endogenous growth

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pages: 606 words: 87,358

The Great Convergence: Information Technology and the New Globalization by Richard Baldwin

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3D printing, additive manufacturing, Admiral Zheng, agricultural Revolution, air freight, Amazon Mechanical Turk, Berlin Wall, bilateral investment treaty, Branko Milanovic, buy low sell high, call centre, Columbian Exchange, commoditize, Commodity Super-Cycle, David Ricardo: comparative advantage, deindustrialization, domestication of the camel, Edward Glaeser, endogenous growth, Erik Brynjolfsson, financial intermediation, George Gilder, global supply chain, global value chain, Henri Poincaré, imperial preference, industrial cluster, industrial robot, intangible asset, invention of agriculture, invention of the telegraph, investor state dispute settlement, Isaac Newton, Islamic Golden Age, James Dyson, knowledge economy, knowledge worker, Lao Tzu, low skilled workers, market fragmentation, mass immigration, Metcalfe’s law, New Economic Geography, out of africa, paper trading, Paul Samuelson, Pax Mongolica, profit motive, rent-seeking, reshoring, Richard Florida, rising living standards, Robert Metcalfe, Second Machine Age, Simon Kuznets, Skype, Snapchat, Stephen Hawking, telepresence, telerobotics, The Wealth of Nations by Adam Smith, trade liberalization, trade route, Washington Consensus

To get the same amount of re-equilibration, more firms have to move to the North when trade costs are low. This is counterintuitive, but the logic is nonetheless airtight. Firms become more (not less) footloose when trade costs are low. Endogenous Growth Takeoffs and Economic Geography The static NEG reasoning discussed hereto is a useful indicator as to the direction things may move, but globalization’s headline events involved growth rates—not just one-off shifts. Fortunately, connecting location and growth is quite simple. The big breakthrough Paul Romer made when he launched the endogenous growth theory in the 1980s was conceptual and mathematical. The mathematical part is of no interest here and the conceptual part is so simple it is hard to believe no one had thought of it before Romer. In fact, it is related to Isaac Newton’s well-known phrase, “If I have seen a little further it is by standing on the shoulders of giants.”2 Or in today’s more prosaic phraseology, knowledge creation generates “spillovers” that make future innovation easier.

The first set, and the baseline for all the rest, is David Ricardo’s notion of comparative advantage. The next two logical toolkits stem from theoretical advances made in the 1990s. One of these was pioneered by Paul Krugman with Tony Venables, Masahisa Fujita, and others. It is called the “new economic geography”—even though some people are inclined to dispute whether it is really new and others whether it is really geography. The other 1990s logic set is the so-called endogenous growth theory, which is indisputably new and definitely about growth. The pathbreaker here is, among others, New York University economist Paul Romer. The last analytic framework helps organize thinking about the impact of information and communication technology (ICT) on offshoring. We begin with the logic of comparative advantage. Ricardo and the Gains and Pains of Trade Ricardo helps one think clearly about how even very uncompetitive nations can be competitive in something.

Romer’s framework had no distance lever for globalization to pull, but more recent work has bolted on a few such levers. Growth in a Global Economy Distance matters for innovation and growth; Isaac Newton’s innovators can’t get up onto the shoulders of giants if the giants are too far away. Putting this sort of consideration into the framework was done when Gene Grossman and Elhanan Helpman took endogenous growth theory to an international setting in their 1991 book Innovation and Growth in the Global Economy.4 Again, the key insight is simplicity itself. They allowed the growth-promoting knowledge spillovers to cross borders, but only imperfectly. The mechanics can be seen with another small thought experiment. Start from two closed economies, each of which is on a self-sustaining growth path that is entirely independent of the other’s growth.

pages: 370 words: 102,823

Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth by Michael Jacobs, Mariana Mazzucato

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3D printing, balance sheet recession, banking crisis, basic income, Bernie Sanders, Bretton Woods, business climate, Carmen Reinhart, central bank independence, collaborative economy, complexity theory, conceptual framework, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, decarbonisation, deindustrialization, dematerialisation, Detroit bankruptcy, double entry bookkeeping, Elon Musk, endogenous growth, energy security, eurozone crisis, factory automation, facts on the ground, fiat currency, Financial Instability Hypothesis, financial intermediation, forward guidance, full employment, G4S, Gini coefficient, Growth in a Time of Debt, Hyman Minsky, income inequality, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Internet of things, investor state dispute settlement, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labour market flexibility, low skilled workers, Martin Wolf, mass incarceration, Mont Pelerin Society, neoliberal agenda, Network effects, new economy, non-tariff barriers, paradox of thrift, Paul Samuelson, price stability, private sector deleveraging, quantitative easing, QWERTY keyboard, railway mania, rent-seeking, road to serfdom, savings glut, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Steve Jobs, the built environment, The Great Moderation, The Spirit Level, Thorstein Veblen, too big to fail, total factor productivity, transaction costs, trickle-down economics, universal basic income, very high income

This means it is hard to appropriate privately the return from public goods, and hence they are characterised by too little private investment. Public goods might include clean air, national defence, basic research, all of which create benefits, positive externalities, for the wider community besides the agent investing in it. 5 R. Nelson and S. Winter, ‘An Evolutionary Theory of Economic Change’, 1984, Cambridge, MA, Harvard University Press; P. M. Romer, ‘The Origins of Endogenous Growth’, The Journal of Economic Perspectives, vol. 8, no. 1, 1994, pp. 3–22. 6 C. Freeman, Technology Policy and Economic Performance: Lessons from Japan, London, Pinter, 1987. 7 B.-A. Lundvall, ‘Introduction’, in B.-A. Lundvall, ed. National Systems of Innovation: Towards a Theory of Innovation and Interactive Learning, London, Pinter, 1992, pp. 1–20. 8 SSTI, ‘The Changing Nature of U.S. Basic Research: Trends in Funding Sources’ http://ssti.org/blog/changing-nature-us-basic-research-trends-funding-sources (accessed 8 August 2015). 9 Eurostat, ‘Science, Technology and Innovation Database’, R&D Expenditure at National and Regional Level, Key Indicators—GERD by Source of Funds (%) [rd_e_fundgerd] (extracted on 23 December 2015). 10 A.

For this we need to draw on much richer veins of evolutionary and institutional economic thought about the dynamics of change in economic systems. We need to understand the basis of growth in innovation, and the role of path-dependence in system transformation. Innovation and growth Technological innovation has long been recognised as one of the core drivers of economic growth, but in modern theories of endogenous growth it is given a pre-eminent role.14 Investment in innovation—in human capital, research and development (R&D) and knowledge—is the key not just to productivity improvement but to an expansion in the ways in which value can be created. This is crucial to solving the climate change problem. A long tradition in environmentalism has argued that the quest to remain within the planet’s ecological limits must inevitably mean an end to growth.

More recent critics of economic growth have argued that a continuous increase in economic output does not lead to a concomitant increase in human well-being, and is unsustainable within the finite biophysical boundaries of the planet.16 But this is a contingent matter. It depends on the path of innovation: not just on how far new technologies and systems of production, distribution and consumption can raise output while reducing environmental impact, but on how far economic value can be created out of knowledge and information. Unlike material resources, knowledge does not deplete. Indeed, knowledge builds on knowledge: one of the sources of endogenous growth is that constant or increasing returns to ideas can overcome diminishing returns to physical capital.17 It is very hard to unlearn what has been learned and intellectual capital accumulates, so technical progress tends to push productivity ever upwards. As Isaac Newton famously acknowledged, he saw further only by ‘standing on the shoulders of giants’. In a virtuous spiral, knowledge begets increased output and liberates resources for further investment.

pages: 226 words: 59,080

Economics Rules: The Rights and Wrongs of the Dismal Science by Dani Rodrik

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airline deregulation, Albert Einstein, bank run, barriers to entry, Bretton Woods, butterfly effect, capital controls, Carmen Reinhart, central bank independence, collective bargaining, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, distributed generation, Donald Davies, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, Everything should be made as simple as possible, Fellow of the Royal Society, financial deregulation, financial innovation, floating exchange rates, fudge factor, full employment, George Akerlof, Gini coefficient, Growth in a Time of Debt, income inequality, inflation targeting, informal economy, information asymmetry, invisible hand, Jean Tirole, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, labor-force participation, liquidity trap, loss aversion, low skilled workers, market design, market fundamentalism, minimum wage unemployment, oil shock, open economy, Pareto efficiency, Paul Samuelson, price stability, prisoner's dilemma, profit maximization, quantitative easing, randomized controlled trial, rent control, rent-seeking, Richard Thaler, risk/return, Robert Shiller, Robert Shiller, school vouchers, South Sea Bubble, spectrum auction, The Market for Lemons, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, trade liberalization, trade route, ultimatum game, University of East Anglia, unorthodox policies, Vilfredo Pareto, Washington Consensus, white flight

The reforms had to be targeted at the largest obstacles, avoiding the risk that governments would waste large amounts of political capital with little economic growth in return. But which reforms, among the long list above, fit the bill? The answer depended on the favored model of growth. Those of us who looked at growth from the perspective of the “neoclassical model” emphasized the supply of physical and human capital and the barriers it faced. Those who preferred “endogenous” growth models, in which growth is driven by investment in new technologies, homed in on the environment for market competition and innovation. Those who had worked intensively with models that put institutional quality at center stage concentrated on property rights and contract enforcement. Those who were steeped in “dual economy” models would look at the conditions for structural transformation and the transition from traditional economic activities such as subsistence agriculture to modern firms and industries.

