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Venture Capital in the 21st Century - Lectures
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Lecture 1 -
Investing at the Technological Frontier
In this first lecture in the Institute for New
Economic Thinking’s series “Venture Capital in the 21st Century”, Prof. Bill Janeway
explains how economic growth and development can be conceived as an
evolutionary process, punctuated and driven by technological innovations.
Investment on the frontier of new technology, new processes and new markets
necessarily means investing in an environment of radical uncertainty about
the future, in which the past serves as little guide. Prof. Janeway draws upon the
classic insights of Keynes, Knight and Schumpeter to explain the
interdependent roles entrepreneurial firms, the State and financial
capitalism have historically played in translating
technological innovation into economic development, and how they have
changed over time. |
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Resources for Lecture 1
- Investing at
the Technological Frontier (INET
video)
- Classic works (online)
- John Maynard Keynes (1937): "The General Theory of
Employment", 1937, Quarterly Journal of Economics
(Feb), p.209-23 [HET,
pdf]
- John Maynard Keynes (1936) The General Theory of
Employment, Interest and Money: London: Macmillan. [HET],
especially "Chapter 12 -
The State of Long-Term
Expectation"
- Frank H. Knight (1921) Risk, Uncertainty and Profit,
[1921
ed, 1933
repr] [lib],
- Joseph Schumpeter (1923-39) Business Cycles: A
theoretical, historical and statistical analysis of the
Capitalist process, 1939 edition, v.1, v.2 [av1,
av2] [pdf]
- Joseph Schumpeter (1942) Capitalism, Socialism and
Democracy, 1942. [pdf]
- Quotes
- Keynes on uncertainty in J.M. Keynes (1937) "General Theory
of Employment", QJE, quote from
p.213-14.
- Keynes on expectation in J.M. Keynes (1936) General
Theory: Chapter 12 -
The State of Long-Term Expectation, quote from
p.152
- Keynes's Beauty Contest in J.M. Keynes (1936): General
Theory: Chapter 12,
p.156
- Keynes's Bridge in J.M. Keynes (1936): General Theory:
Chapter 12, p.151
- Knight on uncertainty in F.H. Knight (1921) Risk,
Uncertainty and Profit, quote from
p.199.
- Schumpeter Mark I: "Innovations associated with leadership
of New Men" (Business Cycles, 1939, v.1,
p.96)
- Schumpeter Mark II: "The perfectly bureaucratized giant
industrial unit not only ousts the small or medium-sized firm
and 'expropriates' its owners, but in the end it also ousts the
entrepreneur" (CSD, 1942, p.134)
- Schumpeter: "Everywhere we find industries which would not
exist at all but for protection, subsidies and other political
stimuli...such industries are assets of doubtful value" (Business
Cycles, 1939, v.1
p.13)
- Schumpeter on risk: "First, risk
bearing is no part of the entrepreneurial function. It is the
capitalist who bears the risk. The entrepreneur does so only to
the extent to which, besides being an entrepreneur, he is also a
capitalist, but qua entrepreneur he loses other people's money""
(Business Cycles, 1939, v.1,
p.106)
- Referenced works (online)
- Philippe Aghion, Ufuk Akcigit and Peter Howitt (2013) “What Do We
Learn from Schumpeterian Growth Theory,” NBER Working Paper No.
18824 (Feb. 2013) [nber]
- U. Akcigit and Kerr, W. R. (2010) “Growth through
Heterogeneous Innovations,” NBER Working Paper No. 16443 (Nov.
2010) [harvard]
- Ashish Arora, Sharon Belenzon, Sharon, Patacconi, Andrea,
and Suh, Jungkyu, (2019) "The changing structure of American
innovation: Some cautionary remarks for economic growth," NBER
Working Paper 25893, August 2019, p. 19 [nber]
- Giovanni Dosi and Richard R. Nelson (2010) “Technical Change
and Industrial Dynamics as Evolutionary Processes,” in B.H. Hall
and Rosenberg, N., eds., Handbook of the Economics of
Innovation, v.1. Amsterdam: Elsevier Ch.3 (p.51). [2009 version:
pdf;
non-free:
sci-dir]
- Andy Haldane (2010) “Patience and Finance,” paper
presented to Oxford China Business Forum, Beijing, September 9,
2010, p.15 [bis],
- Carlota Perez (2002) Technological Revolutions and
Financial Capital: The Dynamics of Bubbles and Golden Ages.
London: Elgar. [Perez
site,
elgar,
wiki] (ISBN 1-84376-331-1)
- Carlota Perez (2009) "Technological revolutions and
techno-economic paradigms", Tallin Univ Papers in Technology
Governance and Econ Dynamics No.20 [pdf]
- Herbert A. Simon, “Rationality as Process and as Product of
Thought,” American Economic Review, v. 68, no. 2 (1978),
p. 14. [AER]
- Joseph Stiglitz (1993), “Endogenous Growth and Cycles”, NBER
Working paper No., 4286, reprinted in Y. Shionnoya and Perlman,
M. (eds.), Innovation in Technology, Industries and
Institutions, Studies in Schumpeterian Perspectives,
University of Michigan Press. [nber]
- Richard Zeckhauser (2006) “Investing in the Unknown and
Unknowable,” Capitalism and Society, Vol. 1: Issue 2,
Article 5 (2006), p. 3 [pdf]
- Referenced works (non-free or restricted)
- John Lewis Gaddis (2004) Landscape of History: How
Historians Map the Past. New York: Oxford University Press,
p. 56 [non-free:
oup].
