Archive for the ‘arnold kling’ tag
EconTalk: Arnold Kling on Prosperity, Poverty and Economics 2.0
Reading time: 3 – 4 minutes
For those that don’t know about it, I should first recommend EconTalk. EconTalk is an hour long weekly podcast on various economics topics hosted by Russ Roberts (George Mason University Econ Prof and Stanford University Hoover Institute fellow) and published by the Library of Economics and Liberty. Roberts typically has outstanding guests on the show so the hour is always well spent.
This week Roberts invited Arnold Kling (economist and author of From Poverty to Prosperity) on to the program. The discussion centered around the contrast between earlier economic models, like the Solow model, and new models of economics, like the Romer model (or the combined Solow/Romer model). The discussion of the differences between these models focused on how the new economic models (like the Romer model) are influencing economic development in both developed and developing nations.
It may be useful to lay down a (very) high level view of the Solow and Romer models at this point, which will help the non-economists pick up the podcast discussion much more quickly.
The Solow model is a solid model but, in general, it is unable to explain sustained economic growth over the long-run (e.g. the type of economic growth we have experienced in the United States). Romer figured that advances in technology were likely a root cause of sustained economic growth and worked to modify the Solow model so it would endogenize both growth and technological development (driven by ideas).
A key insight Romer brought forth was the difference between rivalrous and non-rivalrous goods. Rivalrous goods are items that can only be used by one person at a time. The MacBook I am writing this post on is a good example of a rivalrous good. While I am using it to write this post no one else can use it.
Non-rivalrous goods, on the other hand, can be used by many people at the same time. In other words, my use of a non-rivalrous good does not reduce the amount of said good available to you. The classic example of a non-rivalrous good is an idea. Take for example, the Romer model itself. My use of the model does not preclude anyone from using the model at the same time. Non-rivalrous goods also exhibit increasing returns, which is why the incorporation of them into an economic growth model helps to explain sustained economic growth much better than models that exclude non-rivalrous goods.
Economists’ modern understanding of growth and development centers on ideas and how they can improve technology, leading the way to prosperity. Kling discusses the idea of ideas with Roberts in detail during the podcast and the pair also discuss other topics of interest (like why trial and error is important to growth and why governments are generally bad at things that require trial and error).
Economists, entrepreneurs, scientists and researchers alike are sure to enjoy this episode of EconTalk because it covers the exciting intersection of ideas and economics.
