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Lecture 10
Economic Development
One page summary of the 17 Goals
. 77). HarperBusiness. Kindle Edition.
Romer
Growth Model
Ideas
Paul Romer
Economics of Ideas
Ideas
Inventions
Innovations
Increasing Returns
Rates of Return
Increasing
Romer
Decreasing
Solow
Economics of Ideas
Profits motivate
Share without losing value
Benefit but not pay
Government encourage
Larger market, more
incentive
Make me an
iPhone.
Sorry, I have the
atoms but not the
knowledge.
We need
innovation
Why are apps
so cheap?
Large fixed cost
Zero marginal cost
Huge market
1.2 billion
$1 million
$1
sell 2 million
$2 million
Profit
$1 million
Research and
Development
$13 billion a year
Economics of Ideas
Imitators drive
innovators out of the
market
Patents
20 year monopoly
Economics of Ideas
People
Incentives
Creativity
Incentives
dignity
property rights
honest government
political stability
rule of law
Increase the number
of ideas per hour?
ideas for making it
easier to create
more ideas
Douglass
North
Nobel
Prize
1993
Institutions
Culture
Rules of the Game
Formal Rules
Informal Constraints
Institutions
Organizations
The Players
Institutions
Market-Creating
Market-Regulating
Market-Stabilizing
Market-Legitimizing
Political Institutions
Market-Creating
Protect property rights
Enforce contracts
Minimize corruption
Rule of Law
Trustworthy Police and Judges
Market-Regulating
Market failures
Monopolies
Public goods
Market-Stabilizing
Low inflation
Low volatility
Low unemployment
Market-Legitimizing
Social Protection
Insurance
Protect against shocks
Political Institutions
Free Press
Elections
Competitive parties
Participation
2. Not All Innovations are Created Equal
3. In the Struggle Lies Opportunity
4. PullVersus Push
5. America’s Innovation Story
6. How the East Met the West
7. Mexico’s Efficiency Problem
8. Good Laws Are Not Enough
9. Corruption is Not the Problem; It’s a Solution
10. IfYou Build It,They May Not Come
11. From Prosperity Paradox to Prosperity Process
Alleviating poverty is not the
same as creating prosperity.
Innovation
a change in the processes by which
an organization transforms labor,
capital, materials, and information into
products and services of greater
value.
Innovation
A valuable invention
Innovations
Sustaining
Efficiency
Market-creating
Innovations
Sustaining
Efficiency
Market-creating
Growth Problem
Innovation Problem

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