1. The sort of technical progress that leads togrowthis oftenaccidental and
owes little toresearchanddevelopment. Discuss.
Innovationsandadvancedtechnologiesallowoutputtobe producedusingfew resources. In
orderto continuouslyandeffectivelygenerate new technologies,investmentinresearchand
developmentisanecessityforeconomicgrowth. Growthbecame familiarafterthe Industrial
Revolutionandthe firstgeneral purpose technology,creatingadivision,asthe Westdivergedfrom
the rest of the world.However,notall countrieshave the abilitytoinnovate andthus,investinR&D,
some justimitate.Inthe absence of researchanddevelopment the rate of technical progressandits
effectongrowth wouldnotnecessarily be equivalent.
Althoughpresentlyconsideredcommonplace,economicgrowthis a recentphenomenonof
the last three centuries endogenoustoresearchanddevelopment.Before the mid-18th
centurymost
countrieshada relativelystagnantagrarianeconomy. Therewere noformal researchand
developmentcentres,therefore,“furthereconomicdevelopmentwasfeasible onlywithsome
technological innovations,asanexogenousshocktothe systemor an improvementfrom
experience”, implying“the remarkable absence of importanttechnicalimprovements”;justifyingthe
slowrate of progress (Keynespar.6&Lin 18). However,history hasdemonstrated examplesof
technical progress;“shipdesignimprovedgreatly,lensesand,withthem, the telescope and
microscope”(Baumol 1074). Duringthisperiodtechnical progresswasafflictedbythe Malthusian
trap – technical progresswouldresult,intermsof percapitaincome, inunalteredgrowth butwitha
higherpopulation.Despitethe fact growthaccountingproposes;“productivitygrowthwas0.033%
peryear” fromA.D 500-1500, thiseconomicdevelopmentwas somewhatminusculeand
endogenousto apopulationincrease (Weil263).Additionally,changesinpolitical regimeinfluenced
growth;“before the industrial revolutionthe NetherlandsandGreatBritainflourishedunder
constitutional governments:the Netherlandsaftertheirsuccessful revoltagainstSpainandGreat
Britainafterits“Great Rebellion”of 1640-60” (De Long & Shleifer672). Consequently,regardless of
technical progressandexogenousfactors; economicgrowthrequires scientificresearch facilitiesfor
considerable growthaccelerations.
The Industrial Revolutioninitiatedrapid technological innovation andtransferredtasksfrom
skilledartisansto more productive machinery.Thiseventually ledtocomparativelyradical growth
ratesachievedbyaccumulative commitmenttoresearchanddevelopment.Inthe 19th
century,
countriesexperienced asustainedrise inlivingstandardsabove subsistence asthe Malthusian
relationbecame irrelevantand “economieswere able tomove fromexperience-basedexogenous
innovationtoscience- andexperiment-basedendogenousinnovation”, generatingasteady
expansionof growthproductivity (Lin28).Asa consequence, technological progress became routine
for governmentsandindustries asthey became keentoimplementtechnical change and agricultural
researchstations.Thiscame alongside the foundationof industrial anduniversityresearch
laboratories.“Suchatransformationof inventionenabledthemtoaccelerate theirtechnological
advancesthroughinvestmentsinresearchanddevelopment,andtechnological inventionand
innovationbecame endogenous”(Lin18). Thisresultedin anexpliciteffectongrowth; “during1801-
1831 GDP per capitagrew0.5% peryear andproductivityat0.4% per year”,analogouslyslow to

2. moderngrowth,neverthelessa0.367% increment inproductivityfrom1500; generated bythe
accelerationof technological progress throughgreaterdevotionto researchanddevelopment (Weil
265). Althoughthe implementationof technical progressisdependentonthe efficiencyof diffusion
as opposedtoresearchand development,importantly,globalisationhasimproved the diffusionrate
of innovations. “Worldcommunicationsare now practicallyinstantaneous,butrequiredweeksand
evenmonthsatthe birthof the Industrial Revolution”(Baumol1078). Liberalizedattitudestowards
the transferability of innovationshave providedastrongercorrelationbetween technical progress
and growth, implicitly allowingdevelopingcountriestocatch up by expandingandimproving
imitation. “Todaymeetingsof scientistsandtechniciansare widelyencouraged,earliermercantilistic
practicesentailedmeasuresbyeachcountrytopreventothernationsfromlearningitsindustrial
techniques,andthe emigrationof specialisedworkerswasoftenforbidden”(Baumol 1078). History
demonstrateshowthe IndustrialRevolutionacceleratedtechnological innovationandprogress
throughthe investmentinresearchanddevelopment whichlead tofundamental growthrates.
