Academic Freedom May Lead to Economic Growth through Innovation

Academic freedom matters for many reasons. Our new study that is available for free download at SSRN empirically shows that academic freedom can be related to economic growth through more innovation. Examining 157 countries over the 1900–2015 period, the study concludes that academic freedom is associated with more patents filed (a quantity measure for innovation) and more forward citations per granted patent (a quality measure for innovation). Given that academic freedom has declined in the last decade for the first time since 1900, and the decline is particularly pronounced in innovation-intensive countries, the findings suggest that the decline in academic freedom slows down economic growth.

Adam Smith, in his landmark book The Wealth of Nations that laid the foundations for modern economic thought, recognized freedom as a source for economic growth as early as 1776. Free-market societies develop faster because freedom spurs innovation. Institutions that allow for free cooperation and competition promote knowledge production and development. Independence from authority and hierarchy fosters an atmosphere of information exchange and tolerance to failures that spurs idea circulation, experimentation, diversity, and creativity—all ultimately inducing innovation.

Academic freedom is similarly embedded in the norms of science, along with other cornerstones of science such as open disclosure and freedom of critique. These norms are key to promoting the kind of unconditional exploration that fuels science and would not be possible in the private sector, where highly uncertain economic returns and limited appropriability discourage profit-oriented researchers.

However, the relevance of academic freedom for innovation has never been empirically tested. Exploring the relation seems especially important now that academic freedom is increasingly under threat and indicators have registered signs of its decline in the last decade, for the first time in the post–World War II period.

The results from a comprehensive sample covering 92 percent of the overall inventive activity since the beginning of the twentieth century consistently suggest that academic freedom has strong positive effects on both the quantity and the quality of innovation output.

Based on the estimates, the global decline in academic freedom that occurred in the last decade has resulted in a global loss quantifiable in the range of 4.0 to 6.7 percent fewer patents filed and 5.9 to 23.5 percent fewer patent citations.

Overall, the study provides a strong empirical argument for restoring and improving academic freedom in innovation-intensive countries and elsewhere that has rarely been put forth before: economic growth through more and better innovation.