The Economics of Crisis Innovation Policy: A Historical Perspective
Since the beginning of the COVID-19 pandemic, policymakers, researchers, and journalists have made comparisons to World War II. In 1940, a group of top U.S. science administrators organized a major coordinated research effort to support the Allied war effort, including significant investments in medical research which yielded innovations like mass-produced penicillin, antimalarials, and a flu vaccine. We draw on this episode to discuss the economics of crisis innovation. Since the objectives of crisis R&D are different than ordinary R&D (prioritizing speed, coordination, redundancy, and more), we argue that appropriate R&D policy in a crisis requires going beyond the standard Nelson-Arrow framework for research policy.
We thank Harvard Business School and the NBER Innovation Policy grant for financial support. This material is based upon work supported by the National Science Foundation under Grant No. 1951470. All errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.