivity or technical progress. The difficulty with this is that if knowledge had not changed, the movement from a to b will not have been experienced. The only reason capital has been accumulated is due to the increase in technical progress. Generally speaking technological progress generates new wealth in two ways: either through innovative process which help to increase the productivity of labour and capital and thus enable production levels to increase and/or to save available resources, or through innovative products which lead to the creation of new markets and industries and give a boost to investment and create jobs, Hence the principal source of growth is innovation. A general consensus states a positive incidence of technological progress on growth, competitiveness and employment. We will write a custom essay sample on To what extent do market failures result in a similar optimal allocation of resources to the innovation process specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on To what extent do market failures result in a similar optimal allocation of resources to the innovation process specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on To what extent do market failures result in a similar optimal allocation of resources to the innovation process specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Enormous amounts of money are spent on innovation and studies reveal that the economic return on innovation is very high in relative terms. Reviewing the diagram on returns to innovation below can see this. Graph2 The demand curve indicates the marginal valuations of this particular product and it is assumed that a single monopoly supplier produces the goods with constant marginal costs c and sets prices above marginal costs at P. The private rate of return is B as the firm exploits its product and receives a private rate of return extended over time against the cost of innovation. The social rate of return is larger as it is the sum of the private return and consumer surplus i. e. (A+D). Better measures can be seen empirically as Nadiri (1993) concluded that the private return on innovation was usually around 20 to 30% and the average social return close to 50%. This begs the question, why are such less resources devoted to innovation even though the rate of returns to society is so high? There are many reasons to this, which I shall discuss later, but crucially it depends on the view of markets and competition. There are 3 types of views: classical (emphasis on the rate of return equalises at the competition level), the dominant view of neoclassical state of equilibrium underpinning welfare economics and economic allocation) and the dynamic view of Austrians (looks at markets as creative and focuses on innovation as an economic process and entrepreneurs as key agents). In the early 1960s various specialist agreed perfect competition was incompatible with innovation as it required huge resources and exploitation of innovation suspected increasing returns. It was typically found that industries that regarded innovation as important were concentrated industries not perfectly competitive which were consistent with Pareto optimality, Hence the reason why neoclassical firms did not optimally allocate resources to organise and fund innovation. Numerous authors like Arrow (1960), Mansfield (1968) and Nordhaus (1969) pointed to market failure- that prevent the attainment of pareto equilibria by violating one or other of the conditions for perfect competition and explained that absence of the government in the free operation of the market would lead companies to under invest in basic innovation. Market failure may be explained in terms of four aspects: uncertainties (missing markets), appropriability, indivisibility and public goods. The innovation process both generates and is influenced by uncertainty and this aspect of market failure is particularly damaging to the possibility of a Pareto-efficient allocation of resources to invention and innovation. It is the inherent level of uncertainty, which most distinguishes an R+D project from a traditional industrial investment project. Innovation entails numerous scientific, technological and commercial uncertainties, which make it difficult for financial bankers to forecast results and monitor their investment project. Put briefly, missing or future markets for contingent claims in an uncertain world do not exist in any sense sufficiently for individuals to take risks in an optimal fashion. In addition to the uncertainties, providers of capital face another major difficulty: this derives from the intangible nature of innovation and the fact that investment cost is not recoverable. Consequently, the percentage of innovation projects, which are successful and generate a return on a large investment, is usually low. Thus financial backers insist on real guarantees to cover themselves if the investment fails. It is difficult to ascertain optimal levels of innovation in an uncertain world due to the existence of information asymmetries; Stiglitz (1991) makes it clear, that the resulting unequal distribution of knowledge creates problems of adverse selection and moral hazard, which deny the possibility of Pareto-optimality. Fundamentally, innovation and information asymmetries can be regarded as one, stating not only a trade-off between static and dynamic efficiency but also that innovation and pareto-optimality are incompatible. Another market failure is appropriation externalities. They have always been recognised as a major constraint on the incentives to innovate, as investors cannot appropriate to themselves the full amount of profits, which result from their funding of research and innovative activity. Furthermore, applied and/or industrial R+D is not altogether free of this imperfect appropriablilty of profits, which investors have. Despite advances in intellectual property rights in recent years, innovative processes and products developed by companies can easily be imitated by others and in some cases with relatively little effort and capital cost. For instance, studies in Europe put the total losses as a result of imitations alone of EU companies at nearly 50billion ECU in 1994. This led to lost earnings and huge numbers of job losses. However efficient the level of protection afforded by international law, there is no question of investors being able to appropriate the entire profits from their investment in innovation; not only for the reasons stated already but also because of the powerful external factors affecting innovation activities and the indirect spin-offs from them. As, had been stated earlier, the social rate of return may exceed private rates of return, private investors only receive a small return on their investment, and therefore it is necessary for governments to act to close the gap between private and social yields on technology investment. Next, the indivisible nature of the innovation process constitutes another major obstacle to optimum allocation of private capital. If R+D activity were perfectly divisible and it were possible to predict the social and private impact of each project, it would no doubt have been easier to separate funds required between public and private capital. However, phases of the innovation process are independent and the results are often unpredictable. Also indivisibilities inherent to the innovation process imply that there are increasing returns to the exploitation of technology and that it will be necessary for firms to retain some market power if they are to recover the costs to innovation. At best, an innovating industry can be monopolistically competitive, and from this different angle, Pareto efficiency and innovation are seen to be incompatible. The, last case regards science and technology as public goods i. e. non-rival, in the sense that the marginal cost of reproducing these is negligible and their owners exercise little control over the way in which they are used. In the free market economy it makes sense for the government to find the production and/ or dissemination of scientific knowledge. But this justification of the government role in funding basic research has been challenged by recent innovative approaches because the public good attributes of scientific and technological knowledge implies that market solution to the allocation of resources to innovation will not be efficient. Economists have identified other sources of market failure such as transaction costs, the national features of some corporate governance models, the reluctance of monopolies to fund innovative work, etc. The EU introduced a science and technology policy as to corrective for pervasive market failures and also due to the emergence of the single European market. The policy emphasised obvious areas of collaboration for R+D and innovation in order to be more competitive with USA and Japan and to compete with the low wages in South America. Currently, member states are spending 1. 9% of their resources on innovation compared with 2. 5% in Japan and 2. 7% in USA. Recently, the EU set the target at an overenthusiastic 3% The policy corrects market failures in uncertainties by appropriating price structures in the missing markets and thereby reducing distortions. Moreover, missing markets imply the need for agents to form expectations on the likely private values of their questions, expectations which policy can certainly influence. Given all these difficulties, which arise from the innovation process, it would seem to be wishful thinking to imagine that scientific and technological progress could be adequately funded in all the market economies without some form of government assistance. However one needs to recognise that government intervention can fail as well. Such examples are, imperfect information, the benefit between those who pay and those who benefit, bureaucratic capture and pressure group activity. It does not automatically follow that government policy will be welfare-improving. This is particularly so with respect to innovative activates, the formulation of which entails access to detailed microeconomic and social information

