The problem with the mousetrap market, even under your framing of the problem, is that people are merely incentivized not to make incorrect decisions, there’s no way to profit off of other peoples’ poor choice of moustrap.
Yes, this is certainly a big issue. However, there are other fundamental issues with innovation that it’s upstream of.
Take for example the scarcity of information. Under normal assumptions of markets if I do a poor job of marketing my product, someone else will step in to do that for me (profiting off of my ability to market combined with the knowledge that the product is more valuable). However, If I’m the only one that KNOWS about my product, that assumption breaks down. This applies to both new types of mousetraps and new theories.
In addition, if I had some sort of IP around the innovation it may mean that even if someone DID know about it, they would not be incentivized to spread it because I would get all the value. This is analogous to someone creating a theory and other scientists not being incentivized to spread it. As you said, this is a problem of misaligned incentives between the people who spread ideas/innovations and the people who get value from them.
Yes, this is certainly a big issue. However, there are other fundamental issues with innovation that it’s upstream of.
Take for example the scarcity of information. Under normal assumptions of markets if I do a poor job of marketing my product, someone else will step in to do that for me (profiting off of my ability to market combined with the knowledge that the product is more valuable). However, If I’m the only one that KNOWS about my product, that assumption breaks down. This applies to both new types of mousetraps and new theories.
In addition, if I had some sort of IP around the innovation it may mean that even if someone DID know about it, they would not be incentivized to spread it because I would get all the value. This is analogous to someone creating a theory and other scientists not being incentivized to spread it. As you said, this is a problem of misaligned incentives between the people who spread ideas/innovations and the people who get value from them.