For Krugman, the key to how government could do this was to better understand “Knowledge”;how it was created and how it diffused through the economy. If knowledge (in all its forms) were available to all, technology advances and the relatively speedy integration of existing technology (commercialization), would not be confined only to monopolistic competitors and developing nations. Any free and  accessible knowledge, which was diffused through the economy, its labor force (human capital), and would create disruptive spillovers which would break the lock-in of monopolistic firms and developed nations on economic growth. Innovation, based on knowledge and spillovers, would be constant and able to occur despite the best efforts to the powerful. The growth machine could work in a knowledge-based economy. But again the question was how best to accelerate the spread and integration of these drivers of economic growth — the choice was through (1) unplanned and natural “spillovers” injecting themselves automatically into the normal activities of the private markets OR (2) the conscious intervention of government and public policy.

What’s the Theory Behind Innovation and the Knowledge-Based Economy | Journal of Applied Research in Economic Development Saturday, April 26, 2014 @ 1:20pm | Modified