Week 2: Endogenous growth theory, technology policy and the quest for ideas

This post was suggested by my colleague Christos Genakos.

Paul Romer recently was awarded the Nobel memorial prize in Economics for his work on endogenous growth theory (shared with Bill Nordhaus who conducted early work on the economics of climate policy).  For some additional background see Romer’s excellent website or recent articles from the WEF or the 1994 special issue of Journal of Economic Perspectives.  For one of many tributes on the influence of Romer’s work, see Joshua Gans. Indeed, it is difficult to overstate the influence that endogenous theory has played in justifying support for technology and innovation policy (not just because of Romer’s recent role as Chief Economist at the World Bank).

Of course, endogenous growth theory depends on the continued generation of new ideas, innovations, and technologies, which leads Christos to ask a simple but fundamental question:

Paul Romer’s (1990) central idea was that endogenous growth is been driven by an ideas generating sector. But, according to recent research by Bloom et al (2017), ideas are really getting harder to find!  Is that the end of growth?