- D. Breznitz and Zysman, J., eds., (2013), The Third
Globalization: Can Wealthy Nations Stay Rich in the Twenty-First
Century? Oxford University Press, pp. 4-5, 8. [non-free:
oup]
- Roman Frydman and M.D. Goldberg (2011) Beyond
Mechanical Markets: Asset Price Swings, Risk, and the Role of
the State. Princeton University Press, pp. 41-2
[non-free
pup]
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↑ Lecture 1 |
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Lecture 2 -
What Venture Capitalists Do
In the second lecture of INET's “Venture Capital in the 21st Century”
series, Prof. Bill Janeway explores the relationship between entrepreneurial
firms and venture capital. In providing start-up financing, venture
capital investment may earn high payoffs if a new technology succeeds, but
also risks large losses if it does not. Prof. Janeway reviews the
various strategies VCs have taken in financing new technology firms and the
factors influencing their decision-making. He also discusses the VC's
relationship with the entrepreneur and their record
in building technologically innovative firms. He also explains why certain
sectors might face more obstacles than others in attracting venture capital. |
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Resources for Lecture 2
- What Venture Capitalists Do (INET
video)
- Bill Janeway works
- Lecture slides: "Lecture
2 - What Venture Capitalists Do"
- William H. Janeway (2012), Doing Capitalism in the Innovation Economy: Reconfiguring the three-player game between
markets, speculators and the state. 2018 2nd ed., Cambridge, UK: Cambridge University Press. [non-free:
cambridge up,
amazon]
- Referenced works (online)
- U. Akcigit, E. Dinlersoz, J. Greenwood. and V. Penciakova
(2019) “Synergizing Ventures,” NBER Working Paper 26196, August
2019. [pdf]
- M. Ewens, R. Nanda. and M. Rhodes-Kropf (2018) “Cost of
Experimentation and the Evolution of Venture Capital,” NBER
Working Paper 24523, April 2018. [nber]
[JFE, p.422 non-free:
sd]
- M. Ewens, R. Nanda., and C. Stanton (2020) “The Evolution
of CEO Compensation in Venture Capital Backed Startups,”
September 2019 [ssrn]
- F.A. Hayek (1948) "The Meaning of Competition", in
Hayek, Individualism and Economic Order, [ejw, mis].
- W. R. Kerr, R. Nanda and M. Rhodes-Kropf. (2014)
“Entrepreneurship as Experimentation,” Journal of Economic
Perspectives, v.28 (3), p. 25 [aea]
- P. Gompers, W. Gornall, S.N. Kaplan and I.A. Strebulaev
(2016) "How do Venture Capitalists Make Decisions?", NBER
Working Paper 22587 (Sep 2016) [nber]
- Robert E. Hall and Susan E. Woodward, (2010) “The Burden of
the Nondiversifiable Risk of Entrepreneurship,” American
Economic Review, v.100 (Jun), p.1163 [pdf]
- A.B. Hargadon and M. Kenney (2012) “Misguided Policy?
Following venture capital into clean technology”, California
Management Review, v.54 (2), p. 128 [pdf]
- J. Lerner and R. Nanda (2020) “Venture Capital’s Role in
Financing Innovation: What We Know and How Much We Still Need to
Learn,“ Journal of Economic Perspectives, v.34 (3) [aea]
(Table 1, p. 240)
- National Venture Capital Association (NVCA) 2019
NVCA Yearbook [pdf],
figure (p.29), IPOs by sector (p.32-36)
- Erin L. Scott, Pian Shu, and Roman M. Lubyinsky (2015)
“Entrepreneurial Uncertainty and Expert Evaluation: An Empirical
Analysis,” Management Science, forthcoming [ssrn]
- Referenced works (non-free or restricted)
- G. Pisano (2006) Science Business: Promise, reality and the
future of biotechnology. Harvard Business School Press, p. 117.