Technological progressis stimulatedbyresearchanddevelopment andisone of the
numerousdependentvariablesthatdetermine economicgrowth –it isnot accidental.“Tobenefit
fromthe newmechanismof technological innovation,anadvancedcountryneedstoinvestin
research,inventnewtechnologyandproducts,andinvestinhumancapital.The increase inhuman
capital enhancesthe capacityof itsscientiststocarry out researchanddevelopment –and allowsits
labourforce to integrate newtechnologyintoproductionprocesses”(Lin28). Neoclassical growth
theorystatesthat technologicalprogressisthe onlyfactorenablinglongruneconomicgrowth.
Analysingthe Cobb-Douglasproductionfunction:Y=Kα
(EL)1-α
inconjunctionwithSchumpeterian
growththeory clarifiesthe importance of researchanddevelopment.The greaterthe stockof
capital,the greaterthe incentive tocarry out researchand development,which implies an
acceleratedrate of innovationsandmore technical progress.Therefore,the effectivenessof labour
will implicitlyincreasedue tothe advancementand flux of technologies intothe industry,ultimately,
raisingoutputandeconomicgrowth. “Technological change allowsaneconomytotranscendthe
limitationsimposedbydiminishingreturns”(Weil 222). Thisprocessiscyclical as “a major innovation
providesaframeworkfora large numberof subsequentinnovations,eachof whichisdependenton
or complementarytothe original one”(Rosenberg15). For example;Microsoft,the Internetandthe
WorldWide Webhave providedalarge frameworkforinnovations,includingFacebookandGoogle.
In addition,Combinatorictheory expressesthatthe more innovationsthathave beenpreviously
obtainedthe more currentinnovationsare generated –a biggerstockof existingtechniquesmeans
a biggerflowof innovations.Notonlywill therebe alargerabsolute numberof innovationsbut
there will be aproportional increase tothe existinginnovations, andthe rate of technical progress
will accelerate overtime.
There isan interactive,non-linearrelationshipbetweenscience,technologyandgrowth
influencedbytechnical progressandresearchanddevelopment.“Inadvancedindustrialeconomies,
the growthof technological knowledgereliesincreasinglyonscience” (Rosenberg9). Investment,
normallyconductedbyprivate firms inthe hopesof inventingprofitable innovations, isrequiredto
undertake researchanddevelopment.“Inthe year1991 total R&D spendinginthe UnitedStates
was estimatedtoamountto$152 billion,of whichprivateindustry financedalmost56percent”
(Rosenberg13). The magnitudinal investmentintoresearchanddevelopmentproducesaflux of
innovations,meaning“thatgivenquantitiesof physical andhumancapital canbe combinedto
produce more outputthan waspreviouslypossible”(Weil 222). Enormousamountsare investedin

3. researchand developmentasitplaysan essential,cyclicrole inthe creationof innovationsand
expansionof effectivenessof labourandtechnologicalprogress.However,the elusive nature of
innovation,technology’slow level of excludabilityandnon-rivalrydiminishesincentivesforcreating
it.Therefore,researchanddevelopmentdoesobtainthe potential toslow downgrowth.
There are circumstancesinwhich researchanddevelopmentnegativelyaffectsgrowthor
doesnotexplicitlycontributetowardsit.The increasedrate of technical progressed;givenrise by
researchand development afterthe IndustrialRevolutionmeant “the WesternHemisphere took off,
and the divergence betweenthe Northandthe Southappeared”(Lin19). The relationshipbetween
technologyandgrowthcan be representedusingasimplifiedproductionfunctionthatignoresthe
rolesof both physical andhumancapital. “The total size of the labourforce isL=LY+LA where LY isthe
numberof workersinvolvedinproducingoutputandLA isthe numberof workersinvolvedin
creatingnewtechnologies. ϒA isthe fractionof workersthe labourforce engagedinresearchand
development”(Weil 232).Therefore, ϒA=LA/LwhichimpliesLY=(1- ϒA)L, the proportionof workers
involvedinproducingoutputcanbe expressedintermsof workersinvolvedincreatingnew
technologies.Hence, “the productionfunctionisY=ALY=A(1- ϒA)L”, total outputisequal tothe
numberof workersinvolvedinproducingoutputmultipliedbythe levelof productivity(Weil 233).