Knightia - Facts and Figures

Knightia - Facts and Figures Name: Knightia; pronounced NYE-tee-ah Habitat: Rivers and lakes of North America Historical Epoch: Eocene (55-35 million years ago) Size and Weight: About six inches long and a few ounces Diet: Small marine organisms Distinguishing Characteristics: Small size; herring-like appearance    About Knightia Most fossils from the Eocene epoch are well out of the reach of ordinary consumers, but not so the small prehistoric fish Knightia, thousands of specimens of which have been discovered in Wyomings Green River formation (in fact, Knightia is Wyomings official state fossil). Thanks to their abundance, its possible to buy a well-preserved Knightia fossil for under $100, a bargain compared to the average dinosaur! (Buyer beware, though: whenever you purchase a fossil, especially online, its essential to check its provenancethat is, whether it really is a genuine specimen of Knightia or simply a baby salmon that has been crushed between two bricks.) Part of the reason there are so many Knightia fossils is that there were so many Knightiathis six-inch-long fish assembled in vast schools throughout the lakes and rivers of Eocene North America, and lay near the bottom of the aquatic food chain (meaning that these huge populations of Knightia sustained larger, scarcer predators, including the prehistoric fish Diplomystus and Mioplosus). Befitting its small size, Knightia itself fed not on fish, but on tiny marine organisms like plankton and diatoms, and it was very herring-like in its appearance and behaviorso much so that it was originally classified as a species of the herring genus Clupea.

