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Review of Environmental Economics and Policy Advance Access originally published online on April 9, 2008
Review of Environmental Economics and Policy 2008 2(1):130-145; doi:10.1093/reep/rem029
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© The Author 2008. Published by Oxford University Press on behalf of the Association of Environmental and Resource Economists. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org

Reflections on the Literature

V. Kerry Smith*

* W. P. Carey Professor of Economics, Arizona State University, Resources for the Future University Fellow, and research associate, National Bureau of Economic Research

This article considers the literature on how different policy instruments influence the pace and direction of technical change. The motivation for addressing this topic stems from current assessments of the costs of policies to reduce the emissions of pollutants thought to contribute to climate change. Three dimensions of the literature are discussed: empirical research on learning curves; tests of the effects of energy price movements on the direction of innovation; and lessons from the experience of military procurement in inducing new, general-purpose technologies. The conclusions of past research are found to be general. Experience with military procurement practices confirms that consistent commitments seem to be associated with dramatic technical changes. Incentives do contribute to directing innovative activity. However, the results of past research offer little specific guidance on instrument design. Thus, there is scope for new research with high payoffs.

Thanks are due to Eric Moore and Brian Keegan for exceptionally careful research assistance and to Charlie Kolstad and Aaron Strong for comments on many of the ideas in this paper. They are not responsible for my mistakes. I would not have been able to complete the analysis of the learning curve studies without the help (early in their careers) of Dimitrias Dadakas and Randy Walsh. As always, Suzy Leonard improves all that I write for this column. My only regret is that I can't get her help with other writing projects! Finally, thanks are due to Vicenta Ditto and Richard Laborin for making sense of numerous drafts of this column.


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