Conclusion

The modern knowledge economy had its start in the United States when, for the first time in world history, an intellectual property clause was included in a national Constitution. This strong endorsement for property rights and decentralized markets in ideas reflected a revolution in thinking about the sources of creativity and economic progress, which conventional economic theories about innovation and growth have yet to fully capture. European administered innovation systems assumed that elites, scarce knowledge, and costly human capital inputs were the primary sources of useful ideas and productivity advances. Administered arrangements failed to induce inventions at appropriate prices, perpetuated errors because of a lack of monitoring and feedback, and were associated with rent-seeking and significant deadweight losses. By contrast, market-oriented policies in the United States generated increasing returns associated with its larger and more diverse population of inventors and useful ideas, which encouraged self-sustaining endogenous growth and a global technological advantage that has persisted for well over a century.