IDEAS home Printed from https://ideas.repec.org/a/spr/joevec/v29y2019i5d10.1007_s00191-019-00625-y.html
   My bibliography  Save this article

A note on the behavioral political economy of innovation policy

Author

Listed:
  • Jan Schnellenbach

    (Brandenburg University of Technology)

  • Christian Schubert

    (German University in Cairo)

Abstract

We propose that policy-making in the realm of innovation policy can be fruitfully analyzed from the perspective of Behavioral Political Economy. Citizens, policy-makers and also bureaucrats are prone to biases that have been empirically identified in behavioral economic and psychological research. When applied to innovation policy, it can be shown that under certain conditions, policy-makers are willing to support riskier innovative projects and that this tendency is amplified by public sector incentives, such as soft budget constraints. The same holds for a tendency to support ongoing innovative projects even if their profitability becomes increasingly doubtful. Finally, we also highlight how special-interest policies aimed at distorting risk perceptions can slow down the innovation process.

Suggested Citation

  • Jan Schnellenbach & Christian Schubert, 2019. "A note on the behavioral political economy of innovation policy," Journal of Evolutionary Economics, Springer, vol. 29(5), pages 1399-1414, November.
    • Handle: RePEc:spr:joevec:v:29:y:2019:i:5:d:10.1007_s00191-019-00625-y
    DOI: 10.1007/s00191-019-00625-y
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00191-019-00625-y
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s00191-019-00625-y?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Nicholas Bloom & Charles I. Jones & John Van Reenen & Michael Webb, 2020. "Are Ideas Getting Harder to Find?," American Economic Review, American Economic Association, vol. 110(4), pages 1104-1144, April.
    2. Charles B. Blankart & Gerrit B. Koester, 2006. "Political Economics versus Public Choice," Kyklos, Wiley Blackwell, vol. 59(2), pages 171-200, May.
    3. Geoffrey Brennan & Alan Hamlin, 1998. "Expressive voting and electoral equilibrium," Public Choice, Springer, vol. 95(1), pages 149-175, April.
    4. Schubert, Christian, 2017. "Exploring the (behavioural) political economy of nudging," Journal of Institutional Economics, Cambridge University Press, vol. 13(3), pages 499-522, September.
    5. George A. Akerlof, 1989. "The Economics Of Illusion," Economics and Politics, Wiley Blackwell, vol. 1(1), pages 1-15, March.
    6. Hamlin, Alan & Jennings, Colin, 2011. "Expressive Political Behaviour: Foundations, Scope and Implications," British Journal of Political Science, Cambridge University Press, vol. 41(3), pages 645-670, July.
    7. Michael Wallerstein, 2004. "Behavioral Economics and Political Economy," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 30, pages 37-48.
    8. Bengt-Åke Lundvall, 2007. "Innovation System Research – Where it came from and where it might go," Globelics Working Paper Series 2007-01, Globelics - Global Network for Economics of Learning, Innovation, and Competence Building Systems, Aalborg University, Department of Business and Management.
    9. Stefano DellaVigna, 2009. "Psychology and Economics: Evidence from the Field," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 315-372, June.
    10. Schubert, Christian, 2015. "Opportunity And Preference Learning," Economics and Philosophy, Cambridge University Press, vol. 31(2), pages 275-295, July.
    11. Hünermund, Paul & Czarnitzki, Dirk, 2019. "Estimating the causal effect of R&D subsidies in a pan-European program," Research Policy, Elsevier, vol. 48(1), pages 115-124.
    12. Cade Massey & Richard H. Thaler, 2013. "The Loser's Curse: Decision Making and Market Efficiency in the National Football League Draft," Management Science, INFORMS, vol. 59(7), pages 1479-1495, July.
    13. Pietro Ortoleva & Erik Snowberg, 2015. "Overconfidence in Political Behavior," American Economic Review, American Economic Association, vol. 105(2), pages 504-535, February.
    14. Bletschacher, Georg & Klodt, Henning, 1992. "Strategische Handels- und Industriepolitik: theoretische Grundlagen, Branchenanalysen und wettbewerbspolitische Implikationen," Open Access Publications from Kiel Institute for the World Economy 456, Kiel Institute for the World Economy (IfW Kiel).
