Theories of Economic Growth

and The New Economy

By Steven A. Waller
Reviewed by Professor L. Randall Wray
Controversial Issues in Recent Economic Literature, Econ 508
University of Missouri - Kansas City
March 11, 2000
Last update: March 26, 2000

Introduction

The cause of economic growth is a hotly debated issue that has culminated in
recent years into a debate about what has been called "The New Economy."
The debate can be divided into two schools of thought; the
Keynesian/Institutionalist School and the Orthodox (or Neoclassical) School.

Both these schools of thought differ fundamentally in views on the way

growth is brought about and in the way it is sustained. The saving-
investment relation is at the heart of these differing theories. In a nutshell,
Neoclassical theory says growth comes from savings and aggregate supply,
while Keynesian theory of growth comes from spending and aggregate
demand. Of course it is more complex than this simplistic view but it shows
how different the two are in formulating growth theory.

The Orthodox theory is grounded in the Classical "loanable funds" model.

This savings-centered philosophy is based on the supply of funds and it
allows the investment demand schedule to equilibrate at an interest rate.
The lower the savings rate, the greater will be the capital-output ratio.
Growth is a result of increased savings in their formula, g = s/k. 1 Where 'g' is
growth, 's' is savings (which equals investment), and 'k' is the capital
currently in place. This is the basic Harrod-Domar relationship for growth.
The Harrod model assumes economic instability. For the Neoclassicalists, if
left to its own devices, growth also seeks a steady equilibrium and it
challenges Keynes' notion that the economy is inherently unstable. But the
most important distinction in relation to growth is its supply orientation and
that supply is somehow limited or restricted. Other theories are similar to the
Orthodox (or Neoclassical) theory in that they focus on supply rather than
demand. Monetarism and Supply-Side economics fall into this group.

Keynesian theory for growth is found in aggregate demand. Most of what

Keynes wrote focused on the era of The Great Depression and the changes
necessary for remedies of the period. It is focused on the "liquidity preference
theory" that shows money can be hoarded. Growth comes about through an
increase of either corporate investment or government investment, or both.
This increase can be caused in various ways such as an increase in the money
supply, lower interest rates, or an increase in income. Investment doesn't
necessarily equal savings. The Domar and Harrod models are a synthesis of
Classical and Keynesian theory. The Domar model focuses on the capacity-
creating effects of net investment. The Harrod model is similar but looks at
whether growth has been sufficient to induce investment. Keynesian theory
does endorse the effects of investment, and the supply and demand schedules
of growth.

In recent years, capacity has been of little concern to Keynesians because

most manufacturers in the U.S. have operated consistently below capacity.
However, operating at below capacity levels does help explain the large
jumps in output in very short periods when the conditions are optimal.

Institutional thought is very well suited to explaining economic changes

because it focuses on the recent traditions or ceremony involved in the social
science of economics. When economic growth requires a new analysis,
Institutional economics can evolve better than all other theories in order to
provide the apparatus to draw correct conclusions. The reason is primarily
because it doesn't attempt to place economics in the realm of a hard,
immutable, or physical science that the Classical economists tried to do. The
most important distinction is that the factors of production of labor and
capital can not be divided. Skills are required in order to 'create' capital (or
tools) and make capital useful. 2

The history of U.S. growth

In Jeffery Madrick's book, The End of Affluence, he points out that U.S.
growth has had phenomenal growth rates (GDP) averaging over 3.4 percent
from 1870 to 1973. However, since 1973 to when the book was written in
1995, the U.S. GDP growth rate has slowed to an average of 2.3 percent. This
is a drastic change when one considers the amount of change in rate of
growth from "3.4% to 2.3%." 3 In Walt Rostow's book, Stages of Economic
Growth, he explains the situation with his theory that we have finally
matured into the final stages of slow growth and high mass-consumption. But
first, Madrick explains his view of what caused our initial and sustained
increase in GDP growth.
The United States focused early on infrastructure and industries that created
forward and backward linkages for growth. In the early 1800's, we became
obsessed with building roads, canals, and railroads. Madrick states, "Trade
had risen by thirteen times on the Erie Canal between 1824 and the 1850's,
and by twelve times on the Mississippi over the same period. Absent from
Madrick's book is proper tribute to James Watt's steam engine, he does
mention it in a sentence or two, but no more than that. The first short
railroad lines were put in during the 1830's and 1840's." 4 The steel industry
as well as others grew from their linkage to the railroad industry. He states
further that, "Domestic trade became a key to growth. The huge American
market was an unparalleled free-trade zone, so to speak, where farmers and
businesses could specialize in the production of what they did best." 5

Industrialization began to change the structure of American business as well.

