Invention and Innovation: Balancing Hold Up, Hold Out, and Standardization

There's an old joke: A beaver and a rabbit are staring at a massive new dam on a river. “Did you build it?” the rabbit asks the beaver. The beaver replies, “No, but it is based on an idea of mine” [1]. This modest bit of humor illustrates the continuing controversy surrounding the relative importance of the originators of an idea (inventors) and those who take an idea and implement it in some non-trivial way in the real world (innovators). Rewarding technological progress is a goal of public policy because it seems reasonable to assume that the great rise in living standards over the past two centuries is related to the simultaneous progress of technology. But whom to reward and how much to tilt toward the inventor or the innovator remain in dispute.