    15. Mueller,Dennis C., 2003. "Public Choice III," Cambridge Books, Cambridge University Press, number 9780521894753.
    16. R. Preston Mcafee & Hugo M. Mialon & Sue H. Mialon, 2010. "Do Sunk Costs Matter?," Economic Inquiry, Western Economic Association International, vol. 48(2), pages 323-336, April.
    17. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    18. Niclas Berggren, 2012. "Time for behavioral political economy? An analysis of articles in behavioral economics," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 25(3), pages 199-221, September.
    19. Christian Schubert, 2013. "Is Novelty Always a Good Thing? Towards an Evolutionary Welfare Economics," Economic Complexity and Evolution, in: Guido Buenstorf & Uwe Cantner & Horst Hanusch & Michael Hutter & Hans-Walter Lorenz & Fritz Rahmeyer (ed.), The Two Sides of Innovation, edition 127, pages 209-242, Springer.
    20. Tyler Cowen, 2005. "Self-deception as the root of political failure," Public Choice, Springer, vol. 124(3), pages 437-451, September.
    21. Vernon L. Smith, 2003. "Constructivist and Ecological Rationality in Economics," American Economic Review, American Economic Association, vol. 93(3), pages 465-508, June.
    22. Dan Lovallo & Colin Camerer, 1999. "Overconfidence and Excess Entry: An Experimental Approach," American Economic Review, American Economic Association, vol. 89(1), pages 306-318, March.
    23. Hertwig, Ralph, 2017. "When to consider boosting: some rules for policy-makers," Behavioural Public Policy, Cambridge University Press, vol. 1(2), pages 143-161, November.
    24. Alberto Alesina & Torsten Persson & Guido Tabellini, 2006. "Reply to Blankart and Koester's Political Economics versus Public Choice Two Views of Political Economy in Competition," Kyklos, Wiley Blackwell, vol. 59(2), pages 201-208, May.
    25. Ulrich Witt, 2003. "Economic policy making in evolutionary perspective," Journal of Evolutionary Economics, Springer, vol. 13(2), pages 77-94, April.
    26. Jan Schnellenbach, 2019. "Evolving hierarchical preferences and behavioral economic policies," Public Choice, Springer, vol. 178(1), pages 31-52, January.
    27. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65(2), pages 135-135.
    28. Ferejohn, John A. & Fiorina, Morris P., 1974. "The Paradox of Not Voting: A Decision Theoretic Analysis," American Political Science Review, Cambridge University Press, vol. 68(2), pages 525-536, June.
    29. Dimos, Christos & Pugh, Geoff, 2016. "The effectiveness of R&D subsidies: A meta-regression analysis of the evaluation literature," Research Policy, Elsevier, vol. 45(4), pages 797-815.
    30. Schnellenbach, Jan & Schubert, Christian, 2015. "Behavioral political economy: A survey," European Journal of Political Economy, Elsevier, vol. 40(PB), pages 395-417.
    31. Jan Fagerberg, 2017. "Innovation Policy: Rationales, Lessons And Challenges," Journal of Economic Surveys, Wiley Blackwell, vol. 31(2), pages 497-512, April.
    32. Boettke, Peter J. & Coyne, Christopher J. & Leeson, Peter T., 2013. "Comparative historical political economy," Journal of Institutional Economics, Cambridge University Press, vol. 9(3), pages 285-301, September.
    33. Samuel Bowles, 1998. "Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 75-111, March.
    34. Dirk Czarnitzki & Katrin Hussinger, 2018. "Input and output additionality of R&D subsidies," Applied Economics, Taylor & Francis Journals, vol. 50(12), pages 1324-1341, March.
    35. Clarysse, Bart & Wright, Mike & Mustar, Philippe, 2009. "Behavioural additionality of R&D subsidies: A learning perspective," Research Policy, Elsevier, vol. 38(10), pages 1517-1533, December.
    36. Mariano Pereira & Diana Suárez, 2018. "Matthew effect, capabilities and innovation policy: the Argentinean case," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 27(1), pages 62-79, January.
