At its inception in the 1980’s, and galvanized by an important lecture by Robert Lucas in 1985, several researchers began to focus on the second question “how can one consciously and continuously grow an economy” (i.e. not leave it just to the invisible hand). The two mainstream Neo wings specified two core factors of economic growth: investment capital and demand. For a perpetual growth machine, more input factors were required. On the fringes of the orthodox mainstream Neos, there existed a model of growth outlined by Robert Solow (he is probably less a growth economist than a Neo-Keynesian). In this outlying model Solow had added a third force in addition to capital and demand: technology. Technology and its introduction into the economy was a very critical driver of economic growth. But Solow left it uncertain as to whether technology was a force external to the economy (and hence not a part of economic theory), but whose impact could drive economic growth (and decline) OR was technology actually a process internal to the economy and the consequence of normal interactions of the private market (and hence suitable to be included into economic theory). You have to be an economist to get “into” this external versus internal debate that followed. We are not economists and so suffice it to say the latter position would eventually be accepted. Once technology and its successful commercialization became kosher for economists to include in their models, the next issue was whether technology (and innovation) could be encouraged/inhibited through economic policy to enter into private markets OR whether technology more or less, Deus ex machina-like, invaded the economy and transformed it without meddling by government or economists.

What’s the Theory Behind Innovation and the Knowledge-Based Economy | Journal of Applied Research in Economic Development Saturday, April 26, 2014 @ 1:14pm | Modified