By Joseph Stiglitz:
The Nobel laureate economist Robert Solow noted some 60 years ago that rising incomes should largely be attributed not to capital accumulation, but to technological progress – to learning how to do things better. While some of the productivity increase reflects the impact of dramatic discoveries, much of it has been due to small, incremental changes. And, if that is the case, it makes sense to focus attention on how societies learn, and what can be done to promote learning – including learning how to learn.
Stiglitz also includes an observation particularly relevant to Australia, with its shrinking manufacturing sector.
The great economist Kenneth Arrow emphasized the importance of learning by doing. The only way to learn what is required for industrial growth, for example, is to have industry. And that may require ….ensuring that one’s exchange rate is competitive….
This comment at Project Syndicate is worth repeating:
William Wallace JUN 8, 2014
Every time I have occasion to run across this category of solutions, it begs the same conclusions: basic research, unguided by the economy but rather by science, is best financed publicly. The trickle down from basic research is phenomenally beneficial in unexpected ways (hello, internet). From there on, however, very hard to create a model of a learning society that makes practical sense.
A deeper disquiet arises from the simple debates that inevitably follow such suggestions, mixing social, economic, and nonsense theories based on rationalist fantasies of the past. The left, with mistaken optimism, conjures social solutions that do not take game theory into consideration. The right clings to models based on a radical divorce of the individual from society that does not hold (thus the lack of perceived shared responsibility), ignoring the myriad ways in which all achievement is based incrementally on those that went before.
No one goes from mute savannah dweller to king of industry without access to our cultural database. When a man places a shiny diamond on a pyramid and claims monumental achievement, he broadcasts his monumental ignorance.