Tag Archives: NewGrowthTheory

From subsistence farming to prosperity?

Nairobi 2009

[Image Nairobi 2009 ©Corbis, Nigel Pavitt]

For several years I’ve been writing about the development challenge — what policies are the most effective to help Paul Collier’s “Bottom Billion” escape from poverty to our world of prosperity? There are a number of central ideas which I think of in an interdependent relationship: (Industrial agriculture, urbanization, cities) => (Ideas, innovation, economic growth) => (Women control their own fertility, women’s education, population growth stabilizes). This virtuous pyramid rests on a foundation of affordable, low-carbon energy.

The purpose of this post is to offer recommendations for print, audio and video resources on these topics.

A good place to begin is with iconic ecologist Stewart Brand:  Environmental Heresies at MIT Technology Review “The founder of The Whole Earth Catalog believes the environmental movement will soon reverse its position on four core issues.” Rethinking Green (video, SALT lecture). And his 2010 book Whole Earth Discipline.

For a current and informed view of development challenges and progress, see the 2014 Gates Letter “3 Myths That Block Progress For The Poor”.

Are you concerned that population growth is out of control? Then read the recent essay by Stanford professor Martin Lewis “Population Bomb? So Wrong”. Marian Swain at the Breakthrough Institute looks at the current situation for population growth rates, carbon free energy, food supplies and development in Four Surprising Facts About Population: Why Humans Are Not Fated to Ecological Disaster. I’m reasonably confident that you will have fewer population nightmares after watching Hans Rosling in the BBC documentary “DON’T PANIC — The Facts About Population“.

My current favorite introduction to both climate change and energy policy  is Stanford University nuclear physicist and Nobel laureate Burton Richter’s 2010 book: Beyond Smoke and Mirrors: Climate Change and Energy in the 21st Century. It is very accessible to the non-technical reader, and balanced in the presentation of energy policy options. Dr. Richter calls energy-policy winners and losers as he sees them.

For an overview of agricultural reform try Pamela Ronald and Raoul Adamchak’s “Organically Grown and Genetically Engineered: The Food of the Future” [video of their SALT talk], [the book at Amazon]. On agriculture and urbanization, try Why big dams and big ag are good for the poor (transcript of interview with Harvard’s John Briscoe).

Regarding urbanization: ideas come from places where people congregate – in particular cities. Innovation comes from banging ideas against each other. And the central engine of economic growth is innovation – both in the form of new technologies and new institutions (or rules). This is one of the insights that made Paul Romer one of today’s most influential economists. Romer’s “endogenous growth theory” or “new growth theory” is sure to win him a much-deserved Nobel Prize. From Dr. Romer’s Stanford biography:

(…) The contrast between the economics of objects and the economics of ideas is the thread that runs through my work. In graduate school, I wondered why growth rates had been increasing over time. Fresh from cosmology, I was not motivated by policy concerns. It just seemed like an important puzzle. Existing theory suggested that scarcity combined with population growth should be making things worse, but they kept getting better at ever faster rates. New ideas, in the form of new technologies, had to be the answer. Everyone “knew” that. But why do new technologies keep arriving at faster rates? One key insight is that because ideas are nonrival or sharable, interacting with more people turns out to make us all better off. In this sense, ideas are the exact opposite of scarce objects. (See my recent paper with Chad Jones for more.)

For an introduction to Romer’s growth theory I recommend Paul’s chapter “Economic Growth” inThe Concise Encyclopedia of Economics, and the Econtalk interview “Romer on Growth” (if you prefer to read, see the full transcript).

Paul Romer’s current project is Charter Cities, a pragmatic scheme to overcome the development bottleneck of bad rules (for examples of bad rule systems think of Haiti, Zimbabwe, North Korea). I am persuaded that the Charter Cities concept has a chance to evolve into an effective development tool, and continue to find every Romer presentation fascinating. There are two TED Talks so far: Paul Romer’s radical idea: Charter cities (2009) and Paul Romer: The world’s first charter city? (2011 regarding Honduras).

For a 2011 look at cities as idea- and hence prosperity-generators, Harvard’s Ed Glaeser is getting a lot of favorable comment on his 2011 book Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier. Glaeser is the subject of an excellent Freakonomics Radio podcast [MP3], and the London School of Economics lecture of the same title. See also the LSE review of Triumph of the City.

More on cities, ideas and growth: why do cities seem to be able to keep growing while most corporations die? Geoffrey West and colleagues at the Santa Fe Institute have been searching for a common theory which might answer that question. Geoffrey recently gave a thoughtful lecture at the Long Now Foundation (SALT).

Lastly, on the same theme, Steven Johnson’s 2010 book Where Good Ideas Come From: The Natural History of Innovation is summarized in his TED Talk: Where good ideas come from, and in his recent RSA Animate lecture of the same title. Enjoy!  

From subsistence farming to prosperity?

