Towards a dynamic (Schumpeterian) welfare economics

Abstract

Knowledge plays an increasingly important role in shaping the dynamics of an economy. A static Paretian welfare economics is therefore inadequate, and needs to be supplemented by a dynamic (Schumpeterian) welfare theory. A dynamic welfare economics acknowledges the role of knowledge and communication. As knowledge develops cumulatively in a social environment, knowledge may not be readily diffused or exchanged. Different costs of communication need to be considered, each affecting the creation of new knowledge. Recent developments in Intellectual Property Right (IPR) law are evaluated to determine the extent to which they affect communication costs and thus future economic welfare.