Consequently,“if fewerpeopleare doingresearchanddevelopmenttoday,more people are
producingoutputtoday – but if fewerpeople are doingR&Dtoday,the level of productivity,and
thusoutput,will indeedbe lowerinthe future”andvice versa(Weil 232).Thisisan almost
paradoxical instance whentechnical progressdoesnotleadtogrowth,“devotingmore resources
intoR&D will sufferareductioninoutputinthe shortrun but be betteroff inthe long run” (Weil
233).
Nonetheless,“developmentexpendituresaccountforapproximately67 percentof total
R&D spending”,suggestingR&Disnot completelycommittedtotechnological progress (Rosenberg
13). “A large part of the D inR&D is devotedtounderstandingthe accuracyand reliabilityof ahigh-
technologyproduct’sperformance characteristics,suchinformationcannotbe deducedfrom
scientificprinciples”(Rosenberg14). There cannotbe a reliance onresearchanddevelopmentto
innovate andleadtotechnical progress.Genius theoriespropose there is acceleratingtechnical
progress;however, state thatakeyvariable inthe rate of innovationisthe numberof talented
inventors. Economicgrowthrateswouldimplicitlyaccelerate throughtime aspopulationgrows.
Proposingthatif a populationhadx skilledinventors,andthe populationdoubled,thentherewould
be 2x skilledinventors. Thisinsinuates thatthe largestcountrieswill become the richest,however
that isnot the case –Qatar beingone of many exceptions.Fordevelopingcountriesitismore a case
of imitatingratherthaninventing,“theyhave the advantage of backwardnesstoinnovate intheir
choicesof technology,industries,andinstitutionsfromhigh-incomeindustrial countries”(Lin29).As
a resulttheydonot explicitlydependonresearchanddevelopment,instead,theycontinuouslytry
to catch up to the leadingtechnological countries,imitatingoldtechnologies.“Latecomersimitate
the successful countries,like flyinggeese,andcatchup.That iswhythe West took300 yearsto
innovate andindustrializebutJapanlessthan100 yearsand East Asia40 years” (Lin32). Thisis
representative of Lucas’technological diffusionmodel thatproclaims;the further,technologically,a
countryis behindthe leadinginnovativecountrythe fasteritwill catchupto it. However,thisfallsas
the country approachesthe same rate of technological progressasthe leadingcountry. Inthese
circumstances,itisnot researchanddevelopmentthatenables acountry’stechnical progressto
converge,itis“intheirabilitytochange theirhumanas well asphysical capital endowments,

4. increase the pace of adoptionof newideas,speedthe processof industrial upgrading,andimprove
softand hard infrastructure”(Lin33).Developingcountriesrelygreatlyoninstitutionsandimitation
inorder to improve theirtechnological knowledge andgenerateeconomicgrowth. Thismeans that
theirinnovation isinefficientastheylackthe essentialframeworktodoso.
It cannot be coincidental thatthe introductionandinvestmentinR&Dhasproduced
episodesof extensivegrowth.Historical analysishasdemonstrated thattechnical progressis
endogenoustoresearchanddevelopment. The commitmenttoR&Dhas improvedtotal factor
productivityandthe rate of innovations. Inaddition,researchanddevelopmentimplicitlyincreases
the stock of capital that positivelyaffectsthe effectiveness of labour,raisingproductivityand
promotinggrowth. Althoughpolicy implicationsfordevelopingcountriesare inthe formof imitation
rather thaninnovation,this involveslessinvestmentinR&D.Theiract of imitationwouldnotbe
possible if there wasnotatleastone leadingcountryinnovatingthroughthe devotionof R&D.
Consequently,the kind of technical progressthatleadstogrowthinevitablyandeventually
originates backtoresearchand development.

5. References:
Baumol,WilliamJ. ProductivityGrowthConvergence,and Welfare:WhattheLong-Run Data Show.
1986
De Long,J. Bradfordand Shleifer,Andrei. Princesand Merchants:European City Growth BeforeThe
IndustrialRevolution.
Keynes,JohnMaynard. EconomicPossibilitiesfor ourGrandchildren.1930
Lin,JustinYifu. TheQuest forProsperity. 2012
Rosenberg,Nathan. Exploring theBlackBox.1994
Weil,DavidN. EconomicGrowth.Thirdedition.2013