Positive Externalities and Public Goods (Economics)

Recall cards on positive externalities, innovation, and public goods. Why the private sector underinvests in innovation: technology's positive spillovers, private versus social benefits, the private versus social rate of return, and how easy copying and captured benefits lead to underinvestment in research and development. How governments encourage innovation: intellectual property rights, direct R&D spending, R&D tax credits, and cooperative research. Public goods: nonexcludability and nonrivalry, private goods, national defense, the free rider problem, why markets underprovide public goods, and how taxes and alternative funding address it.