[non-free:
hbs]
- Extra Resources
- SDC Platinum online historical financial transactions database
[non-free:
Refinitive]
- WTI Crude Oil Prices [Bloomberg]
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Lecture 3 -
Evaluating Venture Capital Performance
In the third lecture of INET's “Venture Capital in the 21st Century”
series, Prof. Bill Janeway reviews the performance of Venture Capital firms and
recent changes in the venture capital market. He starts by summarizing
the stylized facts of venture capital returns (highly skewed, very
persistent, and correlated with the stock market). VC capital
increased rapidly in the late 1990s, peaking in 2000. VC returns have
since settled down, with longer holdings and fewer IPOs. But with the
climate of zero real interest rates since 2008, new unconventional investors
(private equity, hedge funds, etc.) have waded into venture financing
directly, hunting for the high returns of the next big tech giant. A
"Unicorn Bubble" has developed as a result, where dubious firms have been financing their growth by selling
illiquid securities at inflated prices to deep-pocketed investors with
little expertise or control over the entrepreneur. This may have
implications on the long-term link between venture financing and
technological innovation. |
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Resources for Lecture 3
- Evaluating
Venture Capital Performance (INET video)
- Bill Janeway works
- Lecture slides: "Lecture
3 - Evaluating Venture Capital Performance"
- William H. Janeway (2012), Doing Capitalism in the Innovation Economy: Reconfiguring the three-player game between
markets, speculators and the state. 2018 2nd ed., Cambridge, UK: Cambridge University Press. [non-free:
cambridge up,
amazon]
- Homepage: billjaneway.com
- William H. Janeway (2012), Doing Capitalism in the
Innovation Economy: Reconfiguring the three-player game between
markets, speculators and the state. 2018 2nd ed.,
Cambridge, UK: Cambridge University Press.. [non-free:
cambridge up,
amazon]
- M.D. McKenzie and W.H. Janeway (2011) “Venture Capital Funds
and the Public Equity Market”, Accounting & Finance, v.51
(3), p.764 [non-free:
wiley]
- William H. Janeway (2015) "Unicorns: Why this bubble is
different", Forbes (Mar 28, 2015) [janeway]
- Homepage:
billjaneway.com
- Referenced works (online)
- Lance E. Davis, Robert E. Gallman, and Karin Gleiter (1997) In
Pursuit of Leviathan: Technology, Institutions, Productivity,
and Profits in American Whaling, 1816–1906. Chicago
University Press. [nber]
- R. S. Harris, T. Jenkinson, S.N. Kaplan, and R. Stucke
(2013), “Has Persistence Persisted in Private Equity? Evidence
from Buyout and Venture capital Funds", Fama-Miller Working
Paper, [ssrn]
- Steven N. Kaplan and Antoinette Schoar (2003) "Private
Equity Performance: Returns, Persistence and Capital" NBER
Working Paper No.w9807 (Jun 2003) [ssrn]
- M. Kenney and J. Zysman, (2019) “Unicorns, Cheshire cats,
and the new dilemmas of entrepreneurial finance,” Venture
Capital v.21 (1) [tfonline]
- Josh Lerner and Ramana Nanda (2020) “Venture Capital’s Role
in Financing Innovation: What We Know and How Much We Still Need
to Learn,“ Journal of Economic Perspectives, v.34 (3) [aea]
- Referenced works (non-free or restricted)
- R.S. Harris, T. Jenkinson, S. N. Kaplan, “Private Equity
Performance: What Do We Know?” Journal of Finance, v.69 (5), p.
1851 [non-free:
wiley]
- Tom Nicholas (2019) VC: An American History.
Cambridge, MA: Harvard University Press. [non-free:
hup] [Tom Nicholas
homepage at HBS]
- Extra Resources
- National Venture Capital Association (NVCA) 2019
Yearbook [pdf]
- 2020 NVCA Venture Monitor [pitchbook]
- "What's the Difference between Internal Rate of Return
(IRR) and Public Market Equivalent (PME)?" Pitchbook Blog,
March 23, 2020 [pitchbook]
- "Public to Private Equity in the United States: A
Long-Term Look", by Michael J. Mauboussin and Dan Callahan, Morgan Stanley,
August 4, 2020. [pdf]
- "Private Investment Benchmarks" at Cambridge Associates [online]
- Warburg Pincus [wp]
- OECD Data: long-term interest rates [oecd]
- Jumpstart Our Business Startups Act (JOBS Act) (Apr 5, 2012) (PL
112-106)(126 Stat 306) [pdf]
[govinfo]
- "Fed Approves Shift on Inflation Goal, Ushering In Longer
Era of Low Rates" by Nick Timiraos, Wall Street Journal
(Aug 27, 2020) [non-free:
wsj]
- “Softbank:
Inside the ‘Wild West’ $100bn fund shaking up the tech world,”
by A. Massoudi, K. Inagaki, and L. Lewis,
Financial Times (June 20, 2018) [non-free:
ft]
- "The Unicorn Bubble is Bursting" by David Trainer, Forbes,
Oct 7, 2019 [forbes]
- "The Unicorn Governance Trap" by Renee M. Jones, Penn Law
Review Online (2017) [penn]
- "Uber Investor Sues Travis Kalanick for Fraud" by Mike
Isaac, New York Times (Aug 17, 2017) [nyt]
- "Theranos Founder Elizabeth Holmes Indicted on Fraud
Charges" by Reed Abelson, New York Times (June 15, 2018)
[nyt]
- "Adam Neumann and the Art of Failing Up" by Amy Chozick,
New
York Times (Nov 2, 2019) [nyt]
- "Limited Partners (LP) vs. General Partners (GP) in Private
Equity" at Wallstreemojo [site]
- "Power law vs. Normal distribution" [pdf]
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Lecture 4 -
The Failure of Market Failure In the
fourth lecture of INET's “Venture Capital in the 21st Century” series,
Prof. Bill Janeway surveys
the rationales for State support for technical innovation.