Bits and Bytes

Bits and Bytes Bits and Bytes Bits and Bytes By Simon Kewin In its election manifesto, one of the major political parties in the UK recently promised to provide virtually every household in the country a broadband service of at least 2 megabytes per second by 2012. The â€Å"2 megabytes per second† was actually a mistake. A speed of two megabytes per second is the same way as saying 16 megabits per second, a speed which is technically feasible, but unlikely to be universally available in the UK any time soon. The sentence was altered in later versions of the manifesto to the much more realistic â€Å"2 megabits per second†. The typo, however, highlights how easy it is to make mistakes using technical language where words often have very specific meanings. If you’re using terminology from medicine, computers, statistics etc., it pays to check that you have each term correct. In this case, the original authors confused the words bit and byte. Both are units of computer memory/storage. A bit is the smallest amount of storage, a 0 or a 1, the word formed from a blend of â€Å"binary† and â€Å"digit†. A byte, on the other hand, is a collection of bits – almost always eight of them. So, a kilobyte is eight times larger than a kilobit. While computer memory is generally expressed as a number of bytes (kilobytes, megabytes, gigabytes etc.), network speeds are generally expressed as a number of bits per second (kilobits, megabits, gigabits etc.) The terms are very easy to confuse especially when they are abbreviated to just â€Å"meg†, â€Å"gig† etc. as both sets sometimes are. But, a broadband speed of â€Å"2 meg† would always mean â€Å"2 megabits per second† and never â€Å"2 megabytes per second†. Abbreviations are often used for these terms, and the same care needs to be taken. For example, the abbreviation for megabyte is MB whereas the abbreviation for megabit is Mb. The case of the â€Å"b† makes all the difference. The same is true for kilobytes/kilobits (KB/Kb), gigabytes/gigabits (GB/Gb) and so forth. Want to improve your English in five minutes a day? Get a subscription and start receiving our writing tips and exercises daily! Keep learning! Browse the Vocabulary category, check our popular posts, or choose a related post below:100 Words for Facial ExpressionsSelect vs. SelectedThe Difference Between "Shade" and "Shadow"

Global Operations managenment Essay Example | Topics and Well Written Essays - 250 words

Global Operations managenment - Essay Example In order to address this issue, PPQ Parts should uphold a decent relationship with every stakeholder of the country and do not engage into any activity which cause impairment to the reputation and goodwill of PPQ Parts. 1. The foremost economic issue for PPQ Parts would of exchange rate fluctuations. These adverse movements in foreign exchange rate can harm the company’s profits. So in order to mitigate this risk, PPQ Parts should implement a reasonable hedging strategy to combat this foreign exchange currency risk. 2. Another economic issue that the company might have to face is the level of inflation in the foreign country. Due to inflation, the cost of goods sold of PPQ Parts may increase resulting in lower profits. So in order to avoid this situation, PPQ Parts should estimate the reasonable demand of the PPQ Parts’ products and contract with the suppliers to fix the rates of materials for future

