erty are essential. It is hard to run a railroad efficiently if the track width differs from place to place. However, that is the situation we have now as we try to conduct research and move technology around the world. But I foresee an expanding realization that innovation and fair trade will move us toward the global approach to effective intellectual property protection that is required.

Since World War II, the world has seen two kinds of experimentation with intellectual property systems. In developing countries, we have seen attempts to diminish levels of protection radically. In the developed countries, we have seen attempts to create new sui generis forms of protection. In my view, both experiments have achieved far less than they promised. I see a growing awareness around the world that the basic concepts of intellectual property are sound and that flexible application of those concepts to new developments in science and technology makes sense. I return to these themes repeatedly in this chapter.

Why is the importance of intellectual property systems growing? Clearly it is because the role of knowledge, particularly technical knowledge, is becoming much more prominent in modern economic life. I hardly need to assert that to you or illustrate it for you. However, what this means for business and for nations is changing, which is really the theme of this chapter.

Twenty years ago, business seminars and academic research paid a lot of attention to investment. In the international setting, the focus was on foreign direct investment. That has changed. In recent years, we have all given a lot of attention to technology and, increasingly, to innovation and its role in the creation of wealth and the increased well-being of nations.

Let me give you some images to help make my point. In the 1970s it was as though we had a stage. At stage center sat an imposing figure called investment. The plot was all about attracting investment and calculating investment risk, country by country. Technology played a supporting role and intellectual property was in the program notes, but certainly not on stage.

Today, we have a video screen, not a stage. The actor technology is constantly the center of attention on this screen, and now we see investment pursuing technology, trying to keep up. As we look closely at the screen, we see the intellectual property system helping to guide investment in R&D and conditioning the origin, direction, and velocity of innovation.

Stated differently, classical and neoclassical economic theories have sought to depict productive human activity in terms of capital, labor, and resources (meaning things in the ground, such as oil and gold). This trio of factors has overlooked innovation as a primary factor. Only in the last few decades have economists begun to look hard at what happens when the results of scientific and technical research are injected into economic activ-