Adopting
the Neoclassical approach of "market failure", Nelson and Arrow
suggested that private business firms will invest less in research &
development than is socially optimal. Empirical estimates suggest that
the gap between private and social benefit is quite large. This has served
as a justification for the large increase in State investment in basic
research since WWII. But historically, State intervention in
innovation was driven by concerns for national security and economic
development. Janeway suggests it is better to think in terms of national
systems of innovation, rather than market failure. |
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Resources for Lecture 4
- Failure of
Market Failure (INET video)
- Referenced works (online)
- Kenneth J. Arrow (1962) "Economic Welfare and the Allocation of Resources for Innovation", 1962, in
Nelson, editor, The Rate and Direction of Inventive Activity. [1959
rand version; 1962
nber]
- N. Bloom, M. Schankerman, M., and J. Van Reenen, (2013)
“Identifying Technology Spillovers and Product Market Rivalry,”
Econometrica v.81 (4), p.1347 [2007
nber; non-free:
wiley]
- Vannevar Bush (1945) Science, the Endless Frontier, a
report to the president (July 5, 1945) [nsf;
bk,
av] (on Vannevar Bush:Brit,
Wiki)
- Thomas I. Emerson (1955) "The Doctrine of Prior Restraint",
1955, Law and Contemporary Problems (Fall), p.648 [duke]
- John Maynard Keynes (1940) How to Pay for the War: A radical plan for the Chancellor of the Exchequer.
[pdf,
fraser].
- Friedrich List (1941) The
National System of Political Economy. 1885 English
trans [av]
- B. Lucking, N. Bloom and J. Van Reenen (2018) “Have R&D
Spillovers Changed?” NBER Working Paper 24622 (May 2018) [nber]
- E. Moretti, C. Steinwender, and J. Van Reenen (2019) “The
Intellectual Spoils of War? Defense R&D, Productivity and
International Spillovers,” NBER Working Paper 264893, (Nov 2019)
[nber,
pdf]
- Richard R. Nelson (1959) “The Simple Economics of Basic Scientific
Research,” 1959, Journal of Political Economy, v.67 (3),
p.297 [pdf,
js]
- Lord Victor Rothschild Report, "The Organisation and Management of
Government Research and Development", in A Framework for
Government Research and Development, Cmnd. 4814 London: HMSO
[also pub. in Parliamentary Papers (House of Commons and
Command), Session 2, November 1971–October 1972, vol. XXXV,
pp. 747–775].
- Luc Soete, Bart Verspagen, and Bas ter Weel, “Systems of
Innovation” in B.H. Hall and N. Rosenberg, eds, Handbook of the
Economics of Innovation, v.2. Amsterdam: Elsevier, pp. 1161
(ch.27) [2010 wp:
repec, non-free:
sci-dir]
- Referenced works (non-free or restricted)
- Fred Block (2011), “Innovation and the Invisible Hand
of Government” in F. Block and M.R. Keller, eds., State of
Innovation: The U.S. Government’s Role in Technology Development,
Boulder Co: Paradigm. ch.1, [prev of
p.1, non-free:
tfg]
- Clayton Christensen (1997) The Innovator's Dilemma: When
New Technologies Cause Great Firms to Fail. Harvard Business
Review Press. [non-free:
hbs]
- David M. Hart (1998) Forged Consensus, Science,
Technology and Economic Policy in the United States, 1921-1953.
Princeton University Press. [non-free:
pup]
- David C. Mowery, (2010) “Military R&D and Innovation,” in B. W.
Hall and N. Rosenberg, eds., Handbook of the Economics of
Innovation v.2. Amsterdam: Elsevier, p.1236 (ch.29)
[non-free:
sci-dir]
- Priya Satia (2018) Empire of Guns: The Violent Making of
the Industrial Revolution. Penguin [non-free:
stanford up,
penguin].
- Donald E. Stokes (1997) Pasteur’s Quadrant: Basic Science
and Technological Innovation. Brookings Institution Press
[non-free:
brookings]
- Extra Resources
- Mariana Mazzucato (2013) The Entrepreneurial State:
Debunking Public vs. Private Sector Myths. Anthem Press
[non-free:
mm,
amzn].
- A. Arora, S. Belenzon & A. Patacconi (2015) "Killing the
Golden Goose? The Decline of Science in Corporate R&D", NBER
Working Paper 20902, January 2015, (Jan 2015) [nber]
- Miles Parker (2016) "The Rothschild report (1971) and the
purpose of government-funded R&D—a personal account",
Palgrave Communications. [rgate,
nature]
- "Remembering by George Grosz, 1937" at Minneapolis Institute
of Art [artsmia]
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Lecture 5 -
The Banality and Necessity of Bubbles
In the fifth lecture of INET's “Venture Capital in the 21st Century”
series, Prof. Bill Janeway explains
the surprising but often vital importance of financial speculation and
bubbles in fueling technological progress. Janeway reviews and
distinguishes between various kinds of speculative bubbles over the past two
centuries. While many have been unproductive and all have crashed, some
bubbles have had a long-run productive impact by spurring investment into
real capital and new technology (e.g. railways, electrification, computers). Financial
bubbles can often help close financing gaps when venture capital by itself
would otherwise have fallen short, and thus have played an instrumental role
in accelerating technological innovation. |
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Resources for Lecture 5
- The Banality
and Necessity of Bubbles (INET video)
- Bill Janeway works
- Lecture slides: "Lecture
5 - The Banality and Necessity of Bubbles"
- William H. Janeway (2012), Doing Capitalism in the Innovation Economy: Reconfiguring the three-player game between
markets, speculators and the state. 2018 2nd ed., Cambridge, UK: Cambridge University Press. [non-free:
cambridge up,
amazon]
- M.D. McKenzie and W.H. Janeway (2011) “Venture Capital Funds
and the Public Equity Market”, Accounting & Finance, v.51
(3), p.764 [non-free:
wiley]
- W.H. Janeway (2018) "Rise and Fall of Enterprise Software"
at BoS Europe [BoS]
- Homepage: billjaneway.com
- Referenced works (online)
- G.M. Angelotos, G. Lorenzoni, and A. Pavan (2010) “Beauty
Contests and Irrational Exuberance,” NBER Working Paper 15883
(2010) [nber]
- Walter Bagehot (1873) Lombard Street: A description of the money
market [1873 1st
ed, 1878 7th
ed],
[revised 1896 Johnstone
ed,
av; 1920 Withers ed,
av] [1962 ed.