Paul Romer

For several years I’ve been writing about the development challenge — what policies are the most effective to help Paul Collier’s “Bottom Billion (TED Talk)” escape from poverty to our world of prosperity? There are a number of central ideas which I think of in a rough, non-linear relationship: (Industrial agriculture, urbanization, cities) => (Ideas, innovation, economic growth) => (Women control their own fertility, women’s education, population growth stabilizes). Zero-carbon energy that is cheaper-than-coal has to be the foundation of that pyramid.

The purpose of this post is to pull together some recommendations for print, audio and video resources on these topics.

A good place to begin is Steward Brand’s Rethinking Green (video, SALT lecture). For an overview of agricultural reform try Pamela Ronald, Raoul Adamchak’s “Organically Grown and Genetically Engineered: The Food of the Future” [video of their SALT talk], [the book at Amazon]. On agriculture and urbanization, try Why big dams and big ag are good for the poor (text interview with Harvard’s John Briscoe) .

On cities: ideas come from places where people congregate – in particular cities. Innovation comes from banging ideas against each other. And the central engine of economic growth is innovation – both in the form of new technologies and new institutions (or rules). This is one of the insights that have made Paul Romer one of today’s most influential economists. Romer’s “endogenous growth theory” or “new growth theory” is sure to win him a much-deserved Nobel Prize. From Dr. Romer’s Stanford biography:

(…) The contrast between the economics of objects and the economics of ideas is the thread that runs through my work. In graduate school, I wondered why growth rates had been increasing over time. Fresh from cosmology, I was not motivated by policy concerns. It just seemed like an important puzzle. Existing theory suggested that scarcity combined with population growth should be making things worse, but they kept getting better at ever faster rates. New ideas, in the form of new technologies, had to be the answer. Everyone “knew” that. But why do new technologies keep arriving at faster rates? One key insight is that because ideas are nonrival or sharable, interacting with more people turns out to make us all better off. In this sense, ideas are the exact opposite of scarce objects. (See my recent paper with Chad Jones for more.)

For an introduction to Romer’s growth theory I recommend Paul’s chapter “Economic Growth” inThe Concise Encyclopedia of Economics, and the Econtalk interview “Romer on Growth” (if you prefer to read, see the full transcript).

Paul Romer’s current project is Charter Cities, a pragmatic scheme to overcome the development bottleneck of bad rules (for examples of bad rule systems think of Haiti, Zimbabwe, North Korea). I am convinced that the Charter Cities concept will work, and continue to find every Romer presentation fascinating. There are two TED Talks so far: Paul Romer’s radical idea: Charter cities (2009) and Paul Romer: The world’s first charter city? (2011 regarding Honduras).

“When ideas have sex” is a key theme of Matt Ridley’s 2010 book The Rational Optimist. I do not agree with all of Ridley’s themes. But his riff on ideas is good – sample his TED Talk When ideas have sex. I also recommend the longer Ridley lecture/discussion titled Deep Optimism at Stewart Brand’s Seminars About Long Term Thinking (SALT).

For a 2011 look at cities as idea- and hence prosperity-generators, Harvard’s Ed Glaeser is getting a lot of favorable comment on his 2011 book Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier. Glaeser is the subject of an excellent Freakonomics Radio podcast [MP3], and the London School of Economics lecture of the same title. See also the LSE review of Triumph of the City.

More on cities, ideas and growth: why do cities seem to be able to keep growing while most corporations die? Geoffrey West and colleagues at the Santa Fe Institute have been searching for a common theory which might answer that question. Geoffrey recently gave a thoughtful lecture at the Long Now Foundation (SALT).

Lastly, on the same theme, Steven Johnson’s 2010 book Where Good Ideas Come From: The Natural History of Innovation is summarized in his TED Talk: Where good ideas come from, and in his recent RSA Animate lecture of the same title.

Enjoy!

 

Paul Romer: founder of Aplia — real technology solutions for education

(ex-Stanford) economist Paul Romer is one of my heros. It all started with the Russ Roberts interview where I was introduced to the “new growth theory” developed by prof. Romer. You must listen to that Econtalk interview “Romer on Growth” (full transcript). You will also want to review the chapter “Economic Growth” in The Concise Encyclopedia of Economics.

Romer resigned his tenure at Stanford to start Aplia, a venture that just might realize some of the potential we’ve been hoping for by making the proper cocktail of technology and education. On the Aplia website, here is Paul’s “A message from our founder

Dear Colleague,

As instructors, we know that student effort is the most important determinant of student success. Unfortunately, we simply do not have the tools to encourage more effort without taking up lots of our time.

In my teaching at the Business School at Stanford in the 1990s, I wanted to assign more homework, but I could not manage the paper flow and grading. I wanted to use experiments to get students involved, but I could not spare time from lectures. To solve these problems, I developed software and teaching materials that dramatically changed the course. Because I could require assignments before every class and run online experiments that made abstract concepts real, my students gained confidence. Everyone came to class better prepared. Our classroom discussions were more productive. Ultimately, they learned more and felt a stronger sense of accomplishment.