“fox” approaches in, 175 ignorant vs. calculating peasant hypotheses in, 75 individual behavior in, 17, 33, 39, 42, 49, 101, 102, 131, 137, 181–82 marginalists and, 119–22 models in, see models outsider views in, 6 pluralism in, 196–208 points of consensus in, 147–52, 194–95 power and responsibility and, 174–75 predictability in, 6, 26–28, 38, 40–41, 85, 104, 105, 108, 115, 132, 133, 139–40, 157, 175, 184–85, 202 progressive modeling in, 63–72 psychology and sociology of, 167–74 self-interest in, 21, 104, 158, 186–88, 190 shocks in, 130–31, 132 social sciences and, xii–xiii, 45, 181–82, 202–7 strengths and weaknesses of, xi supply and demand in, 3, 13–14, 20, 99, 119, 122, 128–30, 136–37, 170 trade-offs in, 193–94 twenty commandments for, 213–15 values in, 186–96 see also markets; models Economics, Education and Unlearning: Economics Education at the University of Manchester (PCES), 197n education: antipoverty programs and, 4, 55, 105–6 field experiments and variable factors in, 24 markets and, 198 models in, 36–37, 173 efficient-markets hypothesis (EMH), 156–58 Einstein, Albert, 80, 81, 113, 179 El Salvador, 86, 92–93 Elster, Jon, 79n emissions quotas, 188–90, 191–92 empirical method, models and, xii, 7, 46, 65, 72–76, 77–78, 137, 173–74, 183, 199–206 employment: in business cycles, 125–37 labor productivity and, 123 minimum wages and, 17–18, 28n, 114, 115, 124, 143, 150, 151 social and cultural considerations in, 181 see also unemployment endogenous growth models, 88 England, comparative advantage principle and, 52–53 entrepreneurs: corruption and, 91 taxation and, 74 Ethiopia, 86, 123 Europe: Great Recession in, 153, 156 income inequality in, 125, 139 trade agreements between U.S. and, 41 European Common Market, 59 European Union (EU), 76 evolution, theory of, 113–14 exchange rates, 2, 100, 149 experiments: economic models compared with, 21–25 field types of, 23–24, 105–8, 173, 202–5 Explaining Social Behavior: More Nuts and Bolts for the Social Sciences (Elster), 79n external validity, 23–24, 112 fables, models and, 18–21 factor endowments theory, 139–40 Fama, Eugene, 157, 159 Fassin, Didier, xiv Federalists, 187 Federal Reserve, U.S., 134–35, 151n, 158 Feenstra, Rob, 141 field experiments, 23–24, 105–8, 173, 202–5 financial costs, 70 financial industry: globalization of, 164–67 in Great Recession, 152–59, 184 financial markets, deregulation and, 143, 155, 158–59, 162 “Fine Is a Price, A” (Gneezy and Rustichini), 71n fines, 71 First Fundamental Theorem of Welfare Economics, 47–51, 54 fiscal policies, 75–76, 87, 88, 147–48, 149, 160–61, 171 Fischer, Stanley, 165–66 forward causation, 115 Foundations of Economic Analysis (Samuelson), 125 Fourcade, Marion, 79n, 200n France, comparative advantage principle and, 59–60 Freakonomics (Levitt and Dubner), 7 Free to Choose, 49 free trade, 11, 54, 141, 169, 170, 182–83, 194 Friedman, Milton: on assumptions in modeling, 25–26 on cigarette taxes, 27–28 on invisible hand theorem, 49 on liquidity and Great Depression, 134 on model complexity, 37 fuel subsidies, 193 functional distribution of income, 121 Galbraith, John Kenneth, 184 Galileo Galilei, 29 Gambetta, Diego, 34 game theory, 5, 14–15, 33, 36, 61–62, 103–4, 133 simultaneous vs. sequential moves in, 68 garment industry, general-equilibrium effects in, 57–58 Gelman, Andrew, 115 general-equilibrium interactions, 41, 56–58, 69n, 91, 120 General Theory of Second Best, 58–61 Germany, comparative advantage principle and, 59–60 Gibbard, Allan, 20 Gilboa, Itzhak, 72, 73 Gini coefficient, 138 globalization, 139–41, 143, 164–67, 184 Gneezy, Uri, 71n Gold Standard, 2, 127 goods and services, economic models and, 12 Gordon, Roger, 151n Grand Theory of Employment, Interest, and Money, The (Keynes), 128 greenback era, 127n Greenspan, Alan, 158, 159 gross domestic product (GDP), 151n labor productivity and, 123 growth diagnostics, 86–93, 90, 97, 110–11 Haldane, Andrew, 197 Hamilton, Alexander, 187 Hanna, Rema, 107 Hanson, Gordon, 141 Harvard University, xi, 111, 136, 149, 197, 198 Hausmann, Ricardo, 111 health care: in antipoverty programs, 4, 105–7 models and, 5, 36–37, 105–7 Heckscher, Eli, 139 Herndon, Thomas, 77 Hicks, John, 128, 133 Hiebert, Stephanie, xv Hirschman, Albert O., 144–45, 195, 210n–11n housing bubble, 153–54, 156 human capital, 87, 88, 92 Humphrey, Thomas M., 13n Hunting Causes and Using Them: Approaches in Philosophy and Economics (Cartwright), 22n import quotas, 149 incentives, 7, 170, 172, 188–92 income: functional distribution of, 121 military service and, 108 personal distribution of, 121 income inequality, 117, 124–25, 138–44, 147–49 deregulation in, 143 factor endowments theory in, 139–40 Gini coefficient and, 138 globalization in, 139–41, 143 in manufacturing, 141 offshoring in, 141 skill premium in, 138–40, 142 skill upgrading in, 140, 141, 142 technological change in, 141–43 trade in, 139–40 India, 107, 154 Indonesia, 166 industrial organization, 201 industrial revolution, 115 industry: developing economies and policies on, 75–76, 87, 88 government intervention and, 34–35 inflation, 185 in business cycles, 126–27, 130–31, 133, 135, 137 public spending and, 114 infrastructure, 87, 91, 111, 163 Institute for Advanced Study (IAS), xii–xiii, xiv School of Social Science at, xii Institute for International Economics, 159 institutions: development economics and, 98, 161, 202, 205–7 labor productivity and, 123 insurance, banking and, 155 interest rates, 39, 64, 110, 129–30, 156, 161 internal validity, 23–24 International Bank for Reconstruction and Development, 2 see also World Bank international economics, 201–2 International Monetary Fund (IMF), 1n, 2 Washington Consensus and, 160, 165 Internet, big data and, 38 “Interview with Eugene Fama” (Cassidy), 157n investment: business cycles and, 129–30, 136 foreign markets and, 87, 89, 90, 92, 165–67 income inequality and, 141 savings and, 129–30, 165–67 Invisible Hand Theorem, 48–50, 51n, 182, 186 Israel, 103, 188 day care study in, 71, 190–91 Japan: city growth models and, 108 income inequality and, 139 Jenkins, Holman W., Jr., 135n Jevons, William Stanley, 119 Kahneman, Daniel, 203 Kenya, 106–7 Keynes, John Maynard, 1–2, 31, 46, 165 on business cycles, 127–37 on liquidity traps, 130 see also models, Keynesian types of Klemperer, Paul, 36n Klinger, Bailey, 111n Korea, South, 163, 164, 166 Kremer, Michael, 106–7 Krugman, Paul, 136, 148 Kuhn, Thomas, 64n Kupers, Roland, 85 Kydland, Finn E., 101n labor markets, 41, 52, 56, 57, 92, 102, 108, 111, 119, 163 labor productivity, 123–24, 141 labor theory of value, 117–19 Lancaster, Kelvin, 59 Latin America, Washington Consensus and, 159–63, 166 Leamer, Edward, 139 learning, rule-based vs. case-based forms of, 72 Leijonhufvud, Axel, 9–10 Lepenies, Philipp H., 211n leverage, 154 Levitt, Steven, 7 Levy, Santiago, 3–4, 105–6 Lewis, W.

Arthur, 32–33 “Life among the Econ” (Leijonhufvud), 9–10 Lincoln, Abraham, 52 Lipsey, Richard, 59 liquidity, 134–35, 155, 185 liquidity traps, 130 locational advantages, 108 London, England, congestion pricing and, 3 Lucas, Robert, 130, 131–32, 134–36 “Machiavelli’s Mistake: Why Good Laws Are No Substitute for Good Citizens” (Bowles), 71n macroeconomics, 39–40, 87, 102, 107, 143, 157n, 181 business cycles and, 125–37 capital flow and, 165–66 classical questions of, 101 demand-side view of, 128–30, 136–37 globalization and, 165–66 Madison, James, 187 Mäki, Uskali, 22n malaria, randomized testing and, 106, 204 Malthus, Thomas, 118 Manchester University, 197 Mankiw, Greg, 149, 150, 171n, 197 manufacturing: economic growth and, 163–64 exchange rate and, 100, 163 income inequality and, 141 marginal costs, 121, 122 marginalist economics, 119–22 marginal productivity, 120–21, 122–25 marginal utility, 121, 122 Mariel boatlift (1980), 57 market design models, 5 “Market for ‘Lemons’, The” (Akerlof), 69n market fundamentalism, 160, 178 markets: asymmetric information in, 68–69, 70, 71 behavioral economics and, 69–71, 104–7, 202–4 economic models and, see models economics courses and, 198 economists’ bias toward, 169–71, 182–83 efficiency in, xiii, 14, 21, 34, 48, 50, 51, 67, 98, 125, 147, 148, 150, 156–58, 161, 165, 170, 192–95, 196 general-equilibrium interactions in, 41, 56–58, 69n, 91, 120 in Great Recession, 156–59 imperfectly competitive types of, 67–69, 70, 136, 150, 162 incentives in, 7, 170, 172, 188–92 institutions and, 98, 161, 202 likely outcomes in, 17–18 multiple equilibria in, 16–17 perfectly competitive types of, 21, 27, 28, 47, 69n, 71, 122, 180 prisoners’ dilemma in, 14–15, 20, 21, 61–62, 187, 200 self-interest in, 21, 104, 158, 186–88, 190 social cooperation in, 195–96 supply and demand in, 13–14, 20, 99, 119, 122, 128–30, 136–37, 170 values in, 186–96 Washington Consensus and, 159–67, 169 Marshall, Alfred, 13n, 32, 119 “Marshallian Cross Diagrams and Their Uses before Alfred Marshall: The Origins of Supply and Demand Geometry” (Humphrey), 13n Marx, Groucho, 26 Marx, Karl, xi, 31, 116, 118 Massachusetts, University of (Amherst), 77 Massachusetts Institute of Technology (MIT), 107, 108, 165, 206 mathematical economics, 35 mathematical optimization, 30, 101, 202–3 mathematics: economic models and, 29–37, 47 social sciences and, 33–34 Maxwell’s equations, 66n Meade, James, 58 methodological individualism, 181 Mexico: antipoverty programs in, 3–4, 105–6 globalization and, 141, 166 microeconomics, 125–26, 131 microfounded models, 101 Miguel, Ted, 106–7 Milan, Italy, congestion pricing and, 3 Milgrom, Paul, 36n minimum wages, employment and, 17–18, 28n, 114, 115, 124, 143, 150, 151 Minnesota, University of, 131 Mishel, Lawrence, 124n models: authority and criticism of, 76–80 big data and, 38–39, 40 causal factors and, 40–41, 85–86, 99–100, 114–15, 179, 184, 200, 201, 204 coherent argument and clarity in, 80–81 common sense in, 11 comparative advantage principle and, 52–55, 58n, 59–60, 139, 170 compensation for risk and, 110 computers and, 38, 41 contextual truth in, 20, 174 contingency and, 25, 145, 173–74, 185 coordination and, 16–17, 42, 200 critical assumptions in, 18, 26–29, 94–98, 150–51, 180, 183–84, 202 criticisms of, 10–11, 178, 179–85 decision trees and, 89–90, 90 diagnostic analysis and, 86–93, 90, 97, 110–11 direct implications and, 100–109 dual economy forms of, 88 efficient-markets hypothesis and, 156–58 empirical method and, xii, 7, 46, 65, 72–76, 77–78, 137, 173–74, 183, 199–206 endogenous growth types of, 88 experiments compared with, 21–25 fables compared with, 18–21 field experiments and, 23–24, 105–8, 173, 202–5 general-equilibrium interactions and, 41, 56–58, 69n, 91, 120 goods and services and, 12 Great Recession and, 155–59 horizontal vs. vertical development and, 64n, 67, 71 hypotheses and, 46, 47–56 imperfectly competitive markets and, 67–69, 70, 136, 150, 162 incidental implications and, 109–11 institutions and, 12, 98, 202 intuition and, 46, 56–63 Keynesian types of, 40, 88, 101, 102, 127–30, 131, 133–34, 136–37 knowledge and, 46, 47, 63–72 main elements of, 31 mathematics and, 29–37, 47 neoclassical types of, 40, 88, 90–91, 121, 122 new classical approach to, 130–34, 136–37 parables and, 20 partial-equilibrium analysis and, 56, 58, 91 perfectly competitive markets and, 21, 27, 28, 47, 69n, 71, 122, 180 predictability and, 26–28, 38, 40–41, 85, 104, 105, 108, 115, 132, 133, 139–40, 184–85, 202 principle-agent types of, 155 questions and, 114–16 rationality postulate and, 202–3 real world application of, 171–72 rules of formulation in, 199–202 scale economy vs. local advantage in, 108 scientific advances by progressive formulations of, 63–72 scientific character of, 45–81 second-best theory and, 58–61, 163–64, 166 selection of, 83–112, 136–37, 178, 183–84, 208 simplicity and specificity of, 11, 179–80, 210 simplicity vs. complexity of, 37–44 social reality of, 65–67, 179 static vs. dynamic types of, 68 strategic interactions and, 61–62, 63 of supply and demand, 3, 13–14, 20, 99, 119, 122, 128–30, 136–37 theories and, 113–45 time-inconsistent preferences in, 62–63 tipping points arising from, 42 in trade agreements, 41 unrealistic assumptions in, 25–29, 180–81 validity of, 23–24, 66–67, 112 variety of, 11, 12–18, 26, 68, 72, 73, 114, 130, 198, 202, 208, 210 verbal vs. mathematical types of, 34 verification in selection of, 93–112 see also economics; macroeconomics; markets “Models Are Experiments, Experiments are Models” (Mäki), 22n monetary policies, 87 monopolies, 161 in imperfectly competitive markets, 67–68 in perfectly competitive markets, 122 price controls and, 28, 94–97, 150 Montesquieu, Charles-Louis de Secondat, Baron de La Brède et de, 196 mortality rates, 206 mortgage-backed securities, 155 mortgage finance, 39, 155 mosquito nets, randomized testing of, 106, 204 “Mr.

pages: 382 words: 92,138

The Entrepreneurial State: Debunking Public vs. Private Sector Myths by Mariana Mazzucato

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Apple II, banking crisis, barriers to entry, Bretton Woods, California gold rush, call centre, carbon footprint, Carmen Reinhart, cleantech, computer age, creative destruction, credit crunch, David Ricardo: comparative advantage, demand response, deskilling, endogenous growth, energy security, energy transition, eurozone crisis, everywhere but in the productivity statistics, Financial Instability Hypothesis, full employment, G4S, Growth in a Time of Debt, Hyman Minsky, incomplete markets, information retrieval, intangible asset, invisible hand, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, natural language processing, new economy, offshore financial centre, Philip Mirowski, popular electronics, profit maximization, Ralph Nader, renewable energy credits, rent-seeking, ride hailing / ride sharing, risk tolerance, shareholder value, Silicon Valley, Silicon Valley ideology, smart grid, Steve Jobs, Steve Wozniak, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, total factor productivity, trickle-down economics, Washington Consensus, William Shockley: the traitorous eight

In this systems view, it is not the quantity of R&D that matters, but how it is distributed throughout an economy, often reflective of the crucial role of the State in influencing the distribution (Freeman 1995; Lundvall 1992). Schumpeterian economists criticize endogenous growth theory because of its assumption that R&D can be modelled as a lottery where a certain amount of R&D investment will create a certain probability for successful innovation. They argue that in fact innovation is an example of true Knightian uncertainty, which cannot be modelled with a normal (or any other) probability distribution that is implicit in endogenous growth theory, where R&D is often modelled using game theory (Reinganum 1984). By highlighting the strong uncertainty underlying technological innovation, as well as the very strong feedback effects that exist between innovation, growth and market structure, Schumpeterians emphasize the ‘systems’ component of technological progress and growth.4 Systems of innovation are defined as ‘the network of institutions in the public and private sectors whose activities and interactions initiate, import, modify and diffuse new technologies’ (Freeman 1995), or ‘the elements and relationships which interact in the production, diffusion and use of new, and economically useful, knowledge’ (Lundvall 1992, 2).

