EconTalk Robert Solow on Growth and the State of Economics
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Oct 27, 2014 Robert Solow, Professor Emeritus at MIT and Nobel Laureate, shares insights on his groundbreaking growth theory. He emphasizes that capital accumulation isn't enough to explain economic growth, highlighting the pivotal role of technological innovation. Solow discusses the contrasts between U.S. and Soviet approaches to growth and critiques the limitations of productivity metrics in capturing the true value of computing advancements. He also reflects on legacies of Milton Friedman and John M. Keynes, emphasizing the importance of understanding macroeconomic complexities.
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Growth Driven by Tech and Demography
- Economic growth largely depends on demographic changes and technological progress, not capital accumulation.
- Saving and investment levels set output levels but don't determine long-term growth rate.
Tech Progress Trumps Capital
- Over 80% of U.S. income growth (1909-1949) was from technological progress, not from saving and investment.
- These gains reflect shifts in the production function that improve output per input unit.
Tech Progress Needs R&D & Capital
- Technological progress originates from research and development aimed at profit and competitive advantage.
- New technologies often require new capital investment to be effective, rejuvenating the stock of capital goods.
