Where does wealth come from? Not from natural resources, but from knowledge and culture. Shulz discusses David Warsh's new book at TCS. Quotes:
But what about growth itself--especially the sustained economic growth that we now take for granted (however sluggish it may be at times)? At an informal academic conference in Buffalo, N.Y., in 1988--assembled by Jack Kemp, then a member of the House--the Stanford economist Paul Romer presented a paper that ultimately turned the economic thinking on its ear. In Mr. Romer's work, as Mr. Warsh puts it, "the concept of intellectual property was, if not exactly 'discovered,' then formally characterized for the first time in the context of growth." Mr. Romer saw that knowledge was "both an input and output of production."
Thus instead of land, labor and capital--the traditional inputs of economic theory--it was "people, ideas and things" that mattered, driving technological change and entrepreneurial creativity. "No longer were the advantages of technical superiority to be understood as a case of 'market failure,'" Mr. Warsh writes. "They were part of the rules of the game." Such superiority was by its nature temporary--i.e., nonmonopolistic. New knowledge constantly trumped old, and the law (rightly) gave ideas only limited property-protection.
Read the whole thing.
