Abstract
As is recognized by the U.S. Constitution, government intervention is a necessary condition for promoting radical ideas. This is due to the non-rivalrous and increasing return to scale (public-good features) of radical ideas. Governments intervene in the process of turning radical ideas in innovative technology into consumption by funding basic research, through intellectual property (IP) laws, and by encouraging and supporting long-term institutional savings. The first form of intervention increases the supply of radical ideas in innovative technology. The second affects the value of assets based on radical ideas if successful, and the third makes it easier to finance VC funds by institutional investors. Government intervention creates economic rents. It is shown in the chapter that in the market for ideas, temporary and contestable monopolies are welfare increasing.
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