RESEARCH AND DEVELOPMENT

The primary reason that living standards are higher today than they were a century ago is that technological knowledge has advanced. The telephone, the transistor. the computer, and the internal combustion engine are among the thousands of innovations that have improved the ability to produce goods and services Although most technological advance comes from private research by firms and individual inventors, there is also a public interest in promoting these efforts. To a large extent, knowledge is a public good Once one person discovers an idea, the idea enters society’s pool of knowledge, and other people can freely use it Just as government has a role in providing a public good such as national defense, it also has a role in encouraging the research and development of new technologies The U.S. government has long played a role in the creation and dissemination of technological knowledge A century ago, the government sponsored research about farming methods and advised farmers how best to use their land. More recently, the U.S. government has, through the Air Force and NASA, supported aerospace research: as a result, the United States is a leading maker of rockets and planes. The government continues to encourage advances in knowledge with research grants from the National Science Foundation and the national Institutes of Health and with tax breaks for firms engaging in research and development Yet another way in which government policy encourages research is through the patent system. When a person or firm invents a new product, such as a new drug, the inventor can apply for a patent. If the product is deemed truly original, the government awards the patent, which gives the inventor the exclusive right to make the product for a specified number of years. In essence, the patent gives the inventor a property right over his invention, turning his new idea from a public good into a private good. By allowing inventors to profit from their inventions-even if only temporarily-the patent system enhances the  for individuals and firms to engage in research .