One thing that I intend to do on this blog is highlight interesting books on innovation and growth. Let’s start with From Poverty to Prosperity: Intangible Assets, Hidden Liabilities, and the Lasting Triumph over Scarcity by Arnold Kling and Nick Schulz (Encounter Books, 2009)
I like this book a lot. But first, let me say a word about Arnold. I first came across his online essays a few years ago (one that I remember in particular was “You Call This Health Insurance?”). I was very impressed–here was someone who both understood his economics better than most academic economists and could also write more clearly than most journalists).
Kling, who today is one of the main writers on the terrific blog EconLog, continues to write very interesting and original stuff. In this book, Kling and his co-author Nick Schulz of the American Enterprise Institute, do two things. First, they have chapter-long interviews with many of the big-name thinkers in the economics of innovation: Robert Fogel, Robert Solow, Paul Romer, Joel Mokyr, Douglass North, William Easterly, Edmund Phelps, Amar Bhide, William Lewis, William Baumol. Great stuff that you can’t get anywhere else (though I think they should have also interviewed Daron Acemoğlu of MIT and Rob Atkinson of the Information Technology and Innovation Foundation).
Kling and Schulz also make a case for what they call ‘Economics 2.0’ . Here what they say in the book :
“Economics 1.0 is about scarcity….Economics 2.0 is about abundance, which arises from technical progress.”
“Economics 2.0 says, ‘Markets often fail. That is why we need markets….In Economics 2.0, the market is a mechanism for stimulating and filtering innovation”
I think Kling and Schulz are on the right track. What they call Economics 2.0 is similar to what I and others have called “innovation economics,” which stresses knowledge and intangible assets . Way back in 2008, I wrote a cover story for BusinessWeek (remember that magazine?) called
The subhead was
“Innovation economics” shows how smart ideas can turn into jobs and growth—and keep the U.S. competitive
It’s good to see a book which focuses on this topic, whether the authors call it innovation economics or Economics 2.0 or something else. We need more of this kind of thinking.