The Innovation Economy evolves through interactions between scientific discovery and technological invention, between basic and applied research, between the pursuit of fundamental understanding and considerations of practical use. Hence emerge the transformational innovations – general-purpose technologies like the steam engine, electricity and digital electronics – whose deployment and exploitation create the successive waves of new economies.

All of the stages of development are dependent to some degree on speculative forays into the unknown. None lends itself to optimal management in accord with a strict accounting of expected returns relative to costs incurred, whether conducted by a central planner or an established, profit-making enterprise. When scientific advance was funded by the profits of the great corporations through the first half of the twentieth century, the costs of the central research labs could no more be rationalized by the calculus of prospective financial returns than could the costs of the National Science Foundation (NSF) or the Defense Advanced Research Projects Agency (DARPA) or the National Institutes of Health (NIH) – which is why they were all required to shift resources toward explicitly applied research and development when profits came under pressure.

Thus, the prime and critical constituent elements of the Innovation Economy are sources of funding decoupled from concern for economic return. This is clearly so with respect to the unfettered pursuit of scientific curiosity, but support for such research may be fully available from the state only during transient moments of national self-confidence when economic competition seems least threatening.