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These
papers and articles address sources of economic growth and try to explain the growth process
of economies and industries. This part New Economy controversy revolves around fundamental
questions in economic theory. Network economics is included here, since “New Economy”
proponents draw on these ideas. Most articles below (except the business press) are technical in nature.
Arthur,
Brian: “Positive Feedbacks in the
New Economy”, in McKinsey Quarterly 1994, No. 1, pp. 81 – 95, http://mckinseyquarterly.com
Arthur
poses the question if conventional economic theories are still valid for high-tech industries. In
these industries,
increasing returns are observed to a far larger extent than traditional theory
takes into account. Arthur explains lock-in effects and path dependance.
Economides,
Nicholas: “Notes on Network Economics and the ‘New Economy’”, lecture
notes, August 2000, www.stern.nyu.edu/networks/exmba/netnotes2000.pdf
Economides,
Nicholas: “The Economics of Networks”, in International Journal of
Industrial Organization, 14 (1996), pp 673 – 699, http://www.stern.nyu.edu/networks/top.html
Economides
is well-known for his works on network economics. In the first article he
explains fundamental features of networks - a good starting-point for learning more about network economics. In the second article, Economides
focuses on network externalities and their implications on pricing and
market structure.
Evans,
George, Seppo Honkapohja and Paul Romer: "Growth Cycles," NBER
Working Paper, 1996, www.stanford.edu/~promer/gcycnber.pdf
In
this technical paper, the authors show how aggregate growth alternates between
a high growth and a low growth state. They argue that the growth rate depends
to a major extent on the expectations of agents.
Liebowitz,
Stanley/Steven Margolis: “Are Network Externalities a New Source of Market Failure?”,
Working Paper, 1996
Liebowitz
and Margolis
deny the significance of network externalities and argue that their central features
have been misunderstood and theoretically treated in
the wrong way. Therefore, the authors might be seen as critics of at least some of the
"New Economy" ideas. This text is suitable for an advanced audience.
Kelly,
Kevin: “New Rules for the New Economy”, in Wired, 5.09 (Sept. 1997), www.wired.com
Kelly,
Kevin: “The Economics of Ideas”, in Wired, 4.06, Juni 1996,
www.wired.com
Kelly is one of the famous proponents of the New Economy. In the first
article, he explains the new rules of the network economy. This
article has been very controversial, because it dismisses some assumptions of
mainstream economic theory. The second article explains Romer's New Growth
Theory. Note: Every now and then the Wired-URLs change. Please search both
articles directly in their archive.
DeLong,
Bradford: “Old Rules for the New Economy”, in Rewired, December 9, 2000, www.rewired.com/97/1209.html
This
article addresses directly Kelly's hypothesis of inverse pricing (a product
gets cheaper each year while its quality increases). DeLong explains that many
products went through this kind of development, therefore Kelly's observation
is no unique feature of the New Economy.
Romer,
Paul: "Increasing Returns and Long Run Growth," in Journal of
Political Economy, Vol. 94 (October
1986), pp. 1002-37 (not
available online)
This
article is a classic of New Growth Theory and well-known amongst economists.
Romer points at the significance of human capital and knowledge for economic
growth.
Weitzman,
Martin L.: “Recombinant Growth”, in Quarterly Journal of Economics, Vol.
CXIII, Number 2 (May 1998), http://mitpress.mit.edu/journals/QJEC/Weitzman.pdf
Weitzman
argues that limits to growth do not lie so much in the ability to generate new
ideas, but in the ability to process the abundance of new ideas. That's an
interesting addition to the New Growth Theory.
Varian,
Hal: “The Law of Recombinant Growth”, in The Industry Standard, February
28, 2000, www.thestandard.com/article/display/0,1151,11884,00.html
In
this article, Varian explains the Theory of Recombinant Growth
and mentions a few historical examples to show how the invention process works.
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