Dynamic competition in technological innovation drives long run economic growth. We find a rationale for public support of private technological innovation in features of this process which are central to our appreciative structural-evolutionary growth theory presented here. Agents face uncertainty and allocate resources to innovative endeavors based on subjective perceptions of potential opportunities that are generated by and limited to the evolving structural context in which they operate. Efforts cannot be evaluated on optimality criteria of equilibrium models because much of the value that may come to be associated with originating innovations is yet to be determined over the uncertain futures of their development trajectories. The system's history determines its present and future states. Influencing agent behaviours with respect to technological innovation alters the evolutionary path of economic growth. Policy that is historically conditioned, selectively focused and embedded in the structure of technology and the economy induces beneficial technological innovation trajectories. This role is absent from the equilibrium approach to economic growth theory in which fully-informed agents allocate resources based on calculations of optimal returns, producing growth on a stationary balanced growth path. In this approach, policy's sole purpose is the correction of divergence between social and private returns.
Carlaw et al. (Sat,) studied this question.