To continue these efforts, I started Aplia Inc. Its mission is to change how we teach by requiring from students the effort necessary for them to succeed. In the process, it can raise the productivity of instructors by freeing them of such low-value tasks as marking papers or lecturing on the basics and allowing them to do what they do best—respond to questions, lead discussions, demonstrate, and challenge.

Thanks for visiting our website. We hope you’ll come back often, as we’ll be adding further demonstrations of our products’ features.

Best regards,

Paul Romer

At the above link you’ll find five short videos where Paul explains what Aplia is about. This is early days, but the Aplia approach is an example of what I am hoping for. More on Paul Romer — his Bio page at Stanford where I discovered the Aplia startup.

I’m a senior fellow in the Stanford Institute for Economic Policy Research (SIEPR). Until recently, I taught at Stanford’s Graduate School of Business, which led to a teaching award and an entrepreneurial detour into educational software. Before moving to Stanford, I taught at the University of California at Berkeley, the University of Chicago, and the University of Rochester. I am a fellow of the American Academy of Arts and Sciences and received the Recktenwald Prize in Economics. My ex-wife, Virginia Langmuir, and I have two children and one grandchild.

I grew up in a political family. In college, I tried to strike out in a new direction by studying mathematical physics and cosmology. Graduate work in economics (first at MIT, then Queens University, and the University of Chicago) was a compromise that brought me back toward my policy roots but still left room to explore big ideas.

The contrast between the economics of objects and the economics of ideas is the thread that runs through my work. In graduate school, I wondered why growth rates had been increasing over time. Fresh from cosmology, I was not motivated by policy concerns. It just seemed like an important puzzle. Existing theory suggested that scarcity combined with population growth should be making things worse, but they kept getting better at ever faster rates. New ideas, in the form of new technologies, had to be the answer. Everyone “knew” that. But why do new technologies keep arriving at faster rates? One key insight is that because ideas are nonrival or sharable, interacting with more people turns out to make us all better off. In this sense, ideas are the exact opposite of scare objects. (See my recent paper with Chad Jones for more.)

Over time, it became clear to me that we will not understand the deep dynamics of technological ideas until we understood the dynamics of another type of idea, the rules that people follow. The patent system is a set of rules that encourages the discovery of new technologies. So is our system of open science. Rules that limit direct foreign investment can keep ideas from spreading to poor countries. So can rules (and systems of enforcement) that allow high levels of crime. As we interact with more people, the rules become more important and more complicated.
In my current work on rules, I have come full circle. I’m starting with a pressing policy concern: How can people living in places like Haiti, the Democratic Republic of the Congo, or Cuba get access to rules that protect them and let them engage in mutually beneficial exchange with others from all over the world? As Avner Grief and Douglass North have already shown, rules raise deeper theoretical issues than technologies. I’m convinced that practical progress and theoretical insight are more likely if we take the practical concerns seriously, as I’ve done with the suggestion that countries build charter cities.

Paul Romer on growth

For a nation the choices that determine whether income doubles with every generation, or instead with every other generation, dwarf all other policy concerns. — Paul M. Romer

Stanford economist Paul Romer is one of the very best modern-day researchers on the fundamentals of long term economic growth. I highly recommend the Econtalk podcast interview with Paul Romer titled “Romer on Growth“. There is a complete transcript of the Econtalk interview on Econlib.

See also Paul Romer’s short chapter Economic Growth in The Concise Encyclopedia of Economics.

The Reason Magazine interview Post-Scarcity Prophet offers some perspective why the New Growth Theory is so important:

“One of the 25 most influential Americans,” pronounced Time. “His ideas may just revolutionize the study of economics.” Newsweek included him in its roster of “The Century Club,” a “list of 100 people for the New Century.” He is a perennial short-lister for the Nobel Memorial Prize in Economics. His work has been lauded by business guru Peter Drucker and Nobel-winning economist Robert Solow. He is the STANCO 25 Professor of Economics at Stanford University’s Graduate School of Business and a senior fellow of the Hoover Institution. He was recently elected a fellow of the American Academy of Arts and Sciences.

As one of the chief architects of “New Growth Theory,” Paul Romer has had a massive and profound impact on modern economic thinking and policymaking. New Growth Theory shows that economic growth doesn’t arise just from adding more labor to more capital, but from new and better ideas expressed as technological progress. Along the way, it transforms economics from a “dismal science” that describes a world of scarcity and diminishing returns into a discipline that reveals a path toward constant improvement and unlimited potential. Ideas, in Romer’s formulation, really do have consequences. Big ones.

One problem that Americans have is that their government has been taken over by the old-ideas people, in particular, the anti-growth redistributionists. John Mauldin recently published one of Woody Brock’s essays on the Obama policies and the grim outlook for the debt/GDP ratio. Dear reader — please let me know if you come across any Obama policy that is seriously pro-growth.