Showing papers by "Robert E. Lucas published in 2009"

Ideas and Growth

Abstract: This paper introduces and partially develops a new model of endogenous technological change, viewed as the product of a class of problem-solving producers. The model, based on earlier work by Eaton and Kortum, is built up from the premise that all knowledge resides in the head of some individual person and the knowledge of a firm, or economy, or any group of people is simply the knowledge of the individuals that comprise it. The model is applied to an economy with a cohort structure. A calibration of the model using cross-section earnings data, in addition to aggregate GDP growth, is considered. What is it about modern capitalist economies that allows them, in contrast to all earlier societies, to generate sustained growth in productivity and living standards? It is widely agreed that the productivity growth of the industrialized economies is mainly an ongoing intellectual achievement, a sustained flow of new ideas. Are these ideas the achievements of a few geniuses, Newton, Beethoven and a handful of others, viewed as external to the activities of ordinary people? Are they the product of a specialized research sector, engaged in the invention of patent-protected processes over which they have monopoly rights? Both images are based on important features of reality and both have inspired interesting growth theories, but neither seems to me central. What is central, I believe, is the fact that the industrial revolution involved the emergence (or rapid expansion) of a class of educated people, thousands - now many millions - of people who spend entire careers exchanging ideas, solving work-related problems, generating new knowledge. In this paper I introduce and partially develop a new model of technological change, viewed as the product of a class of problem-solving producers. The model is built up from the premise that all knowledge resides in the head of some individual person, so that the knowledge of a firm, or economy, or any group of people is simply a list of the knowledge of its members. A main feature of the model will be the social or reciprocal character of intellectual activity: Each person gains from the knowledge of the people around him; his ideas in turn stimulate others.1 As we will see, this idea is very flexible, but to develop it we need to have a tractable mathematical idealization of an individual's knowledge, of the relation of this knowledge

Trade and the Diffusion of the Industrial Revolution

Abstract: This paper proposes a model to describe the evolution of real gross domestic product (GDP) in the world economy that is intended to apply to all open economies. The parameters of the model are calibrated using evidence from Sachs and Warner on economies classed as open, from Parente and Prescott on economies that have successfully begun to develop, and from Kuznets and the World Bank on the employment share of agriculture in various times and places. The theory predicts convergence of the income levels and growth rates in the open economies and has strong but reasonable implications for transition dynamics. (JEL F41, O33, O47)