My article in the European Economic Review argues that regulation does not only change prices, incentives, or compliance costs. It can also change what innovators are able to try in the first place.

Stuart Kauffman’s idea of the adjacent possible helps explain why innovation is so hard to predict. New things do not merely solve existing problems; they create new possibilities. My regulatory twist is this: regulation can block not only known products, but unknown future recombinations. That is the problem of forgone innovation.