pdf] [txt: McM,
lib]
- [Bagehot's "people won't take 2 percent" quote actually from
Bagehot's article "Investments", 1852, Inquirer
(July 31), p.482]
- James R. Brown, Steven M. Fazzari and Bruce C. Petersen
(2009) "Financing Innovation and Growth: Cash Flow, External
Equity, and the 1990s R&D Boom", Journal of Finance v.64
(1), p.151. [ssrn,
non-free: js]
- M. Dong, D. Hirshleifer and S.H. Teoh,(2018) “Stock Market
Overvaluation, Moon Shots and Corporate Innovation,” NBER
Working Paper 24142 (July 2018) [nber]
- Oscar Jorda, Moritz Schularik, and Alan M. Taylor (2015) “Leveraged
Bubbles,” NBER Working Paper 21486, (August 2015) [nber]
- John Maynard Keynes (1931) "An Economic Analysis of Unemployment", 1931, in Quincy Wright, editor,
Unemployment as a World Problem., p.3 [av]
[repr. in 1983 Collected Writings, vol. XII, p. 347)..
[quote from
p.9]
- Keynes's Beauty Contest in J.M. Keynes (1936): General
Theory: Chapter 12,
p.156
- Donald MacKenzie (2008) An Engine Not a Camera: How
Financial Models Shape Markets. MIT Press. [uberty,
non-free
mit]
- Ramana Nanda, and Matthew Rhodes-Kropf (2013) “Investment
Cycles and Startup Innovation,” Journal of Finance, v.110
(2), p.4 [hbs,
non-free:
sci-dir]
- Ramana Nanda and Matthew Rhodes-Kropf (2014) “Financing Risk
and Innovation,” Harvard Working Paper 11-013 (pub. 2017
Management Science, v.63 (4), p.901). [hbs,
non-free:
repec,
info]
- Larry Neal (1998) “Financial Crisis of 1825", Federal Reserve
Bank of St. Louis Review (May/June),p. 61 [frbstl]
- Andrew Odlyzko (2010) “Collective hallucinations and inefficient
markets: The British Railway Mania of the 1840s,” [ssrn]
- "Railway Mania: The Largest Speculative Bubble You've Never
Heard Of" by Oliver Reynolds, at Focus Economics blog
(Jul 30, 2018) [blog]
- George Soros (2010) The Soros Lectures at the Central
European University. New York: Public Affairs. [non-free:
pubaff, amzn] [Youtube video:
lec.1,
lec.2,
lec.3,
lec.4,
lec.5]
- Anthony Trollope (1875) The Way We Live Now. London.
v.1,
v.2 [gut].
- Referenced works (non-free or restricted)
- T. P. Hughes (1983) Networks of Power: Electrification in
Western Society 1880-1930. Johns Hopkins University Press,
p. 62 [non-free:
acls:jhup]
- David Kynaston (1995) The City of London, vol. I - A
World of Its Own: 1815–1890. London: Pimlico,p.
220.[non-free:
penguin]
- David Kynaston (1995) The City of London, vol. II -
Golden Years: 1890–1914. London: Pimlico, p. 109. [non-free:
penguin]
- Hyman Minsky (1986) Stabilizing an Unstable Economy.
Yale University Press, p. 21 [non-free:
yaleup,
amzn]
- Mary O’Sullivan (2007) "Funding New Industries: A Historical
Perspective on the Financing Role of the US Stock Market in the
Twentieth Century," in N. Lamoreaux and Sokoloff, K., eds,
Financing Innovation in the United States: 1870 to the Present. MIT Press, [non-free:
mit]
- Robert Shiller (2000) Irrational Exuberance.
Princeton Univ Press [non-free:
shiller,
pup].
- Brad Stone (2013) The Everything Store: Jeff Bezos and the
Age of Amazon. New York: Little, Brown [non-free:
lb,
amzn]
- Extra Resources
- "The South Sea Bubble, a Scene in ‘Change Alley in 1720"
by Andrew Matthew Ward, 1849, at
Tate Gallery [tate]
- IMF Fiscal Affairs Department Database [imf]
- Arthur D. Chandler (1977) The Visible Hand: The
Managerial Revolution in American Business, Harvard
University Press, pp. 90-2. [non-free:
alcs]
- Charles Kindleberger (1978) Manias, Panics and Crashes: A
History of Financial Crises. 2015 7th edition with R.Z.
