Showing papers by "Robert M. Solow published in 2010"

Stories about economics and technology

Abstract: This essay offers an unsystematic sketch of seval ways in which economists have approached the need to represent and model changes in technology. It begins with the failures of Ricardo and Mill to respond adequately to the continueing increase of productivity after the Industrial Revolution, and ascribes it to the lack of appropriate analytical technique. It goes on to the question of classification of inventions posed by Hicks, with responses from other authors. It concludes with comments on the current intereste in endogenizing technical profress as a routine profit-seeking activity, with the thought that an uneasy compormise between exogeneous and endogeneous may be the best that can be done.

The bigger they are

Abstract: One socially useful function of the 1⁄2nancial system is to intermediate between savers and investors. Many diverse individuals, enterprises, and other institutions save–spend less on their current needs than they take in–and it is economically important that their savings be made available to those 1⁄2rms, governments, investors, and other units in the 1⁄2nancial system that can make the most pro1⁄2table (or otherwise valuable) use of such savings. Because most savers lack the information and understanding they would need and because they cannot easily diversify, 1⁄2nancial institutions perform this function for them. When something hinders the performance of the 1⁄2nancial system, the “real” economy of production and employment suffers. The economy invests too little or too much, or it invests in the wrong industries. If it is true today that many viable businesses are unable to obtain credit on reasonable terms, the system most likely is not functioning well. The other socially useful function of the 1⁄2nancial system is more complicated and recondite. In the course of real economic life, an enormous variety of risks arises. Bank Amay have made a large loan to company B, with the survival of both of them depending on the uncertain success of B’s new line of products. A retired couple with no heirs has to allocate their accumulated savings over their uncertain lifetimes; if they spend too much, they may run out of funds and suffer, and if they spend too little, they may die with useless wealth, having skimped their golden years. Some individuals and institutions don’t mind bearing economic risk because their attitudes, their wealth, the nature of their incomes, or their ability to diversify makes it relatively easy. There are also those whose circumstances make substantial risk-bearing painful or intolerable. The 1⁄2nancial system can arrange to transfer many risks from the second group to the 1⁄2rst, with appropriate compensation all around. Consequently, the real economy works better. Company Cmay have the ideas and the skills to undertake some-

Introduction: The Moving Lines of the Division of Labour

Abstract: How is labour allocated between men and women, between North and South, on the farm and in the plant? Traditional analyses in terms of market or factor endowments have been enhanced by studies on demography, trade and technological change, but the questions remain of how and where countries specialize. The answers may depend on the dividing lines, on the increase in the variety of tasks or on their growth in numbers, but then further questions arise about the asymmetries that the division of labour creates. When economists study the dynamics of the feminiz ation of the labour market, deindustrialization or foreign direct investment and its impact on growth, can they use the same concept of the division of labour? In this book, the contributions move in two complementary directions: the fi rst weighs and updates the relative importance of the diff erent determining factors; the second deepens the analysis by adding further determinants and by making productive entities understandable through the study of their interactions. The impact of the division of labour must be perceived through the light of its ‘demographic, territorial, and thus political, eff ects’, as Augustin Cournot put it.1 Through the authors’ diff erent approaches, the classical opposition fades between the central role of the market in determining the degree of the division of labour among productive units, as suggested by Adam Smith, and the factor endowments and international trade developed by David Ricardo. The concept of the division of labour followed a trajectory of decline and rehabilitation in the twentieth century. The marginalist equilibrium analysis found it diffi cult to deal with the association between the division of labour and increasing returns, and the resulting possibility of falling supply and cost curves.2 In general, the analysis of the division of labour between countries worked through the traditional mechanisms of specialization and trade. The aim was to identify how they infl uence productivity. At the international level, comparative advantage was understood as a combination of specifi c and transferable competitive advantages