Smithian vs. Schumpeterian Growth

In this quote from his latest book Joel Mokyr contrasts two important views on the origins of economic growth:

“[…] The difference between “Smithian” and “Schumpeterian” growth is that for the former, exchange and cooperation based on trust or respect for the law are treated as a game between individuals whereas the essence of Schumpeterian growth is based on the manipulation of natural regularities and phenomena and thus au fond should be seen as a game against nature.”

“Smithian” refers to Adam Smith, of course, who is seen as the founding father of modern economics. Continue reading Smithian vs. Schumpeterian Growth

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Innovation,unemployment and subjective well-being

These days, everybody is talking about the losers of globalization and how they made Trump and Brexit happen. People in industrialized countries lose their jobs due to offshoring and international competition, which leads them to vote for right-wing populists, so the common narrative goes. That might not be the full story though. Continue reading Innovation,unemployment and subjective well-being

How important is social mobility for innovation and growth?

Raj Chetty is a rising star in economics. After graduating from Harvard at the age of 23, he became an assistant professor at Berkeley, where he got tenure only four years later. Since then he won the John Bates Clark Medal in 2013 and moved to Stanford in 2015. His latest research is concerned with the question of upward mobility in society and how it affects innovation and economic growth. Continue reading How important is social mobility for innovation and growth?

The origin of time preference

Time preference is one of the fundamental primitives in our economic models. It is crucial in investment decision problems were you have to incur a cost today to get a (higher) return at a later point in time. The famous “Marshmallow Test” (here is a funny Youtube video) is one of the most canonical examples of such a problem. Continue reading The origin of time preference

China needs to choose

Almost recovered from a trip to China last week. Actually it was my first time in East Asia. Seeing the impressive economic growth that happened in China close-by is simply amazing. We spent most of the time in Hangzhou–a city with 8 million inhabitants. When you consider that this is a small town for Chinese standards you’re left amazed even more. Continue reading China needs to choose