Innovation and Economic Growth

Discussion in 'Economics' started by alessandro1982, Oct 22, 2010.

  1. Hello everyone

    I'm Alessandro from Italy. I'm working on a thesis for my University and I've a problem you might help me to solve.

    The thesis is about the relationship between Innovation (and technology) and economic growth. I'm writing the main chapter of the thesis about how innovation influences economic growth.
    I was wondering if you can give me some pieces of advice about what I could include in this chapter. In other words, if you were me, what would you write about in this chapter?
    Of course I have some ideas but I'd like to hear other opinions because it's a very complicated subject and I'm worried I could miss something.

    One other thing. The next chapter is about "innovation policies to foster economic growth" so I would like not to talk about this in the main chapter.

    A big thank you in advance

    Ciao ciao

  2. Historically, half of productivity growth comes from new technology.


    Suppose you write about "no such thing as shovel ready". Work on modifying policies which choke productivity. Of course this is boring, political money seeks out the new and "innovative vocabulary psychobabble" concept that mere mortals know will not work.
  3. hedge123


    There are many sources of economic growth, but as nutmeg points out, technology is considered by most economists to account for most of that in the long run. This conclusion comes primarily from the work done by MIT's Robert Solow and the application of his Solow Growth Model to empirical data on the main factors of growth in economies over time. Paul Krugman's work applying the Solow model to Asian economic growth is particularly famous. Both men are Nobel Prize winners.

    Solow called technology "Multifactor Productivity":

    Krugman's original article:
  4. Consumers can't buy the most technologically advaced products when they are indebted or unemployed.
    Everything has limits.
  5. start with this

    Forty years ago, our real economy grew better with a financial sector that received one-twentieth as large a percentage of total profits (2%) than does the current financial sector (40%). The minimum measure of how much damage the bloated, grossly over-compensated finance sector causes to the real economy is this massive increase in the share of total national income wasted through the finance sector’s parasitism.

    Second, the finance sector is worse than parasitic. The financial sector functions as the sharp canines that the predator state uses to rend the nation. In addition to siphoning off capital for its own benefit, the finance sector misallocates the remaining capital in ways that harm the real economy in order to reward already-rich financial elites harming the nation. The facts are alarming:

    • Corporate stock repurchases and grants of stock to officers have exceeded new capital raised by the U.S. capital markets this decade. That means that the capital markets decapitalize the real economy. Too often, they do so in order to enrich corrupt corporate insiders through accounting fraud or backdated stock options.

    • The U.S. real economy suffers from critical shortages of employees with strong mathematical, engineering, and scientific backgrounds. Graduates in these three fields all too frequently choose careers in finance rather than the real economy because the financial sector provides far greater executive compensation. Individuals with these quantitative backgrounds work overwhelmingly in devising the kinds of financial models that were important contributors to the financial crisis. We take people that could be conducting the research & development work essential to the success of our real economy (including its success in becoming sustainable) and put them instead in financial sector activities where, because of that sector’s perverse incentives, they further damage both the financial sector and the real economy.

    • The financial sector’s fixation on accounting earnings leads it to pressure U.S manufacturing and service firms to export jobs abroad, to deny capital to firms that are unionized, and to encourage firms to use foreign tax havens to evade paying U.S. taxes.

    william black: bank regulator during the savings and loans