Tuesday, April 19, 2011
Pg. 343-344
The interaction of the Microsoft industry with the introduction of the Internet depicts the "principles of endogenous technological change". Microsoft took the world by storm. In the 1990's, it seemed as though Microsoft might be able to overcome the powerful forces of competition and challenge Adam Smith's theory of the Invisible Hand. Then, the invention of the Internet led to a battle of control over the basic machinery known as the "the browser war".
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A for Kim.
ReplyDeleteBut what does this all mean?
Endogenous growth is tied up with increasing returns, which is tied up with monopoly power.
Romer combined endogenous growth with a competitive sector that disciplined that monopoly power.
The Microsoft case provides a test case to see how strong that discipline is.