Farmers started moving into the cities for the new jobs in manufacturing
that was spurred by new industries. The advent of the telegraph system in
the mid-1800's made it possible to order goods from across the country. "In
1830 freight took three weeks to go from New York to Chicago. By the late
1850's it took three days." 6 Immigration of new workers could not keep up
with the demands of the railroads. By 1880, the U.S. had six times the miles
of railroad track that Britain had and "one and a half times as many people."
7 This market was unparalleled anywhere in the world. The Keynesian
theory of investment and aggregate demand explains this growth very well.
The Classical Malthusian theory of population growth exceeding supply
evaporated quickly.

All this led to a structural industrial change to mass production. Business

structure took on a vertical or top-down style of management and was suited
very well for mass production. Europe's management structure gave more
power to labor and labor unions and was not particularly well suited to mass
production. In addition, political boundaries and tariff barriers divided their
markets. However, Madrick says that all this wasn't the only reason
European countries didn't grow as fast as the U.S. did. He feels that their
inability to change their old style of production to mass production was the
reason. Institutionalists would agree with Madrick's assessment that the
U.S. willingness to change its production techniques would explain its
growth.

The Great Depression came to the U.S. in the 1930's and had started in
various other parts the world following World War I. It has been thought that
the Hawley-Smoot Act (1930) which imposed tariffs on foreign trade was
important toward bringing the depression to the U.S. There's no doubt in my
mind that it reduced demand for U.S. products abroad. Keynes completed
writing The General Theory in 1933. Most of Keynes' theories were never
utilized until after World War II, but some of the socio-economic programs in
the U.S. during the depression had the Keynesian flavor of his theories. But
it wasn't until an increase in aggregate demand, caused by World War II,
actually helped push the U.S. to full capacity of production and full
employment. After World War II, the Marshall Plan rebuilt war-torn
countries and this investment aided their economies.

The Bretton-Woods conference in 1944 focused on regaining global economic

stability. The General Agreement on Tariffs and Trade (GATT) was formed
and later modified into the World Trade Organization (WTO). Also the
International Monetary Fund (IMF) was formed. Most countries decided to
tie their currency to the U.S. dollar, which was on the gold standard,
essentially put industrialized country's currencies under a single currency.
However, others would say that the utilization of Keynesian economic
theories accounted for stability during this period, which lasted into the
1960's. The gold standard ended in 1973 when the U.S. chose instead to
utilize fiat money largely due to the outflow of dollars from the cost of the
Viet Nam War.

Since 1970, Madrick states the U.S. has been losing manufacturing jobs and
it is primarily due to new technologies replacing workers. When
manufacturing workers do find work, it is usually at less pay than previously
enjoyed as well. Jobs have been increasing in the service sector, which tend to
pay less than manufacturing jobs. He cites several possible remedies for the
slowdown in growth by "increasing the flexibility and competitiveness of our
businesses, raising our savings rate, balancing the budget, improving our
education, and developing new markets for our goods overseas." 8 Actually,
higher savings rates and balanced Federal budgets would have the opposite
effect of slowing the economy. But Madrick does admit these are not going to
address the core of the problems. To Madrick, the primary problem is slow
productivity growth. He states that without the productivity growth we've
enjoyed in the past, other problems will continue such as a social security
shortfall and the Medicare crisis. The slow productivity growth will lead to
slow wage growth, which will lead to the future problems he mentions above.
He states its "easier to blame big government, big business, foreign
competitors, minorities, immigrants, welfare recipients, criminals, labor
unions, a liberal conspiracy, or extramarital sex on the part of our politicians
than to confront the reality of declining growth and the hard choices that it
implies." 9

