1. || Chapter 3, Group Alpha 04.03.15