Aliber [non-free:
palgrave,
amzn]
- William R. Kerr and Ramana Nanda (2014) "Financing
Innovation" NBER Working Paper 20676 [nber]
- Veritas software [site,
wiki], BEA systems [oracle,
wiki];
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Lecture 6 -
Exploring New Economic Space
In this sixth lecture in the Institute for New
Economic Thinking’s series “Venture Capital in the 21st Century”, Prof. Bill Janeway
explores the relationship between core general purpose technologies (e.g.
steam engine, electricity, computers) and the sectors to which they are
applied (e.g. railways, radio communications, e-commerce). There
is positive feedback between innovation in core technologies and development
and deployment in application sectors. The impact of technological
innovation on the macroeconomy is often underestimated. As is the
important role of the State in fostering both core technologies and
application sectors. Finally, the lecture explores the relationship
between innovative firms on the frontier and established firms with channels
to markets. This returns to the Schumpeterian question of the source
of new inventions, whether firms develop it internally or acquire it
externally from other firms. Start-ups with innovative labor are a major
source for other firms, validating the role of venture capital in feeding
the overall innovation system. |
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Resources for Lecture 6
- Exploring New Economic Space (INET
video)
- Referenced works (online)
- A. Arora, W.M. Cohen and J.P. Walsh (2016). "The Acquisition and
Commercialization of Invention in American Manufacturing: Incidence and
Impact", NBER Working Paper 20264 (June 2014) (pub.2016, Research
Policy, v.45 (6)) [nber]
- Philippe Aghion, Ufuk Akcigit and Peter Howitt (2013) “What Do We
Learn from Schumpeterian Growth Theory,” NBER Working Paper No.
18824 (Feb. 2013) [nber]
- Timothy F. Bresnahan & Manuel Trajtenberg (1992) "General Purpose
Technologies "Engines of Growth?" NBER Working Paper 4148 (pub. 1995,
Journal of Econometrics (Jan), p.83) [nber].
- E. Brynjolfsson, D. Rock, and C. Syverson (2018) “The Productivity
J-Curve: How Intangibles Complement General Purpose Technologies,” NBER
working paper 25148, (October 2018) [nber]
- Paul A. David (1990) “The Dynamo and the Computer: An Historical
Perspective on the Modern Productivity Paradox,” American Economic
Review, (May), p. 355 [rgate;
pdf,
non-free: js]
- Brad DeLong (2003) “Profits of Doom,” Wired (Apr 11, 2003), [wired].
- Elhanan Helpman and Manuel Trajtenberg (1994) "A Time to Sow and a
Time to Reap: Growth Based on General Purpose Technologies" NBER Working
Paper 4854 (pub. in Helpman, ed. 1998, General Purpose
Technologies and Economic Growth). [nber]
- R. Hornbeck and A. Rotemberg (2019) “Railroads, Reallocation, and
the Rise of American Manufacturing,” NBER Working Paper 26594 (December
2019) [nber]
- Boyan Jovanovic and Peter L. Rousseau (2005) “General Purpose
Technologies”, NBER Working Paper 11093 (Jan 2005) [nber]
(pub. in P. Aghion and S. Durlauf, eds., 2005, Handbook of
Economic Growth, Amsterdam: Elsevier).
- Robert Solow (1987) "We'd better watch out" in New York Times
Book Review (July 12, 1987), page 36. [pdf]
- Referenced works (non-free or restricted)
- W. Brian Arthur (2009) The Nature of Technology: What It Is and
How It Evolves. New York: Free Press [non-free:
santafe,
s&s]
- Timothy Bresnahan (2010) "General Purpose Technologies", in B.H.
Hall and N. Rosenberg, eds, Handbook of the Economics of Innovation,
v.2. Amsterdam: Elsevier, ch.18 (p.761) [non-free:
sci-dir]
- Clayton Christensen (1997) The Innovator's Dilemma: When
New Technologies Cause Great Firms to Fail. Harvard Business
Review Press. [non-free:
hbs]
- Alexander J. Field (2011) A Great Leap Forward: 1930s Depression
and U.S. Economic Growth. Yale University Press. [non-free:
yup] [review
in eh]
- Robert W. Fogel (1964) Railroads and American Economic Growth:
Essays in econometric history. Johns Hopkins Press.[non-free:
amzn]
- Christophe Lécuyer (2007) Making Silicon Valley: Innovation and the
Growth of High Tech, 1930-1970. MIT Press [non-free:
mit]
- David C. Mowery, (2010) “Military R&D and Innovation,” in B. W.
Hall and N. Rosenberg, eds., Handbook of the Economics of
Innovation v.2. Amsterdam: Elsevier, p.1236 (ch.29)
[non-free:
sci-dir]
- David E. Nye (1992) Electrifying America: Social Meaning of a New
Technology, 1880-1940. MIT Press. [non-free:
MIT]
- Everett M. Rogers (1962) The Diffusion of Innovations. 2003
5th ed. Simon & Schuster. [non-free:
s&s]
- Extra Resources
- "Description of the Engine for Raising Water By Fire", c.1725 print
by Sutton Nichols [bl][described
in "Links in the History of the Steam Engine", 1905, The
Engineer, (Aug 11),
p.130]
- "Urwin's Patent Steam Engine Improvements", 1854, Mechanics
Magazine (Jun 10),
p.529.