When successful, often the search for one product leads to the discovery of a completely different one, in a process characterized by serendipity.1 This of course does not mean that innovation is based on luck, far from it. It is based on long-term strategies and targeted investments. But the returns from those investments are highly uncertain and thus cannot be understood through rational economic theory (as was discussed above, this is one of the critiques that modern day Schumpeterians make of ‘endogenous growth theory’, which models R&D as a game-theoretic choice). Furthermore, the ability to engage in innovation differs greatly between companies and is one of the main reasons that firms are so different from each other, and why it is nearly impossible to find firms distributed ‘normally’ around an ‘optimal-size firm’ (the ‘representative’ agent), a concept so dear to neoclassical microeconomic theory.

‘me too’ 64–7; see also pharmaceutical companies (‘pharma’); specific drugs Duhigg, Charles 173–4 DuPont 178–9 economic crisis: boosting clean technologies 142–3; causes of 12, 182; public sector blamed for 15, 17; varied impact of in EU 41 Economist, view on State and enterprise 16 ‘ecosystems’: see innovation ecosystems electric cars/vehicles 108, 123, 124, 133 Electric Power Research Institute (EPRI) 151 Elias, John 102–3 email 104 End of Laissez Faire, The (Keynes) 4, 194 endogenous growth theory: see ‘new growth’ theory energy crisis 137, 144–5; see also green industrial revolution Energy Frontier Research Centers (EFRCs) 133 Enron 148 ‘enterprise zones’ 54 ‘entrepreneurial’ State: building of 54, 196–7; growth and inequality in 183; risk assumption and vision of 24; role of 6, 10, 21, 23; see also State Entrepreneurial State, The (report) 2, 3 entrepreneurs: DARPA’s brokering role with 77; financing of 57; investment choices of 136; myth of in Silicon Valley 63; risk types and 58–9; SBIR funding to 80, 188 EPA (Environmental Protection Agency) 150 equitable growth 13, 177, 185 European Organization for Nuclear Research (CERN) 101 ‘European Paradox’ 53 European Union: approach to green initiatives 124; ‘Big State’ behind innovation in 166; feed-in tariffs in 153; ‘fiscal compact’ of 42, 197; green transition targets in 115n2; gross R&D spending as percentage of GDP 43; growth producing spending in 196; investment in renewable energy 120, 121; public sectors in 17–18; R&D targets of 41; weaknesses of countries in 52–3 Evans, Peter 4 Evergreen Solar 151–2, 162 Evolutionary Theory of Economic Change, An (Nelson and Winter) 34–5 ‘evolutionary theory’ of production 34–5 ‘exogenous growth theory’ 34 externalities 4, 7, 21, 168; see also Apple Fadell, Tony 100n8; see also Apple Fairchild Semiconductor 76 fast Fourier transform (FDT) algorithm 109 feed-in tariffs: in energy technology 114; in European markets 153; German 122, 138, 149, 156; policy changes in 125n7; UK 124 Fert, Albert 96 Fiegerman, Seth 171n3 finance firms 182 financialization 25–8 FingerWorks 103 Finland 120n4, 121, 190 First Solar (formerly Solar Cells Inc.) 128–9, 151, 159–60; see also green industrial revolution Fiscal Investment Loan Program (Japan) 40 flat panel display (FPD) industry 106 Florida, Richard 107 Forbes on WuxiSuntech 153 ‘Fordist’ model of production in 38–9 Foxconn 170–71 France 61, 120, 120n4, 121 Freeman, Chris 193 Fuchs, Erica 133 Funding a Revolution: Government Support for Computing Research 63 G4S, security company 16 game theory 36 GDP, balance in categories of 30 Gedser turbine 145 Genentech Inc. 57, 69, 81 General Electric (GE) 125, 137, 147–8, 160–61, 174n5 general purpose technologies (GPTs) 62, 83 Genzyme 81, 181 Germany: feed-in tariffs 122, 138, 149, 156; government energy R&D spending 121; green revolution in 115n2, 116, 120, 122; long-term support provided by 158; public R&D spending in 61, 144–6; solar resources of 144; State investment bank 190; systems of innovation in 37; wind energy and R&D projects in 144–6, 149, 156 Ghosh, Shikhar 127 giant magnetoresistance (GMR) 96–7 GlaxoSmithKline 66–7, 82 Global Wind Energy Council (GWEC) 138–9 Goldwind 149 Goodenough, John B. 108 Google 20, 174–5 government energy R&D spending 121, 121 GPS (global positioning system) 105, 105n12 Great Transformation, The (Polanyi) 194–5 Greece, R&D/GDP 52 Green, Martin 152 green industrial revolution: ARPA-E 133–5; ‘carbon lock-in’ 117; China’s ‘green’ 5 year plan 122–4; climate change 117, 123, 135; development banks funding of 139–40, 139n14; DoE role in 132–3; Economist on 16; financial commitment for 116; funding of 116–19; global new investment in renewable energy 120; government energy R&D spending 121; government support to 114–15, 119, 129, 141–2; hurdles to 138, 156, 160; leaders in 11–12, 126; national approaches to 119–22; ‘No More Solyndras Act’ 130–31n12; patient capital 138–40; policies impacting 113–15, 119; pushing green development 136–7; renewable energy credits (RECs) 115n1; smart grid technology in 115, 118; sustainability 117, 119, 123; UK’s approach to 124–6; US approach to 126–35; venture capital in 127–9, 128n9; venture capital subsectors in 128; see also clean technology; solar power; wind power Green Investment Bank 125n7 Gronet, Chris 151 growth: economy-wide 62; effect of venture capital on 49; of firms and R&D benefit 44; firm size relationship to 45–6; ‘inclusive’ 167, 183, 195; inequality and 31, 54, 177; innovation as key source of 9, 177; measures of 33; myths about innovation and 10; national debt relationship to 18; ‘smart’ 167, 183; and technology 33–4; theories of 33–4; variables important for 18; see also equitable growth Grünberg, Peter 96, 97 Grunwald, Michael 113, 136 Haltiwanger, J 45 Hamilton, Alexander 73 Hanwha Group 157 hard disk drives (HDD) 96–7, 109 Harrison, Brian 154 Harrod, Roy F. 33 Haslam, Karen 171n3 Heymann, Matthias 145 Hoffman Electronics 150, 150n4 Hopkins, Matt 129n10, 160 House of Commons Energy and Climate Change Committee 125 Hsieh, Chang-Tai 46 HTTP/HTML 103–5, 109 Hughes, Alan 45 Hurst, Samuel 101 IBM 50, 97, 104, 107 ‘iGesture Numpad’ 103 Ill Fares the Land (Judt) 1 Immelt, Jeffrey 126 income-contingent loans and equity 189–90 income distribution 30n1 India 45–6, 120 industrial policy: challenges to 13; decentralized 78; in ‘rebalancing’ of economies 27; recent US history of 10, 21; redistributive tools needed in 167; State led 40; see also ‘picking winners’ inequality: as debilitating economic issue 177; growth impacted by 31; reducing 166, 186; shareholders as source of 183; tax cut impact on 54 information and communications technology (ICT) 50, 118 Information Processing Techniques Office (DARPA’s) 76 Innovalight 158 innovation: collective character of 183–7, 193; ‘culture’ of 87; as cumulative 167, 187; Death Valley stage of 47, 48, 122; development banks fostering 139–40; development of 3, 41–2; and distribution 186; economic growth driven by 9; firms resisting pressure for 77; global process of 155; government support for 31; in Japan 37–8; macro models on 44; myths about 10, 22; myths of R&D being about 44; ‘open innovation’ model of 25, 27; patent increase relationship to 50–51; process in energy technology 114; Schumpeterian innovation economics 5; State as a force in 5, 166; State leading in risky 62–4; stock market speculation and 49–50; tax policy impact on 51; threatened in US 24; undermining of in US 53, 183, 187; US 24; see also ‘systems of innovation’ approach innovation ecosystems: cumulative innovation curve in 167–8; open systems 193; socioeconomic prosperity dependence on 179; symbiotic vs. parasitic 23–5, 155, 162–3, 179; types of 2; see also actors ‘innovation fund’ 189 innovation networks 36, 40 innovation policy 22–3, 44, 46, 54, 167 Inquiry into the Nature and Causes of the Wealth of Nations, An (Smith) 1; see also ‘Invisible Hand’ Institute for Fiscal Studies (IFS) 51–2 institutional change, assessment of 36 integrated circuits 98, 98n6 Intel 130n11 intellectual property protection 110 intellectual property rights 174 International Bank for Reconstruction and Development (IBRD) 5 Internet: Apple’s use of 109; commercialization of 22; DARPA’s role in 76; and HTTP/HTML 103–5, 109; origin of 63; public funding behind 105 interventionist policy 83 investment returns, social vs. private 3–4 ‘Invisible Hand’ 30 iOS mobile operating system 89–90 iPad 102, 105, 109, 111n14 iPhone 101–3, 105–6, 109 iPlayer 16 iPod 95–6, 100–102, 105, 109, 110 Ireland 120n4, 121, 121 IRS 529 plans 111, 111n15 Italy 17, 39, 41, 52, 121 Jacobs 149 Janeway, William H. 49–50 Japan: Apple entering market of 110; computer electronics competition by 97, 98, 98n7, 106–7; economic growth of 37–8; finance system coordination by 40; flat panel display (FPD) industry of 106; government energy R&D spending 121; lithium-ion battery perfection by 108; MITI 37–8, 40; public R&D spending in 61; systems of innovation in vs.

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The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics by William R. Easterly

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Andrei Shleifer, business climate, Carmen Reinhart, central bank independence, clean water, colonial rule, correlation does not imply causation, creative destruction, endogenous growth, financial repression, Gini coefficient, Gunnar Myrdal, Hernando de Soto, income inequality, income per capita, inflation targeting, interchangeable parts, inventory management, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, large denomination, manufacturing employment, Network effects, New Urbanism, open economy, Productivity paradox, purchasing power parity, rent-seeking, Ronald Reagan, selection bias, Silicon Valley, Simon Kuznets, The Wealth of Nations by Adam Smith, Thomas Malthus, total factor productivity, trade liberalization, urban sprawl, Watson beat the top human players on Jeopardy!, Yogi Berra, Yom Kippur War

Critchfield, 1981, chap. 5, pp. 51-60. This Page Intentionally Left Blank References and Further Reading Ades, Alberto, and Rafael Di Tella. 1994. ”Competition and Corruption.” Oxford University Institute of Economics and Statistics Discussion Paper 169. Aghion, P,, and P. Howitt. 1992. “AModel of Growth Through Creative Destruction.” Econometrica 60, no. 2 (March). Aghion, P,, and P. Howitt. 1999. Endogenous Growth Theory. Cambridge, Mass.: MIT Press. Ajayi, S. Ibi. 1997. “An Analysis of External Debt and Capital Flight in the Severely Indebted Low-Income Countries.” In Z. Iqbal and R. Kanbur, eds., External Financefor Low-Income Countries. Washington, D.C.: International Monetary Fund. Alesina, Alberto. 1996. “Fiscal Discipline and the Budget Process.” American Economic Review, Papers and Proceedings 86 (May): 401-407.

Heywood, Paul. 1996. ”Continuity and Change: Analysing Political Corruptionin Modern Spain.” In Walter Little and Eduardo Posada-Carbo, eds., Political Corruption in Europe and Latin America. New York St. Martin’s Press. Hine, David. 1996. ”Political Corruptionin Italy.” In Walter Little and Eduardo Posada-Carbo, eds., PoliticalCorruption in Europe andLatin America. New York:St. Martin’s Press. Howitt, Peter. 1999. ”Steady Endogenous Growth with Population and R&D Inputs Growing.” Journal of Political Economy 107, no. 4 (August): 715-730. Hsieh, Chang-Tai. 1999. ”Productivity Growth and Factor Prices in East Asia.” American Economic Review 89, no. 2 (May): 133-138. Humana, Charles. 1992. World Human Rights Guide. 3d ed. New York Oxford University Press. Humphreys, Charles, and John Underwood. 1989. “The External Debt Difficulties of Low-Income Africa.”

