[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

Internet Connection
COMPETITIVENESS
The Council on Competitiveness is a nonprofit organization
that focuses on the role of innovation and technological change
in enhancing the international competitiveness of American
firms. Its Web site (www.compete.org) offers forums on issues
related to technological innovation and national economic
performance.
Technological Change and
Economic Growth
Living standards in the United States are far higher today than they were one hundred
years ago. The reason is that productivity—the amount produced by the average
worker per hour—has increased enormously. Underlying these increases is
technological change. In the 1970s and 1980s the pace of growth in productivity in
the United States slowed down markedly, from almost 3 percent to around 1 percent.
In the latter half of the 1990s, it picked up again, by some measures surpassing
even pre-1970 rates. Some of the change has to do with changes in levels of investment
in capital, but much of it has to do with the pace of innovation, which has
resulted largely from the deliberate allocation of resources to R & D. No wonder
then that governments focus so much attention on the issue of how to create an
economic environment that is conducive to innovation. While the incentives provided
by intellectual property protection and government expenditures on basic
research are important, several other features of the economy have played a vital
role in helping the United States maintain a dominant position. These factors
include financial markets (especially venture capital firms) that are willing to
finance new ventures, a labor force that is willing to take the risks associated with
working for an upstart firm likely to fail, a university system that has attracted the
best scientists from around the world, and close ties between research universities
and corporations.
468 ∂ CHAPTER 20 TECHNOLOGICAL CHANGE