On the Dynamic Efficiency of the Market System
AbstractWe introduce a framework of development in which the direction of change is determined endogenously. Which new products, which new qualities and which new techniques are introduced in the course of development is determined by the profitability of different potential innovations. We define a concept of long-run efficiency of development which formalizes a widespread notion of `dynamic efficiency'. The concept merely excludes persistent inefficiencies. We finally give conditions that guarantee long-run efficiency of laissez-faire development. This formalizes a popular claim about the dynamic efficiency of the market system, and, at the same time, makes more precise the limits to the claim.
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Bibliographic InfoPaper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number 507.
Date of creation: May 1993
Date of revision:
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Endogenous Growth; Direction of Change; Dynamic Efficiency.;
Find related papers by JEL classification:
- D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
- D60 - Microeconomics - - Welfare Economics - - - General
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
- O30 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - General
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
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