Mokyr, Joel, 1990. The Lever of Riches: Technological Creativity and Economic Progress. Oxford Oxford University Press. Muhuri, Pradip, and Shea Rutstein. 1994. Comparative Studies 9: Socioeconomic, Demographic, and Health Indicatorsfor Subnational Areas. Calverton, Md.: Macro International June. Mulligan, Casey B., and Xavier Sala-i-Martin. 1993. “Transitional Dynamics in TwoSector Models of Endogenous Growth.” Quarterly Journal of Economics 108 (August): 739-773. Murphy, Kevin M,, Andrei Shleifer, and Robert W. Vishny. 1989. “Industrialization and the Big Push.” Journal of Political Economy 97, no. 5 (October): 1003-1026. Murphy, Kevin M,, Andrei Shleifer, and Robert W. Vishny. 1991. ”The Allocation of Talent: Implications for Growth.” Quarterly Journal of Economics 106, no. 2 (May): 503530. Nafziger, E.

pages: 798 words: 240,182

The Transhumanist Reader by Max More, Natasha Vita-More

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23andMe, Any sufficiently advanced technology is indistinguishable from magic, artificial general intelligence, augmented reality, Bill Joy: nanobots, bioinformatics, brain emulation, Buckminster Fuller, cellular automata, clean water, cloud computing, cognitive bias, cognitive dissonance, combinatorial explosion, conceptual framework, Conway's Game of Life, cosmological principle, data acquisition, discovery of DNA, Douglas Engelbart, Drosophila, en.wikipedia.org, endogenous growth, experimental subject, Extropian, fault tolerance, Flynn Effect, Francis Fukuyama: the end of history, Frank Gehry, friendly AI, game design, germ theory of disease, hypertext link, impulse control, index fund, John von Neumann, joint-stock company, Kevin Kelly, Law of Accelerating Returns, life extension, lifelogging, Louis Pasteur, Menlo Park, meta analysis, meta-analysis, moral hazard, Network effects, Norbert Wiener, P = NP, pattern recognition, phenotype, positional goods, prediction markets, presumed consent, Ray Kurzweil, reversible computing, RFID, Richard Feynman, Ronald Reagan, silicon-based life, Singularitarianism, stem cell, stochastic process, superintelligent machines, supply-chain management, supply-chain management software, technological singularity, Ted Nelson, telepresence, telepresence robot, telerobotics, the built environment, The Coming Technological Singularity, the scientific method, The Wisdom of Crowds, transaction costs, Turing machine, Turing test, Upton Sinclair, Vernor Vinge, Von Neumann architecture, Whole Earth Review, women in the workforce, zero-sum game

If the output levels of different sectors at time t are X(t) the amount of goods delivered to households and other final users will be (Leontief 1986): If all the outputs are reinvested into the economy Y(t) = 0 and the equation produces a dynamical system: The growth will be exponential, with a rate set by the largest eigenvalue of the bracketed matrix and a production vector X tending towards the eigenvector corresponding to the value. If the consumption Y(t) is nonzero the generic case is still exponential growth: matrix recurrences of the form X(t + 1) = CX(t) + d or differential equations like X ′ (t) = CX(t) + d have solutions ­tending towards Λeλt if C is diagonalizable. Endogenous growth models (type A,B,I) Endogenous growth theory models the growth of an economy with improving technology, where the technology is assumed to be growing as a function of the economy and allocation of resources to it. It was developed as a response to exogenous growth models, where diminishing returns predict that growth would stop rather than continue. while the part which nature plays in production shows a tendency to diminishing return, the part which man plays shows a tendency to increasing return.

“The Coming Technological Singularity: How to Survive in the Post-Human Era,” by Vernor Vinge, was presented at the VISION-21 Symposium sponsored by NASA Lewis Center and the Ohio Aerospace Institute, March 30–31, 1993. Copyright © Vernor Vinge 1993. http://www-rohan.sdsu.edu/faculty/vinge/misc/singularity.html 36 An Overview of Models of Technological Singularity Anders Sandberg This essay reviews different definitions and models of technological singularity. The models range from conceptual sketches to detailed endogenous growth models, as well as attempts to fit empirical data to quantitative models. Such models are useful for examining the dynamics of the world-system and possible types of future crisis points where fundamental transitions are likely to occur. Current models suggest that, generically, even small increasing returns tend to produce radical growth. If mental capital becomes copyable (such as would be the case for AI or brain emulation) extremely rapid growth would also become likely.

Innovation is produced as for positive constants B, β and γ. Assuming exogenous saving rate s and no depreciation gives This system can achieve finite time singularities even for fixed population if θ + β > 1. Past innovation and capital can create explosive growth even when each of the factors in isolation cannot. Population-technology model (type A,F,I) A population theoretic model similar to endogenous growth was formulated by Taagepera (1979). It links the population P with technology T and nonrenewable resources R via a modified logistic growth model: where the first factor represents growth rate (increased by technology towards a maximal rate k0). Technology increases as a power of population size for small populations and independent of it at large sizes: where U is a characteristic population size.

pages: 145 words: 43,599

Hawai'I Becalmed: Economic Lessons of the 1990s by Christopher Grandy

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Bretton Woods, business climate, dark matter, endogenous growth, inventory management, Long Term Capital Management, market bubble, Maui Hawaii, minimum wage unemployment, open economy, purchasing power parity, Silicon Valley, Telecommunications Act of 1996

The bill proposed limitations on the total amount of the credit per year. A similar provision appeared in the administration bill HB 722. Anthony Lawrence Clapes has argued that Hawai‘i has not done nearly enough to attract high tech. See Anthony Lawrence Clapes, Blue Wave Millennium: A Future for Hawai‘i. (Honolulu: Dark Matter Press, 2000). Paul Romer and Robert Lucas are among the leading writers in this area. See Paul Romer, “The Origins of Endogenous Growth,” Journal of Economic Perspectives 8:1(1994): 3–22; and Robert E. Lucas, Jr., “On the Mechanics of Economic Development,” Journal of Monetary Economics 22(1988): 3–42. See Robert E. Hall. and Charles I. Jones, “Levels of Economic Activity Across Countries,” American Economic Review, Papers and Proceedings 87:2(1997): 173–177; Robert E. Hall and Charles I. Jones, “Why Do Some Countries Produce So Much More Output Per Worker than Others?”

Journal of Economic Perspectives, 10(2)(1996): 3–24. Perez, Rob. “It’s My Job: Even in a Bad Economy Laying Off Workers Is Difficult.” Honolulu Star-Bulletin, 13 October 1998. ———“HEI Exec Often Absent for Revenues Council.” Honolulu Star-Bulletin, 30 May 2001. Pratt, Richard C. Hawai‘i Politics and Government. With Zachary Smith. Lincoln: University of Nebraska Press, 2000. Romer, Paul. “The Origins of Endogenous Growth.” Journal of Economic Perspectives 8(1)(1994): 3–22. Roth, Randall W., ed. The Price of Paradise: Lucky We Live Hawai‘i? Honolulu: Mutual Publishing, 1992. ———The Price of Paradise, Volume II. Honolulu: Mutual Publishing, 1993. References 125 State of Hawai‘i, Department of Budget and Finance. The Multi-Year Program and Financial Plan and Executive Budget. Vol. 1. December 1994. ———The Executive Budget Supplemental.

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GDP: A Brief but Affectionate History by Diane Coyle

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Asian financial crisis, Berlin Wall, big-box store, Bretton Woods, BRICs, clean water, computer age, conceptual framework, crowdsourcing, Diane Coyle, double entry bookkeeping, en.wikipedia.org, endogenous growth, Erik Brynjolfsson, Fall of the Berlin Wall, falling living standards, financial intermediation, global supply chain, happiness index / gross national happiness, income inequality, income per capita, informal economy, John von Neumann, Kevin Kelly, Long Term Capital Management, mutually assured destruction, Nathan Meyer Rothschild: antibiotics, new economy, Occupy movement, purchasing power parity, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, The Wealth of Nations by Adam Smith, Thorstein Veblen, University of East Anglia, working-age population

UNDERSTANDING GROWTH Even so, as more and more countries’ GDP statistics became available, the theories of growth were refined from the Solow model, which placed so much weight on the important but unexplained role of technology. A new generation of growth models developed from the 1980s onward were able to start explaining how “technology” happened, rather than treating it as a mysterious “black box.” In these “endogenous growth” theories, technological progress fed into GDP growth in a virtuous circle, because faster growth enabled more investment and innovation. “Technology” takes the form of ideas in people’s minds, or education and skills, or ideas embodied in equipment and products. Looking explicitly at the importance of variables measuring education levels and levels of innovation such as patenting in business confirmed their role in explaining the difference in growth rates among different countries.

Abramowitz, Moses, 113 Africa, 31–33, 72, 93, 138 Anders, William, 68 art, 127–28, 132 assets, contributing to sustainability, 134–35, 137 austerity measures, 23 Australia, 73, 109, 118 automation, 128–29 Bangladesh, 53 base year, in GDP calculations, 31, 33–34 Baumol, William, 127 Benford’s Law, 3, 143n3 Berners-Lee, Tim, 81 Bhalla, Surjit, 53 Bhutan, 112 Bos, Frits, 47–48 Boskin Commission, 35, 88 Brazil, 94, 125 Bretton Woods system, 48 BRIC economies, 94, 96 Brynjolfsson, Erik, 128–30 Burundi, 73 business, purpose of, 95 Campaign for Happiness, 112 Canada, 73, 89, 109 capabilities, 72–73, 134 capital consumption, 131 capitalism: 1970s crisis of, 59–75; 2008 crisis of, 93–118; achievements of, 5–6; innovation as hallmark of, 91; investment and depreciation, 131–33 capital widening, 132 Carson, Rachel, Silent Spring, 69 centrally planned economies, 46–47, 56, 60, 66–68 Central Statistical Office (United Kingdom), 18 Chad, 73 chain-weighted price indexes, 33–34 China: economic growth of, 94, 96–97; economic limitations of, 96–97; GDP of, 51–53, 96, 97; living standards in, 51, 57, 96; manufacturing and exporting in, 82, 97, 125; U.S. relations with, 97 Christophers, Brett, 104, 105 circular flow, 26–27, 27f, 57, 63 Clark, Colin, 12, 13, 17, 50, 84 Clean Water Act (1972), 69 Clegg, Nick, 110 Cobb, John, 116 Cold War, 46–47, 60, 66 communications technology, 81–82 communism, 46–47, 60, 66–68, 96 compound arithmetic, 64, 83, 130–31 comprehensive wealth, 133, 135 computers, 80–82, 87–88 conspicuous consumption, 112 consumerism, 45, 112 consumer spending (C), 27–28, 45 consumer surplus, 130 customization, of goods and services, 123–25 Cuyahoga River, 69 Daly, Herman, 116 Darling, Alastair, 102 dashboard approach, 118, 136 data collection, 33, 37, 51–53, 137–38 Data Resources, Incorporated (DRI), 21 Davenant, Charles, 8 David, Paul, 79 Defense Advanced Research Projects Agency (DARPA), 81 defense spending, 14–16 deferred stock options, 37 deflators, 31 Defoe, Daniel, 9 DeLong, Brad, 86, 117 Democratic Republic of Congo, 54, 73 Deng Xiao Ping, 96 depreciation, 25, 30, 131–33 developed/high-income countries: GDP of, 72, 93; informal economy in, 107 developing/low-income countries: economic growth/stagnation in, 61, 71–72; GDP of, 32–33, 51, 71–72; informal economy in, 107, 109; and PPP, 50–53 development aid, 72, 74 digital products and services, 129–31 disasters, GDP growth after, 43 Domar, Evsey, 55 double-entry bookkeeping, 8 Easterlin, Richard, 111 Eckstein, Otto, 21 econometric models, 20–21, 23 economic growth: critiques of, 60; in eighteenth and nineteenth centuries, 12; lack of, in developing countries, 61; meanings and measures of, 15; meanings of, 123; potential rate of, 82–83; problems arising from, 63–64; real, 30–31; significance of, 135–36; sustainable, 71, 116, 137; theories/models of, 55–57, 78–81; virtuous circle of, 57, 59, 64, 73, 79; well-being and welfare aided by, 135 economics, challenges to conventional, 59–61 economic welfare. See well-being and welfare economy: centrally planned, 46–47, 56, 60, 66–68; complexity of, 122–25; expansion of (1991–2007), 82–84; private and government roles in, 14–17, 20–21; twenty-first-century meaning of, 139–40 education, access to, 61, 74 Ehrlich, Paul, 69–70 Elstat, 1–2 emerging markets, 94 endogenous growth theories, 79 England. See United Kingdom environmentalism, 60, 68–71, 115–16, 133–34 European Commission, 2–4 European Union (EU), 1 Eurozone, 101 exchange rates, 48–49. See also purchasing power parity expenditures: categories of, 27–28; as GDP measure, 25, 26t, 27 factor cost, 30 famines, 73 Federal Reserve Bank of Dallas, 121, 123–25 Federal Reserve Board, 83, 88, 94 financial crisis (2008–), 93–97 financial intermediation services indirectly measured (FISIM), 100–104, 136 financial sector, 40, 97–105 fiscal policy, 15, 19, 23, 77 fiscal stimulus, 23 FISIM.