    37. Caplan, Bryan, 2001. "Rational Irrationality and the Microfoundations of Political Failure," Public Choice, Springer, vol. 107(3-4), pages 311-331, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Polowczyk Jan, 2021. "A synthesis of evolutionary and behavioural economics," Economics and Business Review, Sciendo, vol. 7(3), pages 16-34, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Schnellenbach, Jan & Schubert, Christian, 2015. "Behavioral political economy: A survey," European Journal of Political Economy, Elsevier, vol. 40(PB), pages 395-417.
    2. Schnellenbach, Jan & Schubert, Christian, 2014. "Behavioral public choice: A survey," Freiburg Discussion Papers on Constitutional Economics 14/03, Walter Eucken Institut e.V..
    3. Hillman, Arye L., 2010. "Expressive behavior in economics and politics," European Journal of Political Economy, Elsevier, vol. 26(4), pages 403-418, December.
    4. Hamlin, Alan & Jennings, Colin, 2011. "Expressive Political Behaviour: Foundations, Scope and Implications," British Journal of Political Science, Cambridge University Press, vol. 41(3), pages 645-670, July.
    5. François Facchini & Louis Jaeck, 2021. "Populism and the rational choice model: The case of the French National Front," Rationality and Society, , vol. 33(2), pages 196-228, May.
    6. Degan, Arianna & Li, Ming, 2015. "Psychologically-based voting with uncertainty," European Journal of Political Economy, Elsevier, vol. 40(PB), pages 242-259.
    7. Kärnä, Anders & Karlsson, Johan & Engberg, Erik & Svensson, Peter, 2020. "Political Failure: A Missing Piece in Innovation Policy Analysis," Working Paper Series 1334, Research Institute of Industrial Economics, revised 21 Apr 2022.
    8. Emilio Ocampo, 2019. "The Economic Analysis of Populism. A Selective Review of the Literature," CEMA Working Papers: Serie Documentos de Trabajo. 694, Universidad del CEMA.
    9. Stephen Drinkwater & Colin Jennings, 2007. "Who are the expressive voters?," Public Choice, Springer, vol. 132(1), pages 179-189, July.
    10. Alberto Alesina & Francesco Passarelli, 2019. "Loss Aversion in Politics," American Journal of Political Science, John Wiley & Sons, vol. 63(4), pages 936-947, October.
    11. Attanasi, Giuseppe & Corazzini, Luca & Passarelli, Francesco, 2017. "Voting as a lottery," Journal of Public Economics, Elsevier, vol. 146(C), pages 129-137.
    12. Aalto, Eero & Gustafsson, Robin, 2020. "Innovation Promotion Rationales and Impacts – A Review," ETLA Reports 99, The Research Institute of the Finnish Economy.
    13. Serge Blondel & Louis Lévy-garboua, 2011. "Can non-expected utility theories explain the paradox of not voting?," Economics Bulletin, AccessEcon, vol. 31(4), pages 3158-3168.
    14. James Alm & Carolyn J. Bourdeaux, 2013. "Applying Behavioral Economics to the Public Sector," Hacienda Pública Española / Review of Public Economics, IEF, vol. 206(3), pages 91-134, September.
    15. repec:agr:journl:v:3(604):y:2015:i:3(604):p:63-74 is not listed on IDEAS
    16. Bart Engelen, 2006. "Solving the Paradox," Rationality and Society, , vol. 18(4), pages 419-441, November.
    17. Dan Usher, 2014. "An alternative explanation of the chance of casting a pivotal vote," Rationality and Society, , vol. 26(1), pages 105-138, February.
    18. Sturm, Silke, 2019. "Political Competition: How to Measure Party Strategy in Direct Voter Communication using Social Media Data?," Hamburg Discussion Papers in International Economics 1, University of Hamburg, Department of Economics.
    19. Pietro Ortoleva & Erik Snowberg, 2015. "Overconfidence in Political Behavior," American Economic Review, American Economic Association, vol. 105(2), pages 504-535, February.
    20. Michael David Thomas, 2019. "Reapplying behavioral symmetry: public choice and choice architecture," Public Choice, Springer, vol. 180(1), pages 11-25, July.
    21. Mihai UNGUREANU & Andra ROESCU, 2015. "Economic models of voting: an empirical study on the electoral behavior in Romanian 2012 parliamentary elections," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(604), A), pages 63-74, Autumn.

    More about this item

    Keywords

    Biases; Heuristics; Sunk cost fallacy; Availability bias; Overconfidence; Loss aversion;
    All these keywords.

    JEL classification:

    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:joevec:v:29:y:2019:i:5:d:10.1007_s00191-019-00625-y. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.