Baumol 4 [William J. Baumol, Professor Emeritus at Princeton University, The Free-Market Innovation Machine : Analyzing the Growth Miracle of Capitalism, The “Somewhat Optimal” Attributes of Capitalist Growth: Oligopolistic Competition and Routinization of Innovation, Princeton University Press, 40-41 , SMarx, JTong]
This brings us to the end of the discussion of the reasons for the unprecedented growth record of the capitalist economies. Undoubtedly there are both contributory influences and impediments that have been omitted. But the five elements that I have stressed seem by themselves sufficient to make this performance less puzzling: oligopolistic competition that uses innovation as a weapon and engages in an innovation arms race, that routinizes the innovation arms race to reduce its uncertainties, and that engages in systematic innovation exchange and licensing for profit. Together, these plausibly constitute a large part of the story. The relative decline in the opportunities for destructive and rentseeking entrepreneurship as compared with productive entrepreneurial activity, along with the emergence of the rule of law from the struggles between the kings and their nobles, arguably also played a particularly critical role in the rise of capitalism. They continue to be important today. Finally, the socially beneficial side of the spillovers from innovation serves as a very valuable offset to any resulting disincentive to innovative activity. All of these features are, in part or in their entirety, attributes of the free-enterprise economies that other types of economy either do not share or do so to a very limited degree. That is, I believe, a persuasive explanation of why even the most inventive ofnon-capitalist societies has fallen so short in terms of innovation.