- Metcalfe's Law at Peter Fisk [site]
- James Hendler and Jennifer Golbeck (2007) "Metcalfe's Law, Web 2.0,
and the Semantic Web" [umd]
- "James Watt (1736-1819)" [bio
by Jennifer Tann for Oxford DNB,
bio at
Spartacus-Ed,
bio
by Carl Lira,
bio at Britannica]
- "Matthew Boulton (1728-1809)" [bio
at Spartacus-Ed,
bio at
WMH, bio
at Britannica]
- "Alexander Graham Bell (1847-1922)" [bio
at Britannica,
bio at
Wiki]
- "E.M. Rogers' Diffusion of Innovation Theory" at Behavioral Change
Models, Boston University [bhm]
- "The Solow Productivity Paradox" by Jack E. Triplett (1998),
Brookings [pdf]
- "The Internet Just Isn't that Big an Idea Yet: A hard look at
Solow's Paradox" by Simon Dudley, in Wired, (Nov 2014) [wired]
- "Review of R.W. Fogel's Railroads & Economic Growth" by Lance Davis
at
eh.net.
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↑ Lecture 6 |
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Lecture 7 -
The Digital Revolution and the State
In this seventh lecture in the Institute for New
Economic Thinking’s series “Venture Capital in the 21st Century”, Prof. Bill Janeway
turns to the maturation of the digital
revolution in information technology of the modern era. The digital
revolution was pioneered by the mission-driven State, and has evolved
considerably since. Prof. Janeway considers the impact of the digital
revolution, and how it might have led to the puzzle of productivity growth
slowdown. This includes large increases in
industrial concentration, rising inequality, overall decline in business
dynamism, increased globalization and financialization, and its attendant
fragility, and political polarization. The digital revolution,
enabled by the State and speculation, has fed back to transform the market
economy and the State's ability to offset the consequences of its own
disruptions. |
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Resources for Lecture 7
- The Digital Revolution and the State (INET
video)
- Referenced works (online)
- Ufuk Akcigit and Sina T. Ates (2019) “What Happened to U.S. Business
Dynamism?” NBER Working Paper 25756 (May 2019) [nber,
bfi]
- D. Andrews, C. Criscuolo, and P. N. Gal (2016) “The Best versus the
Rest: the Global Productivity Slowdown, Divergence across Firms and the
Role of Public Policy,” OECD Productivity Papers, (December 2016), [oecd]
- Brad DeLong (2003) “Profits of Doom,” Wired (Apr 11, 2003), [wired].
- Maarten de Ridder (2019) “Market Power and Innovation in the
Intangible Economy,” LSE working paper (November 2019) [pdf].
- Antoni Estevadeordal, Brian Frantz and Alan M. Taylor (2002) "The
Rise and Fall of World Trade, 1870-1939" NBER Working Paper 9318 (Nov
2002) [nber]
- M. Klasing and P. Milionis (2014) "Quantifying the evolution of
world trade, 1870–1949", Journal of International Economics v.92
(1), p.185 [2012
ssrn wp; non-free:
sci-dir]
- Chad Syverson (2017) “Challenges to Mismeasurement Explanations for
the US Productivity Slowdown,” Journal of Economic Perspectives,
v.31 (2), p.165 [aea]
- Referenced works (non-free or restricted)
- M. K. Brunnermeier, H. James and J.P. Landau (2017) The Euro and
the Battle of Ideas (Princeton University Press. [non-free:
pup]
- "Is Economic Growth Permanently Lower?" by Gavyn Davis, Financial
Times, (Oct 26, 2014) [non-free:
ft]
- K. R. Fabrizio and D.C. Mowery, (2007) “The Federal Role in
Financing Major Innovations: Information Technology during the Postwar
Period,” in N. Lamoreaux and Sokoloff, K., eds,
Financing Innovation in the United States: 1870 to the Present. MIT Press, [non-free:
mit].
- Shane Greenstein (2010) “Innovative Conduct in Computing and
Internet Markets,” in B.H. Hall
and Rosenberg, N., eds., Handbook of the Economics of
Innovation, v.1. Amsterdam: Elsevier Ch. 11 (p.488) [non-free:
sci-dir]
- David C. Mowery, (2010) “Military R&D and Innovation,” in B. W.
Hall and N. Rosenberg, eds., Handbook of the Economics of
Innovation v.2. Amsterdam: Elsevier, p.1236 (ch.29)
[non-free:
sci-dir]
- Thomas Philippon (2019) The Great Reversal: How America Gave up
on Free Markets. Harvard Belknap Press [non-free:
hup]
- Dani Rodrik (2011) The Globalization Paradox: Why Global Markets,
States, and Democracy Can’t Coexist. New York: Norton [non-free:
harvard,
norton]
- Extra Resources
- Mariana Mazzucato (2013) The Entrepreneurial State:
Debunking Public vs. Private Sector Myths. Anthem Press
[non-free:
mm,
amzn].
- "Programming the ENIAC" at Columbia University Computing History [columbia]
- "John von Neumann and the Report on the EDVAC" at Bit by
Bit at Haverford College [bit-by-bit]
- "SAGE: Semi-Automatic Ground Environment Air Defence System" at
Lincoln Laboratory, MIT [mit]
- "Defense Standardization Program (DSP)", Department of Defense
Manual No.4120.24 [usmilitaryl]
(on "Milspec")
- "Impact of Commercial Off-The-Shelf (COTS) Software and Technology
on Systems Engineering" by Dorothy McKinney (Aug 2001) presentation [present]
- "TCP (Transmission Control Protocol) – The transmission protocol
explained" at Ionos Digital Guide [ionos]
- "What is the Internet Protocol (IP)?" at Cloudfare [cloudfare]
- "Sir Tim Berners-Lee"
biography at WW3.
