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Knowledge, Consumption, and Endogenous Growth

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  • Richard N. Langlois

    (University of Connecticut)

Abstract

The recent efflorescence of interest in "endogenous" theories of economic growth has focused attention on the nature and role of knowledge in the growth process (Romer 1986, 1990; Grossman and Helpman 1990, 1994). Unlike earlier models of growth (Solow 1956; Swan 1956) in which technological change appeared as an exogenous parameter, this New Growth Theory (NGT) has sought to "endogenize" technical change by folding its production more fully into the neoclassical positive heuristic. Knowledge no longer appears as manna from heaven, but is now produced just as are bananas and tires: as the result of the rational optimizing behavior of economic agents. These agents invest resources in Research and Development (R&D), a sausage machine whose output is new technological knowledge. For reasons that Kenneth Arrow (1962) long ago articulated, however, the good called knowledge has certain peculiar properties in that, once created, it can spill easily into the hands of others at zero marginal cost. This process of spillover (and the nonconvexity it implies) is the source of the increasing returns that generate economic growth. While not questioning some essential truth to this story, students of the process of technological change - especially those who have not restricted themselves to theoretical models - have expressed considerable doubt about the this picture of technological knowledge and its creation. Those who study the historical processes of technical change have found that knowledge does not always - and perhaps does not usually - take the form Arrow assumed (Nelson 1992). Much technological knowledge cannot in fact be transmitted easily to others; much technological knowledge is inarticulate and tacit (Polanyi 1958), and can be transmitted only at a cost through imitation and apprenticeship. This observation creates a difficulty for knowledge-based theories of growth. To the extent that knowledge is tacit in this way, it behaves like an ordinary private good, and its role in generating increasing returns is lost. One response to the problem of tacit knowledge among sophisticated students of innovation has been to create a clear distinction between knowledge that is tacit and knowledge that is codified. Codified knowledge is knowledge that has been (or can be) converted into symbols for easy transmission, replication, and storage (Boisot 1995; Saviotti 1998). Such knowledge thus partakes of Arrovian public-good properties, which makes it a potential source of increasing returns. Under this stratagem, the large place of tacit knowledge in social learning does not invalidate growth theory so long as there also exists codified knowledge in suitable quantities. Some writers would even go further, suggesting that technological change and economic growth have had the effect of tipping the balance between tacit and codified knowledge (Arora and Gambardella 1994; Cowan and Foray 1997). "More" knowledge is becoming codified, implying (and perhaps explaining) an accelerated pace of social learning and economic growth. This essay takes a more skeptical view of the proposition that we are experiencing greater codification hand in hand with modern technology and economic growth. But such skepticism need not have dire implications for (the theory of) economic growth. The essay will take an equally skeptical view of the proposition that only codified knowledge, and never tacit knowledge, can generate economic growth.

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Bibliographic Info

Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2000-02.

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Length: 38 pages
Date of creation: Jan 2000
Date of revision:
Handle: RePEc:uct:uconnp:2000-02

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Cited by:
  1. Mauro Caminati, 2004. "Variety, Consumption and Growth," Department of Economics University of Siena 431, Department of Economics, University of Siena.
  2. Francisco Fatás-Villafranca & Dulce Saura & Francisco Vazquez, 2009. "Diversity, persistence and chaos in consumption patterns," Journal of Bioeconomics, Springer, vol. 11(1), pages 43-63, April.
  3. Andreas Chai, 2012. "Consumer Specialization and the Demand for Novelty: a Reconsideration of the Links and Implications for Studying Fashion Cycles in Tourism," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 232(6), pages 678-701, November.
  4. Reyes Calderón, 2004. "Fron Neo-classical Entrepreneur to Socio-economic Organization," Faculty Working Papers 01/04, School of Economics and Business Administration, University of Navarra.
  5. DragoÅŸ Mihai Ungureanu & Ruxandra Dana Vilag & George Horia Ionescu & Florian Bogdan Stoian, 2009. "ROMANIA'S REAL CONVERGENCE TO THE EUROPEAN UNION Dragos Mihai Ungureanu , Permanent Representation of Romania to the European Union Ruxandra Dana Vilag, Romanian-American University Bucharest George H," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(11), pages 14.
  6. Maria João Ribeiro Thompson, 2003. "A Nonscale Growth Model with R&D and Human Capital Accumulation," NIPE Working Papers 5/2003, NIPE - Universidade do Minho.
  7. Consoli, Davide & Patrucco, Pier Paolo & Quatraro, Francesco, 2006. "Un'Analisi Comparata delle Performance Tecnologiche nel Nord-Ovest Sabaudo nel Lungo Periodo nel Contesto delle RegioniItaliane: Gli Anni 1980-2001," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 200605, University of Turin.
  8. Richard R. Nelson & Bhaven N. Sampat, 2001. "Las instituciones como factor que regula el desempeño económico," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 3(5), pages 17-51, July-Dece.
  9. Bernard Guilhon, 2004. "Markets for knowledge: problems, scope, and economic implications," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 13(2), pages 165-181.
  10. Ulrich Witt & Tom Broekel & Thomas Brenner, 2007. "Knowledge and its Economic Characteristics - A Conceptual Clarification," Jena Economic Research Papers 2007-013, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  11. Pascal Le Masson & Armand Hatchuel & Benoît Weil, 2010. "Modeling Novelty-Driven Industrial Dynamics with Design Functions: understanding the role of learning from the unknown," Post-Print hal-00696970, HAL.
  12. Davide Consoli, 2005. "Changing boundaries and structure of a technological system: lessons from UK retail banking," Development and Comp Systems 0506004, EconWPA.
  13. Duanmu, Jing-Lin & Fai, Felicia M., 2007. "A processual analysis of knowledge transfer: From foreign MNEs to Chinese suppliers," International Business Review, Elsevier, vol. 16(4), pages 449-473, August.
  14. William Latham & Christian Le Bas & Dmitry Volodin, 2011. "Value of invention, prolific inventor productivity and mobility : evidence from five countries, 1975-2002," Working Papers 1133, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  15. Davide Consoli, 2005. "Changing boundaries and structure of a technological system: lessons from UK retail banking," Industrial Organization 0506006, EconWPA.
  16. Davide Consoli, 2005. "Cash and the Counter: Capabilities and Preferences in the Demand for Banking Technologies," Industrial Organization 0511001, EconWPA.
  17. Davide Consoli, 2005. "Cash and the Counter: Capabilities and Preferences in the Demand for Banking Technologies," Development and Comp Systems 0511010, EconWPA.
  18. Ramello, Giovanni B., 2007. "Access to vs. exclusion from knowledge: Intellectual property, efficiency and social justice," POLIS Working Papers 90, Institute of Public Policy and Public Choice - POLIS.
  19. Nelson, Richard R. & Sampat, Bhaven N., 2001. "Making sense of institutions as a factor shaping economic performance," Journal of Economic Behavior & Organization, Elsevier, vol. 44(1), pages 31-54, January.
  20. Franco Malerba, 2006. "Innovation, Industrial Dynamics and Industry Evolution: Progress and the Research Agendas," Revue de l'OFCE, Presses de Sciences-Po, vol. 97(5), pages 21-46.
  21. Iancu, Aurel, 2009. "Real Economic Convergence," Working Papers of National Institute of Economic Research 090104, National Institute of Economic Research.

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