Economic Growth and Change in a Material World
Chapter 8: The Drivers of Long-Term Growth: Knowledge, Technological Change and Radical Innovation
8. The drivers of long-term growth: knowledge, technological change and radical innovation 8.1 INTRODUCTION In the previous chapters of this book we have articulated in some detail how individuals (and ﬁrms) belonging to the subspecies H. Economicus constantly try to increase their wealth, subject to the AAL rule. The last chapter discussed the problem of aggregation, and the transition from a microeconomic focus to a macroeconomic focus on the system as a whole. However, while technical progress is, in some sense, a reﬂection of additions to human knowledge, and while learning and adaptation, in particular, take place at the level of individual economic agents, it is not possible to treat technical progress at the system level as an aggregation of small increments to knowledge. The core problem is that, in fact, learning and incremental change do not explain radical innovations that change the structure of the economy. Improvements in gas light did not, and could not, explain the advent of electric light. Nor did Edison’s incandescent electric light with its DC generator necessarily bring forth Tesla’s inductive motor and the three-phase power distribution system, the Hall-Heroult electrolytic process for making aluminum, or Moissan’s electric furnace; nor did these breakthroughs necessitate Marconi’s radio-telegraph, the vacuum tube diode, the superheterodyne circuit, TV or the ENIAC electronic computer. These subsequent developments can be regarded, however, as ‘spillovers’ from Edison’s innovation. Similarly, the vacuum tube did not evolve into a transistor, nor did the abacus or the mechanical calculator morph into an electronic...
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