The Damoclean tax and innovation

The paper presents a novel tax that is designed to improve the performance of research and development (R&D) investments. Ideally, the tax allows the technical efficiencies of monopoly while bringing about the desirable effects of the competitive pressure of R&D rivalry. Thus, with the tax, the state can sanction a monopoly of R&D investment in order to attain technical efficiencies and yet avoid the underinvestment in R&D that would result without competitive pressures. A critique of the tax emphasizes the problems of implementing it and offers a more practical alternative that would achieve the same desirable effects.