Siberian Village Land and Life in the Sakha Republic Essay

Siberian Village Land and Life in the Sakha Republic - Essay Example The Tsarist motivation in colonizing Siberia resulted from a desire to acquire more resources. The colonization of the Yakutia by Soviet Union began as a result of building a fortress in the present day Yakutsk city, and provided shelter to Russian military, merchants, government officials and exiles. The Soviet Union government then engaged in collecting yasak, also known as fur tax, which the local community paid in a similar manner to other communities residing in Siberian regions. The policies adopted by the Soviet Union government resulted in establishing Yakutian Province, and creation of an administrative unit constituting termed as okrugs. The okrugs were further subdivided into units known as uluses. Further, the tax system implemented in the region targeted the patrilineal clan, which existed as a simple unit in terms of social organization2 . The Soviet Union government further formed administrative units within the clans to establish a bureaucratic system necessary for st ate administration. During this era, administrative posts within the Yakut society acted as vital posts for colonial positions established for the Siberian natives. However, this period resulted in the Yakut population settling, in the rural areas rather than, the colonial centres established by, the Soviet Union government. The community’s traditional settlement involved one or three dwellings that consisted of approximately twenty people. Their subsistence economy entailed breeding horses and cattle, considered vital in the winter and summer settlements3. The government established an administrative system within the community, and introduced toyons, to head these administrative clans. However, the toyons adopted a militant aristocracy by amassing power in the area of politics and economy. The introduction of toyons resulted in each district accommodating approximately seven percent of toyons within the population. They grabbed more land within the districts and owned more domestic animals at the expense of the population in their administrative posts. In addition, the toyon clans acquired more influence after their registration by the colonial administration, as administrative units. Because of the Soviet Union’s reorganization, the patrilineal clans embraced by the Yakut became unfunctionally4. During the period of Russian Revolution, the Yakuts were already engaged in a push for autonomy. In that period, Yakutia dominance revolves around the Shakha. On the other hand, the Soviet Union comprised approximately ten percent of the population. The elite among the sakha were relatively knowledgeable in relation to the political sphere, as a result of the existence of intelligent exiles from Russia. In the process of clamouring for autonomy, Yakut got embroiled in the Russian Civil war. As a result, a conflict emerged between two divergent groups where, one group advocated for uniting with Far East Siberia, to establish a Republic under the protect ion of the Japanese. Conversely, the opposing group, formed alliances to assist in the cause of fighting against communism. The end of the struggle resulted in the establishment of an autonomous Yakut, under Moscow control5. The Soviet Union relied on the illusionary established autonomous Yakut for resources ideal in enhancing industrial growth in Russia.

Diagnosing and Treating Depression Essay -- essays research papers

When someone says the word depression, it causes a great deal of confusion to American people today. Frequently, depression is used to describe when someone is feeling low, miserable, or having ‘gotten out of bed on the wrong side'. However, doctors use the word in two different ways. They can use it to describe the symptom of low mood, or to refer to a specific illness, Depression. Doctors make a diagnosis of depression after assessing the severity of the low mood, other associated symptoms and the duration of the problem. People who have experienced an episode of depression are at risk of developing another in the future. A small amount of people may experience an incidence of depression as part of a type of bipolar disorder, manic depression, which is characterized by episodes of both low and high dispositions. Depression is very common in the United States, occurring in more than five to ten percent of Americans over their lifetime. A â€Å"depressing† statistic is that women are twice more likely to get depression than men. There are no individual personality types that are more at risk than others, yet some risk factors have been identified. These include inherited or genetic factors, such as having parents or grandparents who have endured depression. Some non-genetic factors that can contribute to depression are having a tragedy early on in life such as the death of a parent or close friend. The causes of depression are very obscure and unknown to psychologists. Heredity is a major factor because it leads to the chemical imbalances of the neurotransmitter, Serotonin. Early life experiences like a death may make some people more susceptible. Another cause of depression could be stressful life events, such as losing a job or ... ... of phone numbers that you can call to receive help. Sometimes these are better because you can talk to a real person, even a depression survivor, who can more easily understand your problems. The first is the Yellow Ribbon Suicide Prevention Program whose number is 1-800-SUICIDE (1-800-784-2433). Another anonymous hotline is the National Depressive & Manic-Depressive Association (800) 826-3632. The National Foundation for Depressive Illness also has a 24/7 hotline: (800) 248-4344. The last hotline is D/ART Depression Awareness, Recognition, and Treatment: (800) 969-6942. Feel free to use any one of these toll free numbers to try and control your, or a friend’s, depression. One book that can help is Frank Minirth’s Freedom From Depression. Overall, depression can lead to many worse things, and the best thing that we can do is identify it early and try to treat it.