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The Great Stagnation by Tyler Cowen

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Asian financial crisis, Bernie Madoff, en.wikipedia.org, endogenous growth, financial innovation, Flynn Effect, income inequality, indoor plumbing, life extension, liquidity trap, Long Term Capital Management, Mark Zuckerberg, meta analysis, meta-analysis, Peter Thiel, RAND corporation, school choice, Tyler Cowen: Great Stagnation, urban renewal

On the sources of growth, see Charles I. Jones, “Sources of U.S. Economic Growth in a World of Ideas,” American Economic Review, March 2002, 92, 1, 220-239. The innovation graph is reproduced from Jonathan Huebner, “A possible declining trend for worldwide innovation,” Technological Forecasting & Social Change, 2005, 72, p. 982. On the rate of patenting and related issues, see Paul S. Segerstrom, “Endogenous Growth Without Scale Effects,” American Economic Review, December 1998, 88, 5, 1290-1310; and also Samuel S. Kortum, “Research, Patenting, and Technological Change,” Econometrica, November 1997, 65, 6, 1389-1419. On how finance has driven a lot of the rise in top incomes, see Steven Kaplan and Joshua Rauh, “Wall Street and Main Street: What Contributes to the Rise in the Highest Incomes?” Review of Financial Studies, 2010, v. 23, no. 3.

The Haves and the Have-Nots by Branko Milanovic

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Berlin Wall, Branko Milanovic, colonial rule, crony capitalism, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, endogenous growth, Fall of the Berlin Wall, financial deregulation, full employment, Gini coefficient, high net worth, illegal immigration, income inequality, income per capita, Joseph Schumpeter, means of production, open borders, Pareto efficiency, Plutocrats, plutocrats, purchasing power parity, Simon Kuznets, very high income, Vilfredo Pareto, Washington Consensus, zero-sum game

See also Richard Baldwin and Philippe Martin, Two Waves of Globalisation: Superficial Similarities, Fundamental Differences , National Bureau of Economic Research Working Paper 6904 (Cambridge, MA: National Bureau of Economic Research, January 1999). 7 Data from Maurice Obsfeld and Alan Taylor, “Globalization and Capital Markets,” in Globalization in Historical Perspective, edited by Michael D. Bordo, Alan M. Taylor, and Jeffrey G. Williamson (Chicago: University of Chicago Press, 2003), 121-187, quoted in Niall Ferguson and Moritz Schularick, “The Empire Effect: The Determinants of Country Risk in the First Age of Globalization, 1880-1913,” Journal of Economic History (June 2006): 285. 8 Paul Romer, “The Origins of Endogenous Growth,” Journal of Economic Perspectives 8, no. 1 (1994): 3-22. 9 Paul Romer, “Are Non-convexities Important for Understanding Growth?” American Economic Review [Papers and Proceedings of the American Economic Association] 80, no. 2 (1990): 97-103. Vignette 2.1 1 See Peter H. Lindert and Jeffrey G. Williamson, “Revising England’s Social Tables, 1688-1812,” Explorations in Economic History 19, no. 4 (1982): 385-408; Lindert and Williamson, “Reinterpreting Britain’s Social Tables” (see Vignette 1.10, note 13); and Lindert, “Three Centuries of Inequality” (see Vignette 1.10, note 13). 2 See Jan Luiten van Zanden, “Tracing the Beginning of the Kuznets Curve: Western Europe During the Early Modern Period,” Economic History Review 48, no. 4 (1995): 643-664.

Journal of Economic Perspectives 11, no. 3 (1997): 3-17. [Do not think of convergence among the small subset of rich countries when the world is diverging!] Quah, Danny. “Empirics for Economic Growth and Convergence: Stratification and Convergence Clubs.” European Economic Review 40 (1996): 427-443. [First formulation of “twin peaks”—a rich and a poor peak—of international income distribution.] Romer, Paul. “The Origins of Endogenous Growth.” Journal of Economic Perspectives 8, no. 1 (1994): 3-22. [Explains how the new approach to growth evolved in response to real-world departures from mainstream neoclassical theory.] Vignette 2.1 Bairoch, Paul. Economics and World History: Myths and Paradoxes. Chicago: University of Chicago Press, 1993. ———. Victoires et déboires: Histoire économique et sociale du monde du XVIe siècle à nos jours.

pages: 482 words: 117,962

Exceptional People: How Migration Shaped Our World and Will Define Our Future by Ian Goldin, Geoffrey Cameron, Meera Balarajan

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Admiral Zheng, agricultural Revolution, barriers to entry, Berlin Wall, Branko Milanovic, British Empire, conceptual framework, creative destruction, demographic transition, Deng Xiaoping, endogenous growth, failed state, Fall of the Berlin Wall, Gini coefficient, global supply chain, guest worker program, illegal immigration, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), job automation, Joseph Schumpeter, knowledge economy, labor-force participation, labour mobility, Lao Tzu, life extension, low skilled workers, low-wage service sector, Malacca Straits, mass immigration, microcredit, Network effects, new economy, New Urbanism, old age dependency ratio, open borders, out of africa, price mechanism, purchasing power parity, Richard Florida, selection bias, Silicon Valley, Silicon Valley startup, Skype, spice trade, trade route, transaction costs, transatlantic slave trade, transatlantic slave trade, women in the workforce, working-age population

Throughout recent history, business has lobbied for more open borders, while labor unions have sought to restrict migration. The momentum of globalization, however, is reinforcing the efforts of large companies to acquire exceptions to immigration restrictions. As one commentator writes: “Immigration policy today is driven by businesses that need more workers—skilled and unskilled, legal and illegal.”101 The lobbying efforts of large companies, supported by a growing body of research on innovation and endogenous growth, have prompted a widespread shift in thinking among developed country governments about the desirability of skilled migration. Most developed countries have implemented or are implementing channels to attract university-educated migrants, enabling their companies to participate in the “international competition for talent.”102 The European Commission has announced that it will need 20 million skilled migrants by 2020 and has issued a directive for the creation of a “blue card” that would allow the EU to compete for talent with the United States, Australia, and Canada.

“If we don't get some good, talented, capable people here, we're in trouble.”114 Philadelphia also started a similar campaign and brought in more than 100,000 new migrants between 2000 and 2006.115 Their campaign to boost the regional economy by attracting skilled international migrants featured new coalitions between civic leaders, migrant groups, chambers of commerce, and city halls. In the foreseeable future, the management of migration at a national level should involve progressively lowering barriers to skilled migration. Research on innovation, entrepreneurship, and endogenous growth highlights the potential benefits of increasing a country's volume and diversity of human capital. Restrictive immigration policies have been shown to have a direct impact on the rates of innovation in the United States (and presumably other countries as well).116 Developed countries that maintain obstacles to skilled migration will lose out to emerging economies as they become more open to mobility.

Furthermore, even with the availability of information over the Internet and satellite networks, without people crossing borders, the dynamic processes of fertilization, invention, and imitation would simply atrophy. Preventing migration would lead to economies becoming anemic through the social and cultural isolation brought on by closed borders. In the short term, it would lead to social and economic disruption, and in the long term, to the weakening of endogenous growth. To imagine how closed borders lead to economic stagnation and cultural ossification, we have only to look at the twentieth-century examples of post-Revolutionary Cuba or North Korea (other examples include the Soviet Union, which was the most significant attempt to prevent emigration in the twentieth century, as well as apartheid South Africa and the Israeli isolation of the Palestinian Territories).8 In these cases, however, even strong and repressive states have been unable to fully enforce closed borders.

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Superintelligence: Paths, Dangers, Strategies by Nick Bostrom

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agricultural Revolution, AI winter, Albert Einstein, algorithmic trading, anthropic principle, anti-communist, artificial general intelligence, autonomous vehicles, barriers to entry, Bayesian statistics, bioinformatics, brain emulation, cloud computing, combinatorial explosion, computer vision, cosmological constant, dark matter, DARPA: Urban Challenge, data acquisition, delayed gratification, demographic transition, Donald Knuth, Douglas Hofstadter, Drosophila, Elon Musk, en.wikipedia.org, endogenous growth, epigenetics, fear of failure, Flash crash, Flynn Effect, friendly AI, Gödel, Escher, Bach, income inequality, industrial robot, informal economy, information retrieval, interchangeable parts, iterative process, job automation, John Markoff, John von Neumann, knowledge worker, Menlo Park, meta analysis, meta-analysis, mutually assured destruction, Nash equilibrium, Netflix Prize, new economy, Norbert Wiener, NP-complete, nuclear winter, optical character recognition, pattern recognition, performance metric, phenotype, prediction markets, price stability, principal–agent problem, race to the bottom, random walk, Ray Kurzweil, recommendation engine, reversible computing, social graph, speech recognition, Stanislav Petrov, statistical model, stem cell, Stephen Hawking, strong AI, superintelligent machines, supervolcano, technological singularity, technoutopianism, The Coming Technological Singularity, The Nature of the Firm, Thomas Kuhn: the structure of scientific revolutions, transaction costs, Turing machine, Vernor Vinge, Watson beat the top human players on Jeopardy!, World Values Survey, zero-sum game

Combined with advances in software, however, an 18-month doubling time in performance per unit of input may be more historically plausible. 24. Some tentative attempts have been made to develop the idea of an intelligence explosion within the framework of economic growth theory; see, e.g., Hanson (1998b); Jones (2009); Salamon (2009). These studies have pointed to the potential of extremely rapid growth given the arrival of digital minds, but since endogenous growth theory is relatively poorly developed even for historical and contemporary applications, any application to a potentially discontinuous future context is better viewed at this stage as a source of potentially useful concepts and considerations than as an exercise likely to deliver authoritative forecasts. For an overview of attempts to mathematically model a technological singularity, see Sandberg (2010). 25.

., and Norvig, Peter. 2010. Artificial Intelligence: A Modern Approach. 3rd ed. Upper Saddle River, NJ: Prentice-Hall. Sabrosky, Curtis W. 1952. “How Many Insects Are There?” In Insects, edited by United States Department of Agriculture, 1–7. Yearbook of Agriculture. Washington, DC: United States Government Printing Office. Salamon, Anna. 2009. “When Software Goes Mental: Why Artificial Minds Mean Fast Endogenous Growth.” Working Paper, December 27. Salem, D. J., and Rowan, A. N. 2001. The State of the Animals: 2001. Public Policy Series. Washington, DC: Humane Society Press. Salverda, W., Nolan, B., and Smeeding, T. M. 2009. The Oxford Handbook of Economic Inequality. Oxford: Oxford University Press. Samuel, A. L. 1959. “Some Studies in Machine Learning Using the Game of Checkers.” IBM Journal of Research and Development 3 (3): 210–19.