In the Marc-Andre Pigeon and L. Randall Wray manuscript 10, they've

pointed out that productivity is residual rather than casual. Adding more
workers typically increases productivity and GDP, or increasing GDP is
usually accompanied by both increasing employment and increasing
productivity. Their formula shows employment level as part of both
productivity and employment growth.
δ(GDP/POP) = δ(EMP/POP) + δ(GDP/EMP)

And their explanation of the formula, "Which of course says merely that the
growth of output per person (per capita income) is equal to the growth of the
employment rate plus the growth of productivity." 10 Increased employment
levels would explain the reason for the outstanding U.S. growth rate for the
last 200 years. Increased employment helps generate an increasing aggregate
demand. They also cite that, "By the mid 1990's, the U.S. employment rate
had risen by nearly 25% over its 1970 level." 11 While employment has
increased at these rates, they cite that slow growth of income per capita is
the reason for slow growth in productivity.

The latest BLS data on productivity shows strong increases. However, to

conclude this is going to continue, we must view many quarters of
productivity improvement while analyzing employment, unemployment, and
per capita income growth rates. The latest Bureau of Labor Statistics figures
on productivity, employment, and median income data are in the tables
below.

Productivity (4th q., '99) Hours (4th q., '99)

Business sector 6.1% 1.5%
Nonfarm business sector 6.4 1.7
Manufacturing 10.3 -2.1

Bureau of Labor Statistics (U.S.), http://stats.bls.gov/lprhome.htm

Has employment risen or has unemployment fallen? There is a distinction

between the two. Rising employment is an increase in the number of workers
employed. Lower unemployment would simply be a decrease in the
percentage of unemployed workers. If employment increases while the
percentage of unemployed remains the same, then there's not only an
increase in workers, but there's also an increase in unemployed workers. But
the data shows, not only has employment increased, unemployment has
decreased or remained nominally similar. And of course, the total population
has increased.

Employment Rate - Unemployment Rate

(employment-population ratio)

Jan. 1950 55.1% 6.5%

Jan. 1960 56.0 5.2
Jan. 1970 58.0 3.9
Jan. 1980 60.0 6.3
Jan. 1990 63.2 5.4
Jan. 2000 64.8 4.0

Bureau of Labor Statistics (U.S.)

http://146.142.4.24/cgi-bin/surveymost?lf

Individual Median Income

1950 $12,074 n/a

1960 13,154 + 08.2%
1970 16,237 + 19.0%
1980 15,490 - 04.8%
1990 17,662 + 12.3%
1997 18,736 + 05.7%

"Measuring 50 Years of Economic Change," [Chart C-3, p60-203.pdf]

http://www.census.gov/hhes/income/chartbk.html

The New Economy

There is a growing number of people that feel the United States has entered
a "New Era" or "The New Economy" sparked by high-technology, computers,
and the Internet. There's no doubt that the U.S. is enjoying some new
alternatives of doing business and to ignore these opportunities could be
potentially harmful for both domestic and global businesses. Unfortunately,
much of the current writings about The New Economy are like reading the
self-help books of the 1970's and seem to be only geared to cash in on this
phenomenon with new rules to follow, buzz-words, and catch-phrases.
However, there is a question of how this growth has come about, will this
growth continue indefinitely, or what will sustain it in the future?

The Progressive Policy Institute (PPI), "believes that three main foundations
will underpin strong and widely-shared economic growth in the New
Economy: development of a ubiquitous digital economy; increased research
and innovation, and improved skills and knowledge of the workforce." 12
They state further on another page of their web-site, "While the old economy
was fundamentally organized around standardized mass production, the New
Economy is organized around flexible production of goods and services." 13
Madrick also cites this in his book, The End of Affluence. In other words, the
goals haven't changed, the means to the same goals of the past have changed.
The PPI also state that lagging productivity growth explains the slow wage
growth in recent years.

