Monday, March 28, 2011
Ch. 18 Pg. 247-249
By the end of the lecture, the majority of the Keynesian audience is furious about Lucas's alterations to Solow's model. Lucas's theory is completely opposed to the approach that nearly everyone in the audience is familiar with which has put them on the defensive. Very few liked what Lucas had to say, and even they were uncertain of his theory. Three years later, Lucas's lengthy paper is finally printed in "On the Mechanics of Economic Development" and is considered today to be the reason why much of economics has steadily transformed. His paper alter the focus of economics from business cycles to growth. It still is still not clear today what exactly gives richer nations the edge over poorer nations. All that is certain is that there is lock-in, but with modern mathematics Lucas has inspired a new generation of economists to continue searching for the answer.
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B for Kim for a spelling mistake.
ReplyDeleteThis section get to the heart of what's going on with new growth theory.
It's 25 years ago, and even Lucas doesn't understand what makes growth function, but he knows it's hugely important.
A couple of decades work and we know that it is "low" technology that doesn't transfer well across borders that is the key: basically, it's human networking to create new ideas.