Explain Paul Romer’s ideas concerning economic growth. What will be a

Explain Paul Romer’s ideas concerning economic growth.

What will be an ideal response?

ANSWER

Romer argues that knowledge is a factor of production just as capital and labor are. Economies must invest in education as they do in capital. Past investments in capital make it profitable to acquire more knowledge, implying that investment leads to new knowledge that leads to new investment. There can be an investment-knowledge cycle that continually stimulates economic growth. According to Romer, ideas drive economic growth.