Zahavi, Amotz, and Zahavi, Avishag. 1997. The Handicap Principle: A Missing Piece of Darwin’s Puzzle. Translated by N. Zahavi-Ely and M. P. Ely. New York: Oxford University Press. Zalasiewicz, J., Williams, M., Smith, A., Barry, T. L., Coe, A. L., Bown, P. R., Brenchley, P., et al. 2008. “Are We Now Living in the Anthropocene?” GSA Today 18 (2): 4–8. Zeira, Joseph. 2011. “Innovations, Patent Races and Endogenous Growth.” Journal of Economic Growth 16 (2): 135–56. Zuleta, Hernando. 2008. “An Empirical Note on Factor Shares.” Journal of International Trade and Economic Development 17 (3): 379–90. INDEX A Afghan Taliban 215 Agricultural Revolution 2, 80, 261 AI-complete problem 14, 47, 71, 93, 145, 186 AI-OUM, see optimality notions AI-RL, see optimality notions AI-VL, see optimality notions algorithmic soup 172 algorithmic trading 16–17 anthropics 27–28, 126, 134–135, 174, 222–225 definition 225 Arendt, Hannah 105 Armstrong, Stuart 280, 291, 294, 302 artificial agent 10, 88, 105–109, 172–176, 185–206; see also Bayesian agent artificial intelligence arms race 64, 88, 247 future of 19, 292 greater-than-human, see superintelligence history of 5–18 overprediction of 4 pioneers 4–5, 18 Asimov, Isaac 139 augmentation 142–143, 201–203 autism 57 automata theory 5 automatic circuit breaker 17 automation 17, 98, 117, 160–176 B backgammon 12 backpropagation algorithm 8 bargaining costs 182 Bayesian agent 9–11, 123, 130; see also artificial agent and optimality notions Bayesian networks 9 Berliner, Hans 12 biological cognition 22, 36–48, 50–51, 232 biological enhancement 36–48, 50–51, 142–143, 232; see also cognitive enhancement boxing 129–131, 143, 156–157 informational 130 physical 129–130 brain implant, see cyborg brain plasticity 48 brain–computer interfaces 44–48, 51, 83, 142–143; see also cyborg Brown, Louise 43 C C. elegans34–35, 266, 267 capability control 129–144, 156–157 capital 39, 48, 68, 84–88, 99, 113–114, 159–184, 251, 287, 288, 289 causal validity semantics 197 CEV, see coherent extrapolated volition Chalmers, David 24, 265, 283, 295, 302 character recognition 15 checkers 12 chess 11–22, 52, 93, 134, 263, 264 child machine 23, 29; see also seed AI CHINOOK 12 Christiano, Paul 198, 207 civilization baseline 63 cloning 42 cognitive enhancement 42–51, 67, 94, 111–112, 193, 204, 232–238, 244, 259 coherent extrapolated volition (CEV) 198, 211–227, 296, 298, 303 definition 211 collaboration (benefits of) 249 collective intelligence 48–51, 52–57, 67, 72, 142, 163, 203, 259, 271, 273, 279 collective superintelligence 39, 48–49, 52–59, 83, 93, 99, 285 definition 54 combinatorial explosion 6, 9, 10, 47, 155 Common Good Principle 254–259 common sense 14 computer vision 9 computing power 7–9, 24, 25–35, 47, 53–60, 68–77, 101, 134, 155, 198, 240–244, 251, 286, 288; see also computronium and hardware overhang computronium 101, 123–124, 140, 193, 219; see also computing power connectionism 8 consciousness 22, 106, 126, 139, 173–176, 216, 226, 271, 282, 288, 292, 303; see also mind crime control methods 127–144, 145–158, 202, 236–238, 286; see also capability control and motivation selection Copernicus, Nicolaus 14 cosmic endowment 101–104, 115, 134, 209, 214–217, 227, 250, 260, 283, 296 crosswords (solving) 12 cryptographic reward tokens 134, 276 cryptography 80 cyborg 44–48, 67, 270 D DARPA, see Defense Advanced Research Projects Agency DART (tool) 15 Dartmouth Summer Project 5 data mining 15–16, 232, 301 decision support systems 15, 98; see also tool-AI decision theory 10–11, 88, 185–186, 221–227, 280, 298; see also optimality notions decisive strategic advantage 78–89, 95, 104–112, 115–126, 129–138, 148–149, 156–159, 177, 190, 209–214, 225, 252 Deep Blue 12 Deep Fritz 22 Defense Advanced Research Projects Agency (DARPA) 15 design effort, see optimization power Dewey, Daniel 291 Differential Technological Development (Principle of) 230–237 Diffie–Hellman key exchange protocol 80 diminishing returns 37–38, 66, 88, 114, 273, 303 direct reach 58 direct specification 139–143 DNA synthesis 39, 98 Do What I Mean (DWIM) 220–221 domesticity 140–143, 146–156, 187, 191, 207, 222 Drexler, Eric 239, 270, 276, 278, 300 drones 15, 98 Dutch book 111 Dyson, Freeman 101, 278 E economic growth 3, 160–166, 179, 261, 274, 299 Einstein, Albert 56, 70, 85 ELIZA (program) 6 embryo selection 36–44, 67, 268 emulation modulation 207 Enigma code 87 environment of evolutionary adaptedness 164, 171 epistemology 222–224 equation solvers 15 eugenics 36–44, 268, 279 Eurisko 12 evolution 8–9, 23–27, 44, 154, 173–176, 187, 198, 207, 265, 266, 267, 273 evolutionary selection 187, 207, 290 evolvable hardware 154 exhaustive search 6 existential risk 4, 21, 55, 100–104, 115–126, 175, 183, 230–236, 239–254, 256–259, 286, 301–302 state risks 233–234 step risks 233 expert system 7 explicit representation 207 exponential growth, see growth external reference semantics 197 F face recognition 15 failure modes 117–120 Faraday cage 130 Fields Medal 255–256, 272 Fifth-Generation Computer Systems Project 7 fitness function 25; see also evolution Flash Crash (2010) 16–17 formal language 7, 145 FreeCell (game) 13 G game theory 87, 159 game-playing AI 12–14 General Problem Solver 6 genetic algorithms 7–13, 24–27, 237–240; see also evolution genetic selection 37–50, 61, 232–238; see also evolution genie AI 148–158, 285 definition 148 genotyping 37 germline interventions 37–44, 67, 273; see also embryo selection Ginsberg, Matt 12 Go (game) 13 goal-content 109–110, 146, 207, 222–227 Good Old-Fashioned Artificial Intelligence (GOFAI) 7–15, 23 Good, I.

pages: 578 words: 168,350

Scale: The Universal Laws of Growth, Innovation, Sustainability, and the Pace of Life in Organisms, Cities, Economies, and Companies by Geoffrey West

Alfred Russel Wallace, Anton Chekhov, Benoit Mandelbrot, Black Swan, British Empire, butterfly effect, carbon footprint, Cesare Marchetti: Marchetti’s constant, clean water, complexity theory, computer age, conceptual framework, continuous integration, corporate social responsibility, correlation does not imply causation, creative destruction, dark matter, Deng Xiaoping, double helix, Edward Glaeser, endogenous growth, Ernest Rutherford, first square of the chessboard, first square of the chessboard / second half of the chessboard, Frank Gehry, Geoffrey West, Santa Fe Institute, Guggenheim Bilbao, housing crisis, Index librorum prohibitorum, invention of agriculture, invention of the telephone, Isaac Newton, Jane Jacobs, Jeff Bezos, Johann Wolfgang von Goethe, John von Neumann, Kenneth Arrow, laissez-faire capitalism, life extension, Mahatma Gandhi, mandelbrot fractal, Marchetti’s constant, Masdar, megacity, Murano, Venice glass, Murray Gell-Mann, New Urbanism, Peter Thiel, profit motive, publish or perish, Ray Kurzweil, Richard Feynman, Richard Feynman, Richard Florida, Silicon Valley, smart cities, Stephen Hawking, Steve Jobs, Stewart Brand, technological singularity, The Coming Technological Singularity, The Death and Life of Great American Cities, the scientific method, too big to fail, transaction costs, urban planning, urban renewal, Vernor Vinge, Vilfredo Pareto, Von Neumann architecture, Whole Earth Catalog, Whole Earth Review, wikimedia commons, working poor

In fact, Simon argued in his 1981 book The Ultimate Resource that a larger population is actually better because it stimulates even more technological innovation, inventiveness, and ingenuity, thereby leading to new ways of exploiting resources and increasing standards of living.6 As we move into the twenty-first century this vision of a cornucopian “horn of plenty,” with its image of limitless barrels of fish being continuously replenished by the magic, not of divine intervention, but of the free expression of human ingenuity and the boundless possibilities of a free market economy, has reemerged as a significant component of corporate and political conceptual thinking. Indeed, Simon’s views have effectively been embraced by many in the academic, business, and political communities. A succinct summary of this view was articulately expressed by the economist Paul Romer, one of the founders of endogenous growth theory, which holds that economic growth is driven primarily by investment in human capital, innovation, and knowledge creation.7 Romer declares that “every generation has perceived the limits to growth that finite resources and undesirable side effects would pose if no new recipes or ideas were discovered. And every generation has underestimated the potential for finding new recipes and ideas.

Among its founding fathers were two other major figures of twentieth-century academia, both Nobel laureates: Philip Anderson, a condensed matter physicist from Princeton University who had worked on superconductivity and was an inventor, among many other things, of the mechanism of symmetry breaking that underlies the prediction of the Higgs particle; and Kenneth Arrow from Stanford University, whose many contributions to the fundamental underpinnings of economics, from social choice to endogenous growth theory, have been hugely influential. He was the youngest person ever to have been awarded the Nobel Memorial Prize for economics, which five of his students have also received. Anderson and Arrow together with David Pines, also a distinguished condensed matter physicist and founder of SFI, initiated the first major program that put SFI on the map. It was designed to address foundational questions in economics from this new complex systems perspective, asking, for instance, how ideas from nonlinear dynamics, statistical physics, and chaos theory might provide new insights into economic theory.

Morris, The Measure of Civilization: How Social Development Decides the Fate of Nations (Princeton, NJ: Princeton University Press, 2013). Both are provocative and somewhat controversial. 4. P. Ehrlich, The Population Bomb (New York: Ballantine Books, 1968). 5. D. Meadows, et al., The Limits to Growth (New York: Universe Books, 1972). 6. J. Simon, The Ultimate Resource (Princeton, NJ: Princeton University Press, 1981). 7. P. M. Romer, “The Origins of Endogenous Growth,” Journal of Economic Perspectives 8(1) (1994): 3–22. 6. PRELUDE TO A SCIENCE OF CITIES 1. J. Moore, “Predators and Prey: A New Ecology of Competition,” Harvard Business Review 71(3) (1993): 75. 2. The results of the program are summarized in the volume edited by D. Lane, et al., Complexity Perspectives in Innovation and Social Change (Berlin: Springer-Verlag, 2009). 3. Jane Jacobs, The Death and Life of Great American Cities (New York: Random House, 1961). 4.

pages: 409 words: 118,448

An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy by Marc Levinson

affirmative action, airline deregulation, banking crisis, Big bang: deregulation of the City of London, Boycotts of Israel, Bretton Woods, Capital in the Twenty-First Century by Thomas Piketty, car-free, Carmen Reinhart, central bank independence, centre right, clean water, deindustrialization, endogenous growth, falling living standards, financial deregulation, floating exchange rates, full employment, George Gilder, Gini coefficient, global supply chain, income inequality, income per capita, indoor plumbing, informal economy, intermodal, invisible hand, Kenneth Rogoff, knowledge economy, late capitalism, linear programming, lump of labour, manufacturing employment, new economy, Nixon shock, North Sea oil, oil shock, Paul Samuelson, pension reform, price stability, purchasing power parity, refrigerator car, Right to Buy, rising living standards, Robert Gordon, rolodex, Ronald Coase, Ronald Reagan, Simon Kuznets, statistical model, strikebreaker, structural adjustment programs, Thomas Malthus, total factor productivity, unorthodox policies, upwardly mobile, War on Poverty, Washington Consensus, Winter of Discontent, Wolfgang Streeck, women in the workforce, working-age population, yield curve, Yom Kippur War, zero-sum game

During the 1970s and 1980s, as more frequent job loss, slower wage growth, and pockets of seemingly intractable unemployment became the norm, elected officials and economic-policy bureaucrats alike flailed ineffectually. Despite stacks of policy memos and a great deal of fancy mathematics, understanding of why the good times disappeared has not increased with time. Back in the 1990s, the American academic Paul Romer revolutionized thinking about economic growth by insisting that innovation and knowledge matter far more than labor and capital; “endogenous growth theory,” the unwieldy name attached to his work, taught that strengthening education, supporting scientific research, and making entrepreneurship easy would do more to improve economic growth than fretting over budget deficits and tax rates. Three decades after his theory swept through economics departments everywhere, Romer was no longer sure he was right. “For the last two decades,” he admitted in 2015, “growth theory has made no scientific progress toward a consensus.”10 Such a statement is shocking to modern ears.

See also under specific countries Ecuador, 250–251 education, 145; ungovernability and, 155, 157 Egypt, 1, 69, 73 Ehrlich, Paul, 61 Eisenhower, Dwight, 24, 48, 105, 144 electricity, deregulation of, 113 Emminger, Otmar, 86 employment/unemployment. See full employment; Full Employment Act; magic square; Phillips Curve; under specific countries, economists, Federal Reserve chairmen, presidents, prime ministers, etc.; unemployment endogenous growth theory, 9 energy sector, 99–100, 101, 102, 103–109, 110, 113 England, 170, 190, 196; income inequality in, 135 entitlements, 157–158 environmental protection, 259 environmental regulation, 64 environmentalism: economic growth and, 57, 59–63; technology and, 63–64. See also pollution; population growth Erhard, Ludwig, 30–31 Europe, 124, 140; bank loans to Third World and, 241; crisis cartels in, 127; Davignon Plan and, 127; debt crisis in, 247; deregulation in, 113; economic slowdown in, 3–4; economy at close of World War II in, 16–17, 19–20; financial crisis of 2008 in, 270; income per person in, 6; income tax in, 146; manufacturing and trade with Japan in, 125–127; oil crisis of 1973 in, 1–2, 3; postwar productivity in, 24; productivity slowdown in, 265; unemployment in, 176; welfare state in, 144 European Community, 152, 168, 213, 214, 215; regional assistance and, 126–127 European countries: economic forecasts in 1973 and, 66–67; economy at close of World War II in, 18–19; postwar trade in, 23.

pages: 165 words: 45,129

The Economics of Inequality by Thomas Piketty, Arthur Goldhammer

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affirmative action, basic income, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, conceptual framework, deindustrialization, endogenous growth, Gini coefficient, income inequality, low skilled workers, means of production, moral hazard, Pareto efficiency, purchasing power parity, Simon Kuznets, The Bell Curve by Richard Herrnstein and Charles Murray, very high income, working-age population

Just because capital has not been invested in the poor countries, which have remained poor, it does not follow that credit market imperfections are solely responsible. If, for instance, we control for the “initial stock of human capital” in 1960 (as measured by literacy rates, educational levels, and so on), we find that there is a negative correlation between initial per capita income in 1960 and average growth rate in the period 1960–1990. Endogenous growth theorists refer to this as “conditional” convergence as opposed to the “unconditional” convergence predicted by the Solow model (Mankiw et al., 1992). For example, South American countries with the same per capita income as the Asian tigers in 1960 had a much lower stock of human capital, because large segments of the population had been totally neglected, whereas in Asia inequality was much lower.

pages: 297 words: 77,362

The Nature of Technology by W. Brian Arthur

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Andrew Wiles, business process, cognitive dissonance, computer age, creative destruction, double helix, endogenous growth, Geoffrey West, Santa Fe Institute, haute cuisine, James Watt: steam engine, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kevin Kelly, knowledge economy, locking in a profit, Mars Rover, means of production, Myron Scholes, railway mania, Silicon Valley, Simon Singh, sorting algorithm, speech recognition, technological singularity, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions

