I've never understood, given a certain set of assumptions, why endogenous growth
theory was more satisfactory than neoclassical theory. In the textbooks I've read, the
difference comes down to the role of technology (NCt doesn't really explain why this
is the limit of growth, or where it comes from, but okay) and diminishing returns on
capital investment. Was endogenous growth theory just made up to answer the question
about statistical correlations between savings and growth? Or was there a better
reason?
Even if the marginal cost of info is nothing, the marginal cost of producing anything
by using information (even profit in financial markets) is not zero, and so you're
basically back to Solow's model, it would seem.
Christian
>I have never been able to figure out why Romer's work has made such a
>buzz. The only thing different between his an Solow's is that he
>emphasizes that the supposed key source of growth has no marginal cost. Whereas
>Solow's idea of growth would be technology embodied in machines, Romer's is
>information, which can be infinitely re-used.