- Andy Haldane
profile at Bank of England
- "Globalization over 5 Centuries" at Brad De Long [bdelong]
- Penn World Tables 9.1 at FRED, St. Louis [fred],
10.0 at Gronigen [pwt]
- World Development Indicators at World Bank [wdi]
- Bureau of Economic Analysis, BEA [bea]
- Domestic Financial Sectors, total financial assets per GDP at FRED
St. Louis [fred]
- "Could the Fed Have Avoided 2008?" by Cullen Roche (Feb 28, 2014) at
Pragmatic Capitalism [pragcap]
(for Bank Capital chart)
- BIS locational banking statistics [bis]
- "Algorithmic Management in the Workplace" by Alexandra Mateescu and
Aiha Nguyen (Feb 2019), Data & Society [pdf],
- "A Seat at the Table", American Compass (Sep 6, 2020) [amcomp]
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↑ Lecture 7 |
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Lecture 8 -
Leadership of the Next New Economy
In this eighth and final lecture in the Institute for New
Economic Thinking’s series “Venture Capital in the 21st Century”, Prof. Bill Janeway
looks to the next technological revolution, the challenge posed by climate
change. Economists cannot approach it merely as an externalities
pricing problem, but one which will require a wider range of policies to be
effective. A new Green Economy needs to be built, which will require a
mission-driven State prepared to invest on a massive scale. Political
leadership may be currently fragmented and resistant. But the incentives to
collaborate among nations, particularly between the United States and China,
will become increasingly compelling. |
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Resources for Lecture 8
- Leadership of the Next New Economy (INET
video)
- Referenced works (online)
- Barack Obama (2017) "The Irreversible Momentum of Clean Energy",
Science (Jan 13, 2017) [science]
- Donald Trump (2017) "Statement by President Trump on the Paris
Climate Accord", White House (June 1, 2017) [whgov]
- Stiglitz-Stern Commission (2017) "Report of the High-Level Economic
Commission On Carbon Prices" (May 29, 2017) [pdf]
- Uri Gneezy and Aldo Rustichini (2000) "A Fine is a Price",
Journal of Legal Studies v.29 [pdf]
- W. B. Bonvillian (2020), “A Summary of the DARPA Model,” in
Mansfield & Owen, eds, Visions of ARPA, p.27 at Policy Exchange [pdf],
- D. Popp, J. Pless, I. Jascic, and N. Johnstone (2020) “Innovation
and Entrepreneurship in the Energy Sector,” NBER Working Paper 27145
(May 2020) [nber]
- Intergovernmental Pact on Climate Change (2018) Global Warming at
1.5C° - Special Report. [ipcc]
- Referenced works (non-free or restricted)
- J. Helverston and J. Nahm (2019) “China’s Key Role in Scaling
Low-Carbon Energy Technologies, Science, (15 Nov 2019), p.794
[non-free:
science]
- Michael Spence (2019) “The Inequality of Nations,” Project Syndicate
(August 1, 2019) [non-free:
projsynd,rcm]
- Joseph Stiglitz (2019) “Addressing Climate Change through Price and
Non-Price Interventions,” NBER Working Paper 25939 (Jun 2019) [nber]
(pub. European Economic Review (Oct, 2019), p.594
[non-free:
sci-dir]
- Extra Resources
- Global trends in renewable energy costs at IRENA [irena]
(Good News Graph)
- ARPA-Energy budget requests [arpa-e],
FY 2020 [pdf]
- "Trump administration sees a 7-degree rise in global temperatures by
2100" J. Eilperin, B. Dennis, and C. Mooney, Washington Post
(September 28, 2018.) [wapo]
- "China emerges as global climate leader in wake of Trump's triumph"
by Isabel Hilton, in The Guardian (Nov 26, 2016) [guardian]
- “How China is leading the renewable energy revolution,” World
Economic Forum, August 29, 2017 [wef]
- "The Race for Renewable Energy Domination" by Martin Armstrong,
Statista (May 31, 2017) [stat]
- "China coal power building boom sparks climate warning" by Matt
McGrath, BBC (Sep 26, 2018) [bbc]
- "Why is China Placing a Global Bet on Coal?" by Steve Inskeep and
Ashley Westerman, NPR - National Public Radio (Apr 29, 2019) [npr]
- Frankfurt School – UNEP Collaborating Centre for Climate &
Sustainable Energy Finance [fs-unep]
- Union of Concerned Scientists (UCS) [ucsusa]
- "Its Coronavirus Cases Dwindling, China Turns Focus Outward",
New
York Times (Mar 18, 2020) [nyt]
- "Americans say climate change is personally important", New York
Times (Jan 22, 2019) [nyt]
- "U.S. Public Views on Climate and Energy" by Cary Funk and Meg
Hefferon, Pew Research Center, (Nov 25, 2019) [pew]
- "What the Green New Deal entails" by Alexandria Ocasio-Cortez (Jan
1, 2019) [twitter].
- National Venture Capital Association (NVCA) 2019
NVCA Yearbook [pdf],
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↑ Lecture 8 |
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