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The Division of Labor and Knowledge is Limited by the Division of Ownership Over the Ultimate Resource: The Role of Economies of Scope in Julian Simon

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  • Rosolino A. Candela

    (Mercatus Center at George Mason University)

Abstract

Julian Simon famously argued that economic growth is correlated with population growth. The basis for this correlation is what Simon refers to as the “ultimate resource,” namely the human mind and the collective stock of dispersed, tacit, and inarticulate knowledge among individuals. Though not incorrect, this simple rendition of his argument does not do full justice to the inspiration that Simon took from the mainline of economic thought. The purpose of this paper is to situate Julian Simon’s The Ultimate Resource as part of the mainline of development economics. I do so by developing an implicit and underappreciated relationship between entrepreneurship and economic growth in Simon’s The Ultimate Resource. I argue that this correlation between economic growth and population growth is predicated on what Simon refers to as “economies of scope.” This implies twofold. First, that a Smithian division of labor and a Hayekian division of knowledge emerge simultaneously, but are inherently predicated on a Misesian division of private property rights. Secondly, population growth is a proximate cause of economic growth, and therefore a by-product of a more fundamental institutional foundation: an ever-increasing scope in the ability of individuals to exchange ideas, goods, and services.

Suggested Citation

  • Rosolino A. Candela, 2022. "The Division of Labor and Knowledge is Limited by the Division of Ownership Over the Ultimate Resource: The Role of Economies of Scope in Julian Simon," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 35(3), pages 323-341, September.
    • Handle: RePEc:kap:revaec:v:35:y:2022:i:3:d:10.1007_s11138-022-00569-w
    DOI: 10.1007/s11138-022-00569-w
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    Cited by:

    1. Peter Jacobsen & Louis Rouanet, 2022. "The ultimate resource after 40: A special issue against the grain," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 35(3), pages 275-282, September.

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    More about this item

    Keywords

    Julian Simon; Economies of Scope; Increasing Returns; Property Rights;
    All these keywords.

    JEL classification:

    • B53 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Austrian
    • N70 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - General, International, or Comparative
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General

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