Paul Romer: prediction

Transcript context

…What do you think of that literature? If you go back to the really long-run questions that interested me, the big question was why, over the centuries, the millennia, has growth been speeding up? I had one model that I eventually concluded wasn’t exactly right. Then my second 1990 model — which I think, in terms of the foundations, was strong — but it had this feature that, as the number of, say, researchers or people grew, it predicted much too fast an acceleration in the rate of growth. Chad Jones has really been leading the push, saying that to understand the broad sweep of history, you’ve got to have something which is offsetting the substantial increase in the number of people who are going into the R&D-type business or the discovery business. And that could take the form either of a short-run kind of adjustment cost effect, so that it’s hard to increase the rate of growth of ideas. Or it could be, the more things you’ve discovered, the harder it is to find other ones, the fishing-out effect. To fit the long-run growth and the big increase in people engaged in science and in research and development, I think Chad is right that you have to have some kind of diminishing returns, or some kind of a constraint in that rate process. There’s a variety of recent papers that have tried to look at that. If your question is, can we sustain a particular growth rate x or can we keep increasing growth rates at higher and higher rates? That may give you a less optimistic answer than, say, the initial take I had. But it may still be the case that we can have growth, that we can sustain it partly by having more and more people go into something like research because there’s 10 or 11 billion people we’ll end up with, and we can increase the fraction of people who go into that. We can offset some of these fishing-out problems just by having more people working on it. And it also doesn’t mean that we’re already at the efficient or optimal level of R&D. The general message is about a bigger global integrated economy is going to lead to faster growth, that policy could improve efficiency by getting more research going. I think those messages will still carry through, even with a slightly less optimistic perspective on how fast we could really grow. Do you think the distinction between economic growth at the frontier and catch-up growth is always so well defined? If you think of China — they seem to have innovations — how quickly they can build things, that they have an autocratic government, but they’ve managed to keep a reasonable amount of stability and keep the public on board. Isn’t that a kind of innovation, like a technological innovation? And their growth, in a way, is at some other frontier rather than just being catch-up?…

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