Other proponents include Michael J. Mandel's article in BusinessWeek where

he makes a statement about savings and investment from the Orthodox view.
He states, "equally important for sustained noninflationary growth is access
to well-run financial markets that can move savings to the most productive
investment opportunities, while cushioning the inevitable excesses to which
markets are prone…Under a reasonable set of assumptions, an increase in
the efficiency of financial markets that decreases interest rates by 20 basis
points can add 6% to output over several years." 14 In other words, Mandel's
premise is focused on the savings-centered loanable funds theory where the
amount of savings available for investment determines the interest rate. The
problem with his statement is that it is the Federal Reserve that makes this
determination of the rate of interest and not the amount of savings available
for finance. When the Federal Reserve announces a new fed funds rate, all
other security interest rates follow suit. However, Mandel does admit that
venture capital spending is the primary generator of investment for research
and development. This is more inline with the Keynesian aggregate demand
model in that increases of aggregate investment create greater aggregate
demand.

In his article, Mandel also quotes Treasury Secretary Lawrence H. Summers

as saying, "The New Economy is built on old virtues: thrift, investment, and
letting market forces operate." 15 'Market forces' and 'thrift' are the old
classical terms that are widely used in The New Economy articles. Thrift is a
term for saving and saving allows investment to occur in Orthodox theory.
For Keynesians though, this simply isn't true. Banks will loan money when a
qualified candidate has a need even if the bank doesn't have the money to
loan at the moment. If necessary, the bank will utilize inter-bank borrowing
and then the discount window for overnight borrowing if they don't meet the
reserve requirements. In doing so, banks are simply optimizing their
profitability. A deposit of savings is not required before a bank loans money.
Saving isn't the issue, it's simply an entry on a 'T' account.

"Market forces" is a term that originated with Adam Smith and "The
Invisible Hand." It primarily proclaims that markets are opened and cleared
at the equilibrium, which was expanded by Marshall and Walras. Supply and
demand schedules intersect to form the market price. This is the basis of
Orthodox and Neoclassical theory. Keynes believed that markets rarely clear.
The discussions of The New Economy have primarily focused their
explanations based on Orthodox theory and this is a supply-oriented
philosophy.

W. Brian Arthur, a professor at Stanford University and Sante Fe Institute,

believes that there is something called the "increasing returns" phenomenon
that relates to the Internet and high-technology. To put it bluntly, "The more
you sell, the more you sell." 16 In other words, Microsoft has dominance over
the personal computer operating system market by virtue of the fact that it
has sold more Windows operating systems than anyone else. Therefore, at
some point, consumers turn away from competitive products because of the
dominance of Microsoft's operating system. In Arthur's original theory, he
used the battle between VHS and Beta video recorders as his example. Fairly
similar to Arthur's theory of 'increasing returns' is Kevin Kelly's (Executive
Editor, Wired Magazine) explanation that focuses on networks. He states
that the value of a network increases by more than the marginal addition to
the network. As more connections are made in lineal terms, the network's
value "grows exponentially" and is "self-feeding." 17

Frank Veneroso points out in his manuscript, There are no Ricardian Rents
in Cyberspace (Chapter 7), the fallacy in Arthur's "increasing returns" theory
is that it assumes the growth of the Internet and high technology is endless.

Institutional economists would agree with Arthur, though with reservations,

and explain that resources have no limitations. 18 It comes from the
Institutional theory that labor and capital can't be separated in
microeconomic production functions. In order to utilize capital (or tools),
human skills are required. Human knowledge "creates" the resources that
might not otherwise be useful. Human skills are necessary in order to utilize
new resources and technology, and therefore increase productivity. A good
example is oil. Until the 1870's, oil on someone's land actually devalued the
land. After the 1870's, oil became a very valuable and necessary resource for
obvious reasons. Today, the global economy would come to a halt if we
suddenly were without oil. But as the oil slowly runs out, we will "create" a
new useful resource in order to replace oil just as we did when we used whale
oil and horse power prior to that. Each new technological discovery not only
increased the amount of resources available for production, but it also
improved the productivity of all resources. The notion that Ricardian rents
can be achieved is tied to the Classical theory that the supply of resources is
fixed or limited.

