It is a lesson we know well from the events of the past several decades: whatever their flaws, regulated markets do a better job than central planners in governing the production and distribution of goods and services. They do so because they harness private incentives to seek out the potential for creating value and because they are capable of processing massive quantities of data and responding to complexity. They don’t accomplish these goals without legal structure and constraints—to provide the basic framework for transactions and cooperation (property and contract, for example) and to control externalities and exploitation of the disparities created by the unequal distribution of information and resources. But the problem of creating the legal framework to support and regulate markets to produce goods and services, while daunting, is still an easier one to solve than the massive one of how to direct individual flows of economic inputs and outputs. This paper explores how this process applies to innovation.
Contracts | Economics | Intellectual Property | Law and Economics | Public Law and Legal Theory
Date of this Version
Gillian K. Hadfield, "Producing Law for Innovation" (December 2010). University of Southern California Law and Economics Working Paper Series. Working Paper 124.