chapter
Preliminary concepts and relations
Pages 22

The first three chapters of this book are introductory. They are intended primarily to familiarize the reader with some of the economic concepts that will be needed later in the book. The first such preliminary concept is that of the production sector, which will be presumed to consist of production units called firms or enterprises and to be distinct from the sector consisting of consumption units called households. We shall have little to say about the household sector. The innovation activity and the growth of the productivities of inputs in firms, industries, and national economies worldwide will be our primary interest. The production sector is presumed to supply goods of two categories: ‘conventional’ goods, such as intermediate and investment inputs and consumer goods, and ‘progress’ goods in the form of new inventions and new skills intended to enhance the welfare-creating capacities of firms and households. Accordingly, in the production sector we distinguish between the conventional activity and the inventive activity. In our introductory chapters we shall identify and discuss the major characteristics of the nature and size of the inventive activity, and the ways in which the latter interacts with and influences the composition and growth of conventional activity. We shall also identify the major styliied facts about world inventive activity, concerning its size and changes over time as well as the distribution among countries and industries in recent times.