There is no limit to our inventiveness and creativity, but perpetual growth in

economic terms does have its restrictions. Business cycles are inevitable
according to Keynes. Orthodox theorists will tell you that if things were left
alone, growth would be self-perpetuating. Arthur's theory would seem to have
this perpetual growth notion built-in. Arthur states that his theory is not
normative, it's positive. He says that in the high-technology arena, once a
product base of "200 or 300 percent better than its predecessor," 19 then this
product becomes monopolistic in character and may not even be the best
choice. He further clarifies this by stating that its somewhat "Schumpeterian
but probably smaller and more year-by-year." 20
By making upgrades of their old products every two years or so, Microsoft has
managed to continue to increase their sales. Will the next version actually
give us the highly improved product we expect from our upgrade or will it be
the old version with fewer bugs and a minor facelift? The outdated products
eventually become unusable to consumers in the sense that its market
complements will be modified to be utilized with the newer product as well.
We are eventually forced to resign ourselves to either using only the
antiquated software or else purchase the 'upgraded' versions.

The crux of the problem with Microsoft is the market failure of monopoly. If
Microsoft had even two viable competitors for their operating system, then
consumers might be enjoying the use of a higher quality product today.
Monopolies not only tend to stifle innovation, but they also supply lower
numbers of their products thereby increasing the average cost and price. You
may recall the day Windows '95 hit the stores. People lined up outside
computer retail outlets waiting for the doors to open so they could actually
get a copy before they ran out. Orthodox proponents can't account for this
market failure because it occurred when the 'market was left to its own
devices.'

In the case of Internet browser software, Netscape is Microsoft's only viable

competitor. Microsoft has effectively managed to somewhat duplicate
Netscape's browser program (Communicator) and then make their own
"Internet Explorer" available free by giving it to purchasers of their Windows
operating system. This was the primary reason behind the antitrust suit
against Microsoft. The competition in technology has had the strategy of
elimination through duplication and giving away products. Once market
domination is achieved, then the characteristics of monopoly and Ricardian
rents can begin to take shape due to limiting the supply. Another way of
looking at this could be a supply-dominated market driving out competition
in order to achieve monopoly in a future demand-oriented market. If this is
the case, then The New Economy is definitely still in its infant stages due to
the number of players not even close to monopolistic power. In fact, today's
New Economy is more of a purely competitive market than in the past due to
ease of entry and the vast numbers of businesses. However, it's not pure
competition until these businesses become price-takers and their products
are homogenous. Veneroso argues that this will happen if it hasn't already.
Veneroso states that high-tech growth has actually slowed down in recent
months. Year-over-year data Veneroso cites is a 40-50% increase of Internet
shoppers in the summer of 1999 as opposed to year ago (summer of 1998)
increases of "several hundred percent." 21 The numbers cited were tabulated
by Media Metrix. But he then cites the year-over-year increase in December
at 37% to show that the slowing continues and is not just a seasonal cycle.
The numbers are still highly desirable numbers by anyone's standard, but his
point is that there seems to be a plateau and market saturation in the near
future. While most Internet companies still haven't shown a profit yet, this
could cause the end of the Internet stock craze.

Amazon.com is shown in his article to have no profits reported since its

creation while revenues fell by approximately ten percent in each of the
second and third quarter last year. Microeconomists have a "shut-down rule"
that states when a company's product price is less than the average variable
cost, the company should shut down its operation. However, Amazon
proponents would say that Amazon's revenues are being plowed back into
expanding its operations. Veneroso cites a study by Fred Hickey, "that
Amazon is no exception…(out of) 130 (Internet companies), ten reported a
profit." 22 However, for Keynes, investment is the spark of growth, an
increase in aggregate demand is the result of increased investment. For an
infant company to make Ricardian rents in the future, it needs to invest
revenues into expanding its operations. Veneroso's reply to this is that "there
are no Ricardian rents in cyberspace." 23 In fact, the Internet is free. He
states that "there are no uniquely productive sites," 24 of which are required
in David Ricardo's rent theory.

