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A New Theory of Endogenous Economic Growth

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  • Scott, Maurice
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    Abstract

    The advance of useful knowledge is widely agreed to be the key factor in explaining economic growth. While many writers have sought to distinguish between "ordinary" investment, which merely imitates existing assets, and research or educational expenditures, which result in innovation, it is argued in this article that this distinction has not been made operational for a theory of economic growth, and it is very doubtful whether it can be. Instead, it seems better to recognize that all investments consist of both one innovation after another and one imitation after another, in varying proportions which cannot in aggregate be identified. Since investment changes the world, and leads to unforeseen new investment opportunities, it results in temporary monopolies as Schumpeter pointed out. Because of these monopolistic profits, which also exist because of ordinary market imperfections, average profitability exceeds marginal profitability and there is an externality to investment, with policy implications. Copyright 1992 by Oxford University Press.

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    Bibliographic Info

    Article provided by Oxford University Press in its journal Oxford Review of Economic Policy.

    Volume (Year): 8 (1992)
    Issue (Month): 4 (Winter)
    Pages: 29-42

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    Handle: RePEc:oup:oxford:v:8:y:1992:i:4:p:29-42

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    Web page: http://oxrep.oupjournals.org/

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    Cited by:
    1. Maxwell Fry, 1998. "Savings, Investment, Growth and Financial Distortions in Pacific Asia and Other Developing Areas," International Economic Journal, Taylor & Francis Journals, vol. 12(1), pages 1-24.
    2. James Riedel, 2007. "The Tyranny of Numbers or the Tyranny of Methodology: Explaining the East Asian Growth Experience," Annals of Economics and Finance, Society for AEF, vol. 8(2), pages 385-396, November.
    3. Gustav Ranis & Frances Stewart, 2000. "Strategies for Success in Human Development," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 1(1), pages 49-69.
    4. Mike Danson & Geoff Whittam, 1998. "Clustering, innovations and trust: the essentials of a clusters strategy for Scotland," ERSA conference papers ersa98p387, European Regional Science Association.
    5. Gustav Ranis, 2000. "Strategies for Success in Human Development," Working Papers 808, Economic Growth Center, Yale University.
    6. Meyer, Dietmar, 1995. "Az új növekedéselmélet
      [The new theory of growth]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 387-398.

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