Chapter 2 Pages 20-28

Some 200 people attended the session of the 1996 conference titled, "New Growth Theory and Economic History: Match or Mismatch." The session featured three speakers; Joel Mokyr, Paul Romer, and Martin Weitzman. Mokyr spoke first, representing the viewpoint of economic historians and referencing the work of English economist Nicholas Crafts, which questioned the reality of the industrial revolution. Romer followed with his presentation. The session was closed with remarks from Weitzman, who offered a viewpoint somewhere between the old and new theories of growth.

Romer's remarks were based on his 1990 paper "Endogenous Technical Change." The paper and Romer's theory are based on the use of a mathematical function to define the growth of knowledge. Though objection to the use of new equations often exists, Romer defends that such theories "...take all the complicated information we have about the world and organize it into (a) kind of hierarchical structure." The "old" growth theory model accounts for technology in addition to the conventional economic inputs of capital, labor, and human capital. It defines technology as publicly available goods and private goods. Romer's "new" growth theory breaks down the inputs into two categories: instructions and materials. Instructions are seen in his theory not to be public and private, but non-rival and rival- a topic introduced in Tom's January 24th post. Growth results from the spreading and improvement of non-rival ideas, and their use in transforming rival goods.

Chapter 2. Pages 16-20

As Mitch mentioned, the American Economic Association (AEA) holds an annual convention to showcase the best economic work that has recently been done. A lot of time and effort go into getting your work recognized at one of these conventions. Not only do you have to think up an original idea, create a model, and then get that model published, but your work must be considered “significant” enough to be eligible for recognition at the AEA convention.

The 1996 convention was the first time Romer’s “Endogenous Technological Change” was introduced in front of an audience. In a field traditionally dominated by men, this year’s convention was organized by a woman, Anne Krueger. Other notables attending were John Nash, Stephen Ross, Martin Feldstein, and Walter Oi. Other worthwhile events at the ’96 convention were the transgendered economist having the most attended session, colleagues fabricating evidence to sue one another, and men being ambushed for their somewhat controversial ideas. And while Romer’s ideas would later have the greatest effect on the economic discipline, his sessions were ignored by most, being overlooked amid big names and controversies.

Chapter 2 Part 1

Chapter 2 details the hierarchal "institutions" of the AEA conferences. The first of which is defined by the publishing of textbooks. Economic textbooks are the most profitable publishing investments. The second institution is classified by the tremendous level of education economic professionals have accomplished. Every year 10,000 students apply to graduate economic programs, 2,500 of which are accepted. Only an average of 850 students earn a Ph.D. in economics every year, unlike the 15,000 that earn a M.D. The third institution is based around the concept of loyalties and circular interdependence- the idea that "the best universities are the ones that get the best students; in turn attract the best teachers/researchers". Finally, the fourth institution is described as invisible and the most select because it is comprised of editors/referees of economic journals that work anonymously, and also make the final decision on which economist's articles will be published.

Chapter One "The Displine"

This chapter introduces the American Economic Association (AEA) and the annual conference that is held by it's members. It gives a basic overview of the unique culture of economists and their research. There are other economic societies but AEA, with 18,000+ members, is probably the best known organization worldwide. While the majority of members are college or university professors, others work for government agencies or in the private sector. With past presidents such as Milton Friedman and John Kenneth Galbraith, as well as honorary members that have won the Nobel Prize, each member is in good company. They all have one thing in common: their passion for economic ideas. Each year they meet to share their research in hopes of making their mark on economic thought.

XXi - 3

The introduction continues with the author talking about how in the late 1970s and early 1980s how the perception of economics began to change. It all started with young economists trying to answer this phenomena of increasing returns. Diminishing returns was a fair classical concept and easy to comprehend but they were after what was not so easily defined. The new ideas of novelty, variety and market power eventually spread through out all of economic thought and shuck the ideas and theories that had stood for over 200 years. Instead of just thinking in terms of the basics being Land, Labor and Capital; we are now forced to also look at people, ideas, and things as key factors in our economic growth. We now look at the endogenous or the internal aspect of growth and how it plays a large role.

Tim

Introduction Cont. Pages xviii - xxi

The introduction continues as it give us the basic building blocks of economic theory that came about in the seventeenth century. It was thought that these “factors of production,” land, labor, and capital, left nothing out. However, we will see that certain conditions of this time were indeed left out. These conditions were deemed as noneconomic forces and were treated as being exogenous to, or outside of, the economic system. One example the author gives is human knowledge; a second, where the author expands, is “increasing returns.”

It was simple to understand decreasing or diminishing returns during this time. The author gives us an example with a coal mine, it was more difficult and more costly to extract coal as time went on. Eventually, the mine would run out. Increasing returns are the opposite and eventually could no longer be ignored as they change the very building blocks of economic theory.

Introduction. Pages XV to XVIII

This will be my first foray into the world of blogging. I hope to be able to convey my thoughts in a way that makes sense to people. Paul Romer, at age 36 wrote a paper for the Journal of Political Economy called “Endogenous Technological Change” it was published in October 1990. It seeks to supplant and to build upon a paper written by Robert Solow and published in 1956. Dictionary.com defines endogenous as “proceeding, growing or developing from within” An interesting point that is made in Romer's paper is the distinguishing of technology as a non-rival, partially excludable good. Non-rival goods can be copied or shared. Excludable goods are able to be controlled in terms of access to them to some degree It is this definition and explanation of what kind of good technology is that has clarified and resolved some of the issues throughout history.

Preface

This is a book by a journalist about economics and economists. More specifically it is about the evolution of the new growth subfield within macroeconomics, and the economists - most importantly Paul Romer - who helped develop it. It's a story about how the advancement of economic knowledge works.

An Experiment

I'm going to try something new this semester.

A single class is going to read a book together.

The class is ECON 3020. It's titled Macroeconomics for Business Decisions. It's basically an intermediate macroeconomics class that is for both majors and non-majors.

The book is Knowledge and the Wealth of Nations: A Story of Economic Discovery by David Warsh. The book is on reserve in our library.

Each chapter of the book is divided up into subsections of several paragraphs. Each student will have to summarize one of these subsections, and build of the earlier summaries. During the semester, each student will have to do a bunch of these. In the end, we'll have a collective book summary.