However, I differ with him somewhat on this point. I know that Amazon.com
would never pack up and move their site to, for example Abracadabra.com.
Amazon has created a 'uniquely productive site' by virtue of its recognizable
and easy-to-remember Uniform Resource Locator (URL). It is as valuable, if
not more so, as a shopping mall at the intersection of two major interstate
highways. There are even some people that have purchased unique URLs in
hope that someday they can sell them at a profit. An example of this might be
if I was to purchase the URL, BillGates.com for the initial required fee of $70.
Billy might want to buy that URL from me, but since I picked it up first, I'll
want some compensation in addition to my original investment. The
difference though is Amazon has a recognizable location for active productive
purposes. The 'store's doors are swinging.' The viability of any retail store
depends more on its customer base and revenue than on its location, although
its physical location in high traffic areas can be the sole attraction of
customers. Veneroso is saying that Ricardian rent comes from a physical
presence, not a virtual presence, and location of the physical presence is what
makes a difference in economic rents. You can't physically have an infinite
number of shopping malls at the intersection of two major highways. He says
that entrants to the Internet who have an online presence as well as a
physical retail store will be more successful than the strictly 'virtual' outlets.

Veneroso also looks at the number of computers sold as a way of gauging the
amount of future Internet growth. The change in rate of the number of
computers sold is a leading indicator of the future of Internet business. This
rate according to Veneroso's data is declining, "With PC penetration at more
than 55% of all households and at much higher levels for businesses, the
growth in new Net users must surely be slowing drastically." 25 However, I
don't think his data includes the global picture which is where the future of
Internet growth is greatest.

Perhaps the greatest change caused by the Internet is competitive pressure.

Instead of a few local companies having some market power in a region, in
some cases, pricing pressures from companies around the globe may affect
changes. Markets may become more competitive and the days of oligopoly we
had may be over. If this is true, then the Classical theories of pure
competition may once again become mainstream economic explanations
instead of hypothetical situations to help economics students understand
basic theory. A case in particular is the insurance industry. Insurance is an
intangible however and a consumer doesn't need to physically touch or 'kick
the tires' of the policy. If you look at a new web-site called Quotesmith.com
you can see how this might work. Quotesmith.com is a site that allows a
consumer to view the prices of insurance policies available within your
specific framework. There are very few reasons why a consumer would
purchase one insurance product that is priced higher than other products of
near-equal value. Its possible that with increasing returns to scale and lower
average costs, the competition may be reduced to a just few highly efficient
companies. Just as important is the possible future elimination of the
salesperson and their Ricardian rents (or commissions).

Detractors of continued Internet growth cite that computer technology has its
limits based on the numbers of people willing to learn this new technology.
Not everyone is willing to go buy a computer and surf the 'Net. But that
technological problem can easily be solved in the near future when the
Internet and television merge. At that point, it is predicted that anyone can
sit comfortably in a favorite chair and select a web-site as if they were
choosing their favorite TV channel, and without any knowledge of computer
technology. WebTv is a pioneer in this area, but it still has a lot of limitations
compared to the computer for Internet surfing and capabilities. Institutional
economists would state that future changes in consumer behavior could
possibly change the future of retail business even if these changes haven't
occurred yet. Maybe today's generation still likes to feel or touch the product
before it's purchased. Maybe tomorrow's generation won't feel the same after
they've grown up with the Internet having existed throughout their entire
life.

Concluding Remarks

For the most part, when journalists and businesspersons attempt to explain
economic theory and philosophy, I think there tends to be something lost in
their interpretations. Sometimes their terminology may get mixed-up thereby
causing their ideas to be misunderstood. Also their training may come only
from the Orthodox theories taught in the fundamental economics courses. As
for the economists, I think the Orthodox theorists have published much more
on this subject than the Keynesians or Institutionalists. Four reasons for this
is, first, Keynes didn't write specifically about growth in full-employment or
near full-employment economic conditions. He did however, make
recommendations for long-term economic sustainability and contemporary
economists must extrapolate his view from his past writings during the
1930's. The second reason is that The New Economy has been viewed by most
as a supply phenomenon rather than a demand phenomenon. Third, any
theory based on a single individual's philosophy has a limited life cycle.
Eventually, the theory mutates into what others think would be stated in
new situations. Forth, Institutional economics hasn't had the notoriety it
once had and in general has been largely ignored, but it seems to me that it
explains The New Economy better than any other theory offered.
Institutional theory mutates by definition. Orthodox theory is quite the
opposite, it never changes and is based on limited supply and equilibrium of
supply and demand.

