Perhaps the most noisy reaction came from Harvard’s, Greg Mankiw, a firm proponent of an augmented Neo-Keynesian Solow model of growth (remember that, you read it earlier). Mankiw, as does Warsh, begins by complimenting innovation economics for its elegant modeling explanation of the obvious. Every Two Neo economist would always have agreed with the core knowledge-based economic concept– “living standards (growth) rise over time because knowledge expands and production functions improve”. (P.377). A great deal of what Krugman and Romer had written in math was, to Mankiw, already part and parcel of conventional economic mainstream thought. But then Mankiw, not so gently, questions why there were still differences between nations (and firms) in growth rate. Why do some nations either choose or simply do not benefit from easily accessible knowledge and technology? Knowledge and education in today’s world are pretty common and given that the Chinese among others, the Japanese before them, and the Americans first of all, had stolen technology and reverse engineered for centuries, why are there still differences in national growth patterns and why do economies decline. Knowledge diffusion already exists and there is no growth machine. Are these nations and firms stupid or incompetent? Or is knowledge diffusion flawed either as a concept, or at least deficient in its day to day application? Neither, Mankiw boldly goes in another direction. No, Mankiw states knowledge is NOT a non rival good. Trade secrets, proprietary knowledge, the presence and absence of technological know how and the sticky transferability of intellectual property itself mean education and innovation are rival goods. They are consumable by only one consumer. Instead, Mankiw asserted the missing ingredients for growth were entrepreneurs who given a favorable environment seize upon knowledge and technology to earn a profit and a fortune.
What’s the Theory Behind Innovation and the Knowledge-Based Economy | Journal of Applied Research in Economic Development Saturday, April 26, 2014 @ 1:35pm
