Explain how the “new growth theory” treats technology differently from

Explain how the “new growth theory” treats technology differently from the way economists used to treat technology.

What will be an ideal response?

ANSWER

Technology used to be treated as an outside factor of growth that could not be explained itself. The new growth theory includes technology as another factor of production and argues that the greater the reward to technology the greater will be technological advance. Firms engage in research and development activity with the expectations of increasing their profitability.