Working Paper: NBER ID: w28411
Authors: Randall Morck
Abstract: Corporate R&D has a social return far above its internal rate of return to the innovating corporation, and so is chronically underfunded from a social perspective. Kindleberger cycles, irregularly recurring stock market manias, panics, and crashes, prominent in financial history, are also a major problem for mainstream economics. If manias inundating “hot” new technologies with capital sufficiently counter chronic underinvestment in innovation, economy-level selection may favor institutions and behavioral norms conducive to Kindleberger cycles despite individual agents’ losses in panics and crashes.
Keywords: Corporate R&D; Social Returns; Innovation; Kindleberger Cycles; Market Behavior
JEL Codes: G01; G02; G4; N2; O16; O3; O33; O4; P1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| corporate R&D (O32) | social return (I26) |
| social return (I26) | internal return (Y60) |
| Kindleberger cycles (E32) | technological progress (O33) |
| market manias (E32) | innovation (O35) |
| capital inundation (F21) | costs associated with panics and crashes (G01) |
| investor behavior (G41) | Kindleberger cycles (E32) |