Better consumers, more innovation

It has long been a truism in innovation studies that demanding customer are an important source of innovation. But how does public policy affect the creation of demanding customers? There are two possible lines of thought on this — neither being mutually exclusive. The first is that of competition (anti-trust) policy. If consumers are given a choice, they will spur innovation. The second is that of government procurement. The government itself can act as a demanding customer to spur innovation. The standard case is that of military and space technologies.
But an interesting approach alternative approach might emerge from looking at OECD’s new Consumer Policy Toolkit:

The OECD publication “Consumer Policy Toolkit” examines how markets have evolved and provides insights for improved consumer policy making. It explores, for the first time, how what we have learned through the study of behavioural economics is changing the way policy makers are addressing problems.

The Toolkit is process oriented. It does not make specific policy recommendations although it describes the array of policy options ranging from consumer awareness and education to prohibitions on certain activities.
Nor is specifically being touted as an innovation policy. Its goal is to help consumer protection policy makers “quickly respond to a rapidly changing and highly sophisticated marketplace.”
But its implications for innovation policy is obvious. If consumers are better prepared to cope with the more sophisticated marketplace, they will be better customers. And better customers are more likely to be more aware of their needs — and demand more from the goods and services being offered. That demand will spur innovation.

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