The interpretation of technology buildout in this section is very much my own. 150 The old dispensations persist: David Edgerton, The Shock of the Old: Technology and Global History Since 1900, Oxford University Press, New York, 2006. 150 A domain morphs: Rosenberg points out that the original applications of a technology are seldom the ones it ends up with. 152 the arrival of… technology: It also sets in motion economic growth. How this happens is the subject of a branch of economics called endogenous growth theory. The arrival of a new technology means that the economy needs to use fewer resources on that purpose than it did before, thus releasing them. The knowledge inherent in the new technology can also spill over into other industries. For both these reasons, the economy grows. 152 The coming of the railroad: For more detailed accounts of its economic impact, see Robert W. Fogel, Railroads and American Economic Growth, Johns Hopkins Press, Baltimore, 1964; Alfred Chandler, The Railroads, Harcourt, Brace & World, New York, 1965; and Albert Fishlow, American Railroads and the Transformation of the Antebellum Economy, Harvard University Press, Cambridge, MA, 1965. 157 It persists despite… inferiority: In a slightly different context Hughes talks of “technological momentum,” in Does Technology Drive History, M.

pages: 283 words: 73,093

Social Democratic America by Lane Kenworthy

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affirmative action, Affordable Care Act / Obamacare, barriers to entry, basic income, Celtic Tiger, centre right, clean water, collective bargaining, corporate governance, David Brooks, desegregation, Edward Glaeser, endogenous growth, full employment, Gini coefficient, hiring and firing, Home mortgage interest deduction, illegal immigration, income inequality, invisible hand, Kenneth Arrow, labor-force participation, manufacturing employment, market bubble, minimum wage unemployment, new economy, postindustrial economy, purchasing power parity, race to the bottom, rent-seeking, rising living standards, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, school choice, shareholder value, sharing economy, Skype, Steve Jobs, too big to fail, Tyler Cowen: Great Stagnation, union organizing, universal basic income, War on Poverty, working poor, zero day

“Changes in the Distribution of Income Volatility.” Unpublished paper. Johnson, David S. 2004. “Using Expenditures to Measure the Standard of Living in the United States: Does It Make a Difference?” Pp. 27–47 in What Has Happened to the Quality of Life in the Advanced Industrialized Nations? Edited by Edward N. Wolff. Cheltenham, UK: Edward Elgar. Jones, Charles I. 1995. “Time Series Tests of Endogenous Growth Models.” Quarterly Journal of Economics 110: 495–525. Judis, John B. and Ruy Teixeira. 2002. The Emerging Democratic Majority. New York: Scribner. Judt, Tony. 2010. Ill Fares the Land. New York: Penguin. Kahlenberg, Richard. 1995. “Class, Not Race.” New Republic, April 3. Kahneman, Daniel. 2011. Thinking, Fast and Slow. New York: Farrar, Straus, and Giroux. Kalleberg, Arne. 2011. Good Jobs, Bad Jobs.

pages: 280 words: 79,029

Smart Money: How High-Stakes Financial Innovation Is Reshaping Our WorldÑFor the Better by Andrew Palmer

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Affordable Care Act / Obamacare, algorithmic trading, Andrei Shleifer, asset-backed security, availability heuristic, bank run, banking crisis, Black-Scholes formula, bonus culture, break the buck, Bretton Woods, call centre, Carmen Reinhart, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, computerized trading, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, David Graeber, diversification, diversified portfolio, Edmond Halley, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, eurozone crisis, family office, financial deregulation, financial innovation, fixed income, Flash crash, Google Glasses, Gordon Gekko, high net worth, housing crisis, Hyman Minsky, implied volatility, income inequality, index fund, information asymmetry, Innovator's Dilemma, interest rate swap, Kenneth Rogoff, Kickstarter, late fees, London Interbank Offered Rate, Long Term Capital Management, loss aversion, margin call, Mark Zuckerberg, McMansion, money market fund, mortgage debt, mortgage tax deduction, Myron Scholes, negative equity, Network effects, Northern Rock, obamacare, payday loans, peer-to-peer lending, Peter Thiel, principal–agent problem, profit maximization, quantitative trading / quantitative finance, railway mania, randomized controlled trial, Richard Feynman, Richard Feynman, Richard Thaler, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Shiller, short selling, Silicon Valley, Silicon Valley startup, Skype, South Sea Bubble, sovereign wealth fund, statistical model, transaction costs, Tunguska event, unbanked and underbanked, underbanked, Vanguard fund, web application

Chris Lewin, “The Creation of Actuarial Science,” Zentralblatt für Didaktik der Mathematik 33, no. 2 (2001): 61–66. 14. François Velde and David Weir, “The Financial Market and Government Debt Policy in France, 1746–1793,” Journal of Economic History (March 1992). 15. For more on the role of technology in propelling financial innovation, see Stelios Michalopoulos, Luc Laeven, and Ross Levine, “Financial Innovation and Endogenous Growth” (NBER Working Paper 51356, September 2009). 16. Richard Sylla, “A Historical Primer on the Business of Credit Ratings” (paper prepared for a conference of the World Bank, Washington, DC, March 2001). 17. Andrew Odlyzko, “Collective Hallucinations and Inefficient Markets: The British Railway Mania of the 1840s,” SSRN Electronic Journal (2010). 18. Peter Tufano, “Business Failure, Judicial Intervention and Financial Innovation: Restructuring US Railroads in the Nineteenth Century,” Business History Review (1997). 19.

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The Origins of Political Order: From Prehuman Times to the French Revolution by Francis Fukuyama

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Admiral Zheng, agricultural Revolution, Andrei Shleifer, Asian financial crisis, Ayatollah Khomeini, barriers to entry, Berlin Wall, blood diamonds, California gold rush, cognitive dissonance, colonial rule, conceptual framework, correlation does not imply causation, currency manipulation / currency intervention, demographic transition, Deng Xiaoping, double entry bookkeeping, endogenous growth, equal pay for equal work, European colonialism, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, Francisco Pizarro, Hernando de Soto, hiring and firing, invention of agriculture, invention of the printing press, Khyber Pass, labour market flexibility, land reform, land tenure, means of production, offshore financial centre, out of africa, Peace of Westphalia, principal–agent problem, RAND corporation, rent-seeking, Right to Buy, Scramble for Africa, selective serotonin reuptake inhibitor (SSRI), spice trade, Stephen Hawking, Steven Pinker, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, trade route, transaction costs, Washington Consensus, zero-sum game

., Nation-Building: Beyond Afghanistan and Iraq (Baltimore: Johns Hopkins University Press, 2006). 25 “Getting to Denmark” was actually the original title of Lant Pritchett and Michael Woolcock’s “Solutions When the Solution Is the Problem: Arraying the Disarray in Development” (Washington, D.C.: Center for Global Development Working Paper 10, 2002). 26 Economic growth theories under titles like Harrod-Domar, Solow, and endogenous growth theory, are severely reductionist and are of questionable value in explaining how growth actually happens in developing countries. 27 A number of observers have made this argument, beginning with Herbert Spencer in the nineteenth century, continuing through Werner Sombart, John Nef, and Charles Tilly. See Herbert Spencer, The Principles of Sociology (New York: D. Appleton, 1896); John Ulric Nef, War and Human Progress: An Essay on the Rise of Industrial Civilization (Chicago: University of Chicago Press, 1942); Charles Tilly, Coercion, Capital, and European States, A D 990–1990 (Cambridge, MA: Blackwell, 1990); and Bruce D.

democratization Demonic Males (Wrangham) Deng, Kent Deng Xiaoping Denmark; accountability in; as model for development; Protestant Reformation in; serfdom abolished in deoxyribonucleic acid, see DNA depression, chronic Descartes, René devshirme de Waal, Frans Dharmasastras Díaz, Porfirio Diet; Danish; Hungarian Diggers Dinka people Discourse on the Origin and Foundation of Inequality Among Mankind (Rousseau) Di tribe DNA; mitochondrial Dolgorukov family Domesday Book Dong Zhuo Douglas, Stephen Downing, George Dravidians Duma, Russian Dumont, Louis Durkheim, Émile Dutch United Provinces Eastern church Eastern Depot East India Company Ecuador Egypt; ancient; Fatimid caliphate in; Mamluk sultanate in; in Ottoman Empire; Umayyad conquest of Eisenstein, Sergei Electronic Frontier Foundation Ellickson, Robert Elliott, J. H. El Salvador encabezamiento Enclosure Movement, British encomiendas endogenous growth theory Engel, Pal Engels, Friedrich England; accountability in; census in; centralized state in; Civil War in, see English Civil War; constitutional compromise of barons and king in, see Magna Carta; democracy in; feudalism in; free cities and bourgeoisie in; Glorious Revolution in, see Glorious Revolution; individualism in; industrialization of (see also Industrial Revolution); military expenditures of; New World colonies of; Norman Conquest of; North American colonies of; political and social solidarity in; representative institutions in (see also Parliament, English); rise of capitalism in; rule of law in (see also Common Law); serfdom abolished in; taxation in; tragedy of the commons in; see also Britain English Civil War; Parliament and; progressive radicalization during; in Whig history Enlightenment Ertman, Thomas Eskimos; Copper Essay on the Principle of Population (Malthus) Estates-General, French Ethelbert, King of England; Laws of Ethiopia eunuchs; in China European Court of Human Rights European Union Evans-Pritchard, E.

pages: 339 words: 105,938

The Skeptical Economist: Revealing the Ethics Inside Economics by Jonathan Aldred

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airport security, Berlin Wall, carbon footprint, citizen journalism, clean water, cognitive dissonance, congestion charging, correlation does not imply causation, Diane Coyle, endogenous growth, experimental subject, Fall of the Berlin Wall, first-past-the-post, framing effect, greed is good, happiness index / gross national happiness, Intergovernmental Panel on Climate Change (IPCC), invisible hand, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, labour market flexibility, laissez-faire capitalism, libertarian paternalism, new economy, Pareto efficiency, pension reform, positional goods, Ralph Waldo Emerson, RAND corporation, risk tolerance, school choice, spectrum auction, Thomas Bayes, trade liberalization, ultimatum game

A large body of psychological research suggests that these preoccupations are associated with increased rates of mental illness, including depression, substance abuse, anxiety and personality disorder.4 Less dramatically, and anecdotally, we can live in a prosperous economic environment, and still discover that modern life is rubbish. So how can a better understanding of economics help? Talk of improving quality of life might provoke expectations that the following chapters include detailed discussions of integrated transport policies, pension reforms and endogenous growth theory. In other words, the kind of policy wonkery which few of us care passionately about. But we do care about the principles at stake - whether it is fair to tax the rich more highly, whether environmental damage can be boiled down to a sum of money, whether surveys can really measure our quality of life or happiness. This book is about these principles. Black box economics obscures them.

pages: 523 words: 111,615

The Economics of Enough: How to Run the Economy as if the Future Matters by Diane Coyle

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accounting loophole / creative accounting, affirmative action, bank run, banking crisis, Berlin Wall, bonus culture, Branko Milanovic, BRICs, call centre, Cass Sunstein, central bank independence, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation does not imply causation, Credit Default Swap, deindustrialization, demographic transition, Diane Coyle, disintermediation, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, Financial Instability Hypothesis, Francis Fukuyama: the end of history, George Akerlof, Gini coefficient, global supply chain, Gordon Gekko, greed is good, happiness index / gross national happiness, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, illegal immigration, income inequality, income per capita, industrial cluster, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jane Jacobs, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour market flexibility, light touch regulation, low skilled workers, market bubble, market design, market fundamentalism, megacity, Network effects, new economy, night-watchman state, Northern Rock, oil shock, Pareto efficiency, principal–agent problem, profit motive, purchasing power parity, railway mania, rising living standards, Ronald Reagan, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, South Sea Bubble, Steven Pinker, The Design of Experiments, The Fortune at the Bottom of the Pyramid, The Market for Lemons, The Myth of the Rational Market, The Spirit Level, transaction costs, transfer pricing, tulip mania, ultimatum game, University of East Anglia, web application, web of trust, winner-take-all economy, World Values Survey, zero-sum game

But there needs to be behavioral change on the part of individuals as well. Saving in order to invest in the future is an important characteristic of a healthy economy and society. The Nobel economist Paul Krugman (in one of his nonpolemical outings) wrote a profound paper about what it is about a society that delivers economic growth.8 Why are some dynamic and others stagnant? He presented this as a formal endogenous growth model, in which the path the economy takes is described by a series of equations that capture the way inputs of capital, labor, and human capital (that is, people’s intelligence, skills, and knowledge) are turned into outputs of goods and services, and the way investment in both physical and human capital comes about. Two parameters turn out to be decisive in determining whether the economy is trapped in a vicious cycle of stagnation or achieves a virtuous circle of investment and growth.