Evaluation Argument

The debate over whether or not social media is beneficial or harmful to kids has become a rising argument in the past few years. This is due to the increase of children possessing smart phones and having frequent access to the internet. It is estimated that more than sixty percent of kids ages thirteen to seventeen have a social networking profile of some sort (AACAP, 2013). Social media is harmful to kids because it exposes them to situations and content they are not emotionally and mentally capable of handling, allows room for cyber bullying, and can cause them to form detrimental habits.Technology is an extension of what goes on in the real world. Bullying was around before the Internet, but cyber bullying makes it easier,† explained Dr. Brian Primack, an assistant professor of medicine and pediatrics at the University Of Pittsburgh School Of Medicine. Although bullying is nothing new; when it takes place in the digital world, the public humiliation can shatter young lives. Photos, cruel comments, taunts and threats can travel in an instant. These then can be seen, revisited, reposted, and linked to a huge audience.Cyber bullying is using digital ommunications, like social media, to make another person feel angry, sad, or scared. Many experts agree that intent and context are important as well (AACAP, 2013). If the behavior was intentional, that's clearly cyber bullying and there should be consequences. However, if a kid inadvertently hurts another kid, then he or she may just need to learn better online behavior. Online messages can be more confusing or scarier than in-person communication because there are no face-to-face cues to help you understand people's intentions.Helping kids recognize bullying will help them earn to better deal with it. Kids may be apt to use more hurtful and extreme language online than offline. It's not uncommon for cyber bullies to say things like â€Å"l wish you would die,† â€Å"You're ugly,† or â€Å"Ever ybody hates you. † If a kid said these things out loud in public, a teacher, a parent, or even another kid would probably overhear and intervene. Cyber bullying can happen anytime, whereas regular bullying generally stops when kids go home.A child could get a text, or see posts on Facebook at any moment. Cyber bullying is very public, which can add to the harmful effects it can have on children. Posts can spread rather quickly to a large, invisible audience due to the nature of how information travels online. Daily overuse of media and technology has been proven to have a negative effect on the health of children, preteens, and teenagers by making them more prone to anxiety, depression, and other psychological disorders, as well as by making them more susceptible to future health problems.A review of research from the past decade has found that adolescents who demonstrated Internet addiction scored higher for obsessive-compulsive behavior, depression, generalized and social an xiety, ttention deficit hyperactivity disorder, introversion, and other maladaptive behaviors (AAP, 2013). There is also considerable debate within the mental-health field about whether dependence on technology is a true addiction, like alcohol, drugs, or gambling.In fact, the American Psychiatric Association, which produces the Diagnostic and Statistical Manual, decided not to include Internet Addiction in their latest revision. Some experts in the tield argue that the unhealthy dependence on technology may be a symptom of some more fundamental pathology, such as depression or anxiety. To underdeveloped minds, these affects can be extremely harmful and can affect them later in life. However, not all usage of social media can be totally harmful.In Why Social Networks Are Good for the Kids,' by Sara Lacy, argues that social networking can make people more empathetic, and that ‘sites like Facebook and Twitter are more about extending your real identity and relationships online. † Indeed, we get actual ‘endorphin rushes†(Lacy, 2013) from connecting with friends and staying in touch with people we don't see or interact with daily. Social media usage can be a door to echnological literacy as well; which could help children prepare for their future professional lives.A 2008 study by the MacArthur Foundation suggested that social sites led some kids to learn to adjust software code in the video games they played, edit video games, or fix computers; and in an ever-advancing technological world, these skills could be helpful. As with everything, balance is the key. Parents should take care to educate their children as much as possible on the dangers of too much social media use, as well as encourage use for educational and socializing purposes. Taken as a whole, social networking impacts children in ways that most people would expect it to.The biggest questions are: How different is virtual empathy from real life empathy? And how is the developm ent of virtual feelings different from the development of real feelings in general? Parents should be aware of the appropriateness of their child's activities on social networking portals, as well as talk about removing unacceptable content or connections to people who may be a bad influence. Parents play a large role in helping maintain kids' online safety.