How Should Firms Be Incentivised to Innovate? Arrow, Schumpeter, Nordhaus, Kremer, R&D Tax Credits and Idea Productivity

Deep End Era. Engineering with Sankalp · Oct 29, 2026 · 1h 8m

Once a molecule is synthesized or an algorithm is proved, anyone can copy the blueprint at near-zero marginal cost—yet discovering that blueprint takes years of risky capital. If we grant broad twenty-year monopoly patents, patients and follow-on inventors are priced out and patent thickets freeze cumulative science; if we rely purely on competition, who pays the fixed cost of discovery? We build the economics of innovation incentives from first principles: Arrow vs Schumpeter, the Aghion-Bloom-Blundell-Griffith-Howitt inverted-U, Nordhaus and Gilbert-Shapiro patent design, Scotchmer…