Unfortunately, it's much easier to criticize and point out errors in theory than
it is to present a new theory. However, in order to create new economic
theories of explanation for The New Economy, we must start from a solid
foundation of thought. In conclusion, I think John Maynard Keynes has an
excellent closing remark from the last paragraph in his book, The General
Theory of Employment, Interest, and Money.

"But apart from this contemporary mood, the ideas of economists and
political philosophers, both when they are right and when they are wrong,
are more powerful than is commonly understood. Indeed the world is ruled by
little else. Practical men, who believe themselves to be quite exempt from any
intellectual influences, are usually the slaves of some defunct economist.
Madmen in authority, who hear voices in the air, are distilling their frenzy
from some academic scribbler of a few years back. I am sure that the power of
vested interests is vastly exaggerated compared with the gradual
encroachment of ideas. Not, indeed, immediately, but after a certain interval;
for in the field of economic and political philosophy there are not many who
are influenced by new theories after they are twenty-five or thirty years of
age, so that the ideas which civil servants and politicians and even agitators
apply to current events are not likely to be the newest. But, soon or late, it is
ideas, not vested interests, which are dangerous for good or evil."

Citations

1. Malcolm Gillis, et al, Economics of Development, W. W. Norton &

Company, 4th ed, 1996, page 42.

2. Marc R. Tool, ed., "Resources Are Not; They Become: An Institutional

Theory," article by Thomas R. De Gregori, Evolutionary Economics, volume 1,
M. E. Sharpe, Inc., pages 291-313.

3. Jeffery Madrick, The End of Affluence, Random House, 1995, page 5.

4. Madrick, page 29.

5. Madrick, page 30.

6. Madrick, page 43.

7. Madrick, page 45.

8. Madrick, page 94.

9. Madrick, page 118.

10. Marc-Andre Pigeon and L. Randall Wray, Demand Constraints and

Economic Growth, manuscript, page 4.

11. Marc-Andre Pigeon and L. Randall Wray, page 3.

12. PPI Technology Project, http://www.dlcppi.org/tech.htm

13. PPI Technology Project, "The New Economy Index,"
http://www.neweconomyindex.org/section1_page01.html

14. Michael J. Mandel, "The New Economy," BusinessWeek, January 26,

2000.

15. Michael J. Mandel, "The New Economy," BusinessWeek, January 26,

2000.

16. Paul Kedrosky, "The More You Sell, the More You Sell," Wired Digital,
Inc., http://www.wired.com/wired/archive/3.10/arthur_pr.html

17. Kevin Kelly, New Rules for the New Economy, Penguin Putnam, Inc.,
1998, pages 23 to 38.

18. Marc R. Tool, ed., "Resources Are Not; They Become: An Institutional
Theory," article by Thomas R. De Gregori, Evolutionary Economics, volume 1,
M. E. Sharpe, Inc., pages 291-313.

19. Paul Kedrosky, "The More You Sell, the More You Sell," Wired Digital,
Inc., http://www.wired.com/wired/archive/3.10/arthur_pr.html

20. Paul Kedrosky, "The More You Sell, the More You Sell," Wired Digital,
Inc., http://www.wired.com/wired/archive/3.10/arthur_pr.html

21. Frank Veneroso, There are no Ricardian Rents in Cyberspace, Chapter 7,

manuscript, page 17.

22. Veneroso, page 5. Fred Hickey is editor of "The High Tech Strategist."

23. Veneroso, page 4.

24. Veneroso, page 5.

25. Veneroso, page 17.

Copyright March, 2000. Steven A. Waller, e-mail: stevenw@gvi.net