Arnold Kling  

Brink Lindsey on Innovation and Growth

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The Kauffman Foundation describes a new paper.


According to the paper, when countries are poor and less advanced, the economic future is relatively predictable. The example of rich countries allows policymakers in less developed countries to peek into the future and see the economic changes that need to be made. Consequently, there is less need for market competition to guide the course of development. But as countries successfully pursue "catch-up growth" and approach the technological frontier, the future grows increasingly uncertain. Now innovation, rather than imitation, is the key to continued progress, and the ceaseless trial-and-error experimentation of competitive markets becomes indispensable.

Sounds to me like a warning that China is likely to run out of low-hanging fruit. I have not yet had time to read the full paper.


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COMMENTS (1 to date)
Nick Bradley writes:

Sounds like Cowen's Stagnation Theory to me: that growth gets harder as we move forward.

We are also in an knowledge economy, and government policies interfere with the sharing of information and knowledge more than anything else. As a result, markets are more important as an economy matures.

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