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Simulating the New Economy

Author

Listed:
  • Eliasson, Gunnar

    () (Royal Institute of Technology)

  • Johansson, Dan

    () (The Ratio Institute)

  • Taymaz, Erol

    (Middle East Technical University)

Abstract

The IT, the Internet, or the Computing & Communications (C&C) technology revolution has been central to the economic discussion for several decades. Before the mid-1990s the catchword was the “productivity paradox” coined by Robert Solow, who stated in 1987 that “computers are everywhere visible, except in the productivity statistics”. Then the New Economy and fast productivity growth fueled by C&C technology suddenly became the catchword of the very late 1990s. Its luster however, faded almost as fast as it arrived with the dot.com deaths of the first years of the new millennium. With this paper we demonstrate that the two paradoxes above are perfectly compatible within a consistent micro (firm) based macro theoretical framework of endogenous growth. Within the same model framework also a third paradox can be resolved, namely the fact that the previous major New Industry creation, the Industrial Revolution, only involved a handful of Western nations that had got their institutions in order. If the New Economy is a potential reality, one cannot take for granted that all industrial economies will participate successfully in its introduction. It all depends on the local receiver competence to build industry on the new technology. We, hence, also demonstrate within the same model the existence of the risk of failing altogether to capture the opportunities of a New Economy.

Suggested Citation

  • Eliasson, Gunnar & Johansson, Dan & Taymaz, Erol, 2004. "Simulating the New Economy," Ratio Working Papers 52, The Ratio Institute.
  • Handle: RePEc:hhs:ratioi:0052
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    References listed on IDEAS

    as
    1. Eliasson, Gunnar & Johansson, Dan & Taymaz, Erol, 2005. "Firm Tunrover and the Rate of Macroeconomic Growth - Simulating the Macroeconomic Effects of Schumpeterian Creative Destruction," Ratio Working Papers 66, The Ratio Institute.
    2. Eliasson, Gunnar, 1991. "Modeling the experimentally organized economy : Complex dynamics in an empirical micro-macro model of endogenous economic growth," Journal of Economic Behavior & Organization, Elsevier, vol. 16(1-2), pages 153-182, July.
    3. Gunnar Eliasson & Asa Eliasson, 1996. "The biotechnological competence bloc," Revue d'Économie Industrielle, Programme National Persée, vol. 78(1), pages 7-26.
    4. Robert J. Gordon, 2000. "Does the "New Economy" Measure Up to the Great Inventions of the Past?," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 49-74, Fall.
    5. Eliasson, Gunnar, 1984. "Micro heterogeneity of firms and the stability of industrial growth," Journal of Economic Behavior & Organization, Elsevier, vol. 5(3-4), pages 249-274.
    6. Andrew Atkeson & Patrick J. Kehoe, 2002. "The transition to a new economy after the Second Industrial Revolution," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
    7. Robert J. Gordon, 2000. "Interpreting the "One Big Wave" in U.S. Long-Term Productivity Growth," NBER Working Papers 7752, National Bureau of Economic Research, Inc.
    8. Eliasson, Gunnar, 1988. "The Firm as a Competent Team," Working Paper Series 207, Research Institute of Industrial Economics, revised Feb 1990.
    9. Anonymous, 1991. "Research Reports And Updates," Journal of Food Distribution Research, Food Distribution Research Society, vol. 22(1), February.
    10. Eliasson, Gunnar, 1977. "Competition and Market Processes in a Simulation Model of the Swedish Economy," American Economic Review, American Economic Association, vol. 67(1), pages 277-281, February.
    11. Dale W. Jorgenson, 2001. "Information Technology and the U.S. Economy," American Economic Review, American Economic Association, vol. 91(1), pages 1-32, March.
    12. Abramovitz,Moses, 1989. "Thinking about Growth," Cambridge Books, Cambridge University Press, number 9780521333962.
    13. Dale W. Jorgenson, 2001. "Information Technology and the U. S. Economy," Harvard Institute of Economic Research Working Papers 1911, Harvard - Institute of Economic Research.
    14. Ballot, Gérard & Taymaz, Erol, 1993. "Firm-Sponsored Training, Technical Progress and Aggregate Performance in a Micro-Macro Model," Working Paper Series 402, Research Institute of Industrial Economics.
    15. Carlsson, Bo A W, 1983. "Industrial Subsidies in Sweden: Macro-Economic Effects and an International Comparison," Journal of Industrial Economics, Wiley Blackwell, vol. 32(1), pages 1-23, September.
    16. Eliasson, Gunnar, 1990. "The firm as a competent team," Journal of Economic Behavior & Organization, Elsevier, vol. 13(3), pages 275-298, June.
    17. Ballot, Gerard & Fakhfakh, Fathi & Taymaz, Erol, 2001. "Firms' human capital, R&D and performance: a study on French and Swedish firms," Labour Economics, Elsevier, vol. 8(4), pages 443-462, September.
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    Cited by:

    1. Silva, Ester G. & Teixeira, Aurora A.C., 2008. "Surveying structural change: Seminal contributions and a bibliometric account," Structural Change and Economic Dynamics, Elsevier, vol. 19(4), pages 273-300, December.
    2. Thomas Brenner & Claudia Werker, 2007. "A Taxonomy of Inference in Simulation Models," Computational Economics, Springer;Society for Computational Economics, vol. 30(3), pages 227-244, October.
    3. Thomas Brenner & Claudia Werker, 2006. "A Practical Guide to Inference in Simulation Models," Papers on Economics and Evolution 2006-02, Philipps University Marburg, Department of Geography.
    4. Eliasson, Gunnar & Braunerhjelm, Pontus, 2012. "Entrerpreneurial Catch Up And New Industrial Competence Bloc Formation In The Baltic Sea Region," Working Paper Series in Economics and Institutions of Innovation 279, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    5. Gunnar Eliasson, 2011. "Advanced purchasing, spillovers and innovative discovery," Journal of Evolutionary Economics, Springer, vol. 21(1), pages 121-139, February.
    6. Eliasson, Gunnar & Johansson, Dan & Taymaz, Erol, 2005. "Firm Tunrover and the Rate of Macroeconomic Growth - Simulating the Macroeconomic Effects of Schumpeterian Creative Destruction," Ratio Working Papers 66, The Ratio Institute.
    7. Eliasson, Gunnar & Eliasson, Åsa, 2004. "The Theory of the Firm and the Markets for Strategic Acquisitions," Ratio Working Papers 44, The Ratio Institute.
    8. Carlsson , Bo, 2016. "Industrial Dynamics: A Review of the Literature 1990-2009," Papers in Innovation Studies 2016/3, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.

    More about this item

    Keywords

    Industrial simulation; Innovation and growth; The New Economy; Non-linear dynamics;

    JEL classification:

    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • C99 - Mathematical and Quantitative Methods - - Design of Experiments - - - Other
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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