[EMAIL PROTECTED] wrote:
Kurz starts with Solow's model, relating it to new growth theory NGT).
Interestingly, Kurz shows that while one of the common views is that the novelty of
NGT is incorporation of increasing returns, IR is not an essential ingredient--if this
assumption is abandoned, growth is no less 'endogenous' in these models.
Q: How is the Solow model "exogenous"?
Arrow related the state variable 'level of technology' of a single firm to another
state variable, the amount of capital accumulated in the economy as a whole. In
simplified form, output of firm i can be written as:
Yi = A(K)F(Ki, Li)
where the i's are subscripts, K aggregate stock of capital, Ki and Li capital and
labor employed in firm i. The increase in A is the unintended by-product of the
experience accumulated producing new capital goods. This learning by doing is taken
to be purely external to firms producing or using the capital goods.
Q: This A is also TFP, no?
Romer's model differs from Arrows in essentially two respects: he adopts a
conventional neoclassical production function and he assumes intertemporal utility
maximization. Attention is on a single state variable: 'knowledhe' or 'information.'
The main idea is that information (contained in inventions or discoveries that have
become innovations) is a non-rival good. However, it is not totally non-excludable.
Firms can exclude others from the info for some time
at least. This allows them to pocket temporary monopoly profits. The whole argument
revolves around these two different aspects of the publicness of the
goods--non-rivalry and non-excludability.
Q: So, basically, A (which is TFP?) is knowledge in NGT?
One of the things I'm curious about is what prompted the development of NGT. From what
people have said, it sounds like a minor contribution (if any meaningful contribution
at all) to growth theory. I'm wondering: what was the impasse (perceived or real) that
prompted development NGT, a theory that seems directed at no particular question at
all?
Christian