pages: 356 words: 103,944

The Globalization Paradox: Democracy and the Future of the World Economy by Dani Rodrik

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affirmative action, Asian financial crisis, bank run, banking crisis, bilateral investment treaty, borderless world, Bretton Woods, British Empire, capital controls, Carmen Reinhart, central bank independence, collective bargaining, colonial rule, Corn Laws, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, Doha Development Round, en.wikipedia.org, endogenous growth, eurozone crisis, financial deregulation, financial innovation, floating exchange rates, frictionless, frictionless market, full employment, George Akerlof, guest worker program, Hernando de Soto, immigration reform, income inequality, income per capita, industrial cluster, information asymmetry, joint-stock company, Kenneth Rogoff, labour market flexibility, labour mobility, land reform, liberal capitalism, light touch regulation, Long Term Capital Management, low skilled workers, margin call, market bubble, market fundamentalism, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, microcredit, Monroe Doctrine, moral hazard, night-watchman state, non-tariff barriers, offshore financial centre, oil shock, open borders, open economy, Paul Samuelson, price stability, profit maximization, race to the bottom, regulatory arbitrage, savings glut, Silicon Valley, special drawing rights, special economic zone, The Wealth of Nations by Adam Smith, Thomas L Friedman, Tobin tax, too big to fail, trade liberalization, trade route, transaction costs, tulip mania, Washington Consensus, World Values Survey

., the neoclassical model of growth), a trade restriction has no effect on the long-run (steady-state) rate of growth of output. This is true regardless of the existence of market imperfections. However, there may be growth effects during the transition to the steady state. (These transitional effects could be positive or negative depending on how the long-run level of output is affected by the trade restriction.) In models of endogenous growth generated by non-diminishing returns to reproducible factors of production or by learning-by-doing and other forms of endogenous technological change, the presumption is that lower trade restrictions boost output growth in the world economy as a whole. But a subset of countries may experience diminished growth depending on their initial factor endowments and levels of technological development.

pages: 394 words: 85,734

The Global Minotaur by Yanis Varoufakis, Paul Mason

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active measures, banking crisis, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, business climate, capital controls, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, colonial rule, corporate governance, correlation coefficient, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, debt deflation, declining real wages, deindustrialization, endogenous growth, eurozone crisis, financial innovation, first-past-the-post, full employment, Hyman Minsky, industrial robot, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, light touch regulation, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, market fundamentalism, Mexican peso crisis / tequila crisis, money market fund, mortgage debt, Myron Scholes, negative equity, new economy, Northern Rock, paper trading, Paul Samuelson, planetary scale, post-oil, price stability, quantitative easing, reserve currency, rising living standards, Ronald Reagan, special economic zone, Steve Jobs, structural adjustment programs, systematic trading, too big to fail, trickle-down economics, urban renewal, War on Poverty, Yom Kippur War

A lower level of economic activity would have, indeed, been fine as long as employment had picked up quickly and the lower wages were able, in conjunction with lower prices, to preserve a level of consumption consistent with calm but steady recovery. Alas, the success of the banking sector in ensuring that monetary policy was tuned towards their interests, just like in the good old (pre-2008) times, guaranteed that endogenous growth was out of the reach of American society. When taken together with (a) Europe’s suicidal dallying with Herbert Hoover-like austerity4 (at a time when half of the continent is in the clasps of its own Great Depression), and (b) China’s structural failure to stimulate domestic demand, it is no great wonder that the Crisis remains with us. Chapters 7 and 8 described vividly the rise of bankruptocracy, the way in which bank failures armed the failed bankers with remarkable extractive, predatory political power, a power to extract a larger part of a shrinking national income at rates proportional to their banks’ black holes.

pages: 353 words: 91,211

The Shock of the Old: Technology and Global History Since 1900 by David Edgerton

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agricultural Revolution, anti-communist, British Empire, Computer Numeric Control, conceptual framework, creative destruction, deglobalization, dematerialisation, desegregation, deskilling, endogenous growth, global village, Haber-Bosch Process, interchangeable parts, knowledge economy, Mahatma Gandhi, manufacturing employment, means of production, megacity, microcredit, new economy, post-industrial society, Productivity paradox, Ronald Reagan, Silicon Valley, spinning jenny, Upton Sinclair, urban planning, V2 rocket

They also argued that the British ‘decline’ (that is slow growth) must have been associated with low innovation, indeed this ‘decline’ was itself taken as evidence of poor innovation. For example, a recent book on innovation and economic performance, most of it arranged in typical fashion in chapters based on nations, expresses surprise that in the case of Japan recent economic performance has not been on a par with the country’s huge R&D spending, which is second only to that of the USA in scale.13 In the 1990s crude versions of endogenous growth theory, which claimed that inputs such as R&D led to growth, globally and nationally, flourished. So powerful has this innovation-centric view been, especially in its nationalistic versions, that all evidence to the contrary has been studiously ignored. It was known in the 1960s that national rates of economic growth did not correlate positively with national investments in invention, research and development, or innovation.

pages: 607 words: 133,452

Against Intellectual Monopoly by Michele Boldrin, David K. Levine

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accounting loophole / creative accounting, agricultural Revolution, barriers to entry, cognitive bias, creative destruction, David Ricardo: comparative advantage, Dean Kamen, Donald Trump, double entry bookkeeping, en.wikipedia.org, endogenous growth, Ernest Rutherford, experimental economics, financial innovation, informal economy, interchangeable parts, invention of radio, invention of the printing press, invisible hand, James Watt: steam engine, Jean Tirole, John Harrison: Longitude, Joseph Schumpeter, Kenneth Arrow, linear programming, market bubble, market design, mutually assured destruction, Nash equilibrium, new economy, open economy, peer-to-peer, pirate software, placebo effect, price discrimination, profit maximization, rent-seeking, Richard Stallman, Silicon Valley, Skype, slashdot, software patent, the market place, total factor productivity, trade liberalization, transaction costs, Y2K

Biggs Distinguished Professor of Economics in Arts and Sciences at Washington University in St. Louis. He is a coeditor of Econometrica and NAJ Economics, president of the Society for Economic Dynamics, a Fellow of the Econometric Society, and a research associate of the National Bureau for Economic Research. Author with Drew Fudenberg of Learning in Games and editor of several conference volumes, his research interests include the study of intellectual property and endogenous growth in dynamic general equilibrium models; the endogenous formation of preferences, institutions, and social norms; and the application of game theory to experimental economics. Levine has published in leading journals such as American Economic Review, Econometrica, Review of Economic Studies, Journal of Political Economy, Journal of Economic Theory, Quarterly Journal of Economics, and American Political Science Review.

pages: 1,205 words: 308,891

Bourgeois Dignity: Why Economics Can't Explain the Modern World by Deirdre N. McCloskey

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Admiral Zheng, agricultural Revolution, Albert Einstein, BRICs, British Empire, butterfly effect, Carmen Reinhart, clockwork universe, computer age, Corn Laws, creative destruction, dark matter, David Ricardo: comparative advantage, Donald Trump, Edward Lorenz: Chaos theory, endogenous growth, European colonialism, experimental economics, financial innovation, Fractional reserve banking, full employment, George Akerlof, germ theory of disease, Gini coefficient, greed is good, Howard Zinn, income per capita, interchangeable parts, invention of agriculture, invention of air conditioning, invention of writing, invisible hand, Isaac Newton, James Watt: steam engine, John Maynard Keynes: technological unemployment, John Snow's cholera map, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, long peace, means of production, Naomi Klein, New Economic Geography, New Urbanism, Paul Samuelson, purchasing power parity, rent-seeking, road to serfdom, Robert Gordon, Ronald Coase, Ronald Reagan, sceptred isle, Scientific racism, Scramble for Africa, Shenzhen was a fishing village, Simon Kuznets, Slavoj Žižek, spinning jenny, Steven Pinker, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, total factor productivity, transaction costs, tulip mania, union organizing, Upton Sinclair, urban renewal, V2 rocket, very high income, working poor, World Values Survey, Yogi Berra

But I soon realized that the timing of institutional change in England fits poorly with its economic 285 change. As many economic historians before and after me have noted, the institutions relevant to the economy of Britain in fact did not change much in the very late seventeenth century, or even over the long eighteenth century 1688-1815. The eminent economic historian Nicholas Crafts notes that the various models of endogenous growth proposed by the economic theorists do a poor job of accounting for what happened in the eighteenth and nineteenth centuries. And as to the Northian version, he continues, “there was no obvious improvement in institutions at the time of the Industrial Revolution.”24There was by contrast an obvious improvement in the dignity and liberty of the bourgeoisie, apparent for example in the invention of the science of political economy itself.

pages: 395 words: 116,675

The Evolution of Everything: How New Ideas Emerge by Matt Ridley

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affirmative action, Affordable Care Act / Obamacare, Albert Einstein, Alfred Russel Wallace, altcoin, anthropic principle, anti-communist, bank run, banking crisis, barriers to entry, bitcoin, blockchain, British Empire, Broken windows theory, Columbian Exchange, computer age, Corn Laws, cosmological constant, creative destruction, Credit Default Swap, crony capitalism, crowdsourcing, cryptocurrency, David Ricardo: comparative advantage, demographic transition, Deng Xiaoping, discovery of DNA, Donald Davies, double helix, Downton Abbey, Edward Glaeser, Edward Lorenz: Chaos theory, Edward Snowden, endogenous growth, epigenetics, ethereum blockchain, facts on the ground, falling living standards, Ferguson, Missouri, financial deregulation, financial innovation, Frederick Winslow Taylor, Geoffrey West, Santa Fe Institute, George Gilder, George Santayana, Gunnar Myrdal, Henri Poincaré, hydraulic fracturing, imperial preference, income per capita, indoor plumbing, interchangeable parts, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, Jane Jacobs, Jeff Bezos, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kevin Kelly, Khan Academy, knowledge economy, land reform, Lao Tzu, long peace, Lyft, M-Pesa, Mahatma Gandhi, Mark Zuckerberg, means of production, meta analysis, meta-analysis, mobile money, money: store of value / unit of account / medium of exchange, Mont Pelerin Society, moral hazard, Necker cube, obamacare, out of africa, packet switching, peer-to-peer, phenotype, Pierre-Simon Laplace, price mechanism, profit motive, RAND corporation, random walk, Ray Kurzweil, rent-seeking, reserve currency, Richard Feynman, Richard Feynman, rising living standards, road to serfdom, Ronald Coase, Ronald Reagan, Satoshi Nakamoto, Second Machine Age, sharing economy, smart contracts, South Sea Bubble, Steve Jobs, Steven Pinker, The Wealth of Nations by Adam Smith, Thorstein Veblen, transaction costs, women in the workforce

As she put it in a lecture in India in 2014, the enrichment of the poor has resulted not from charity, planning, protection, regulation or trade unions, all of which merely redistribute money, but from innovation caused by markets, which have not been bad for the poor: ‘The sole reliable good for the poor, on the contrary, has been the liberating and the honoring of market-tested improvement and supply.’ But does innovation just happen, or is it in itself a product that can be created? This is the question that Paul Romer tackled in the 1990s with his theory of endogenous growth. Technical advances are not just by-products of growth, he argued, but investments that firms can deliberately make. Given the right institutions – a market in which to sell your product, the rule of law to prevent theft, a decent system of finance and taxation to incentivise you, some intellectual property protection, but not too much – you can set out to make an innovation and reap the rewards from it, despite sharing it with the world, in the same way you can set out to build a machine.

pages: 1,013 words: 302,015

A Classless Society: Britain in the 1990s by Alwyn W. Turner

Berlin Wall, Bob Geldof, British Empire, call centre, centre right, deindustrialization, demand response, Desert Island Discs, endogenous growth, Etonian, eurozone crisis, facts on the ground, Fall of the Berlin Wall, falling living standards, first-past-the-post, Francis Fukuyama: the end of history, friendly fire, full employment, global village, greed is good, inflation targeting, means of production, millennium bug, minimum wage unemployment, moral panic, negative equity, Neil Kinnock, offshore financial centre, old-boy network, period drama, Ronald Reagan, sexual politics, South Sea Bubble, Stephen Hawking, upwardly mobile, Winter of Discontent, women in the workforce

(That terminology, incidentally, was not itself new; there were Labour MPs in the 1980s who had talked disparagingly about the ‘Mandelson project’, while the party’s press officer Andy McSmith used to refer to ‘the Kinnockite project’.) Not even Gordon Brown was of much significance in terms of public presentation, and his best-known speech in opposition had been the one containing the explanation in 1994 that ‘Our new economic approach is rooted in ideas which stress the importance of macro-economic, neoclassical endogenous growth theory.’ The subsequent discovery that this had been written by Brown’s youthful adviser, Ed Balls, prompted one of Michael Heseltine’s crowd-pleasing gags at the Tory conference, when he announced of the policy that ‘It’s not Brown’s, it’s Balls’. The response to Blair in the Labour Party was mixed. Membership rose sharply in the first years after the leadership election – it had ‘the fastest-growing membership of any party in the western world’, boasted Blair in 1996 – but many comrades of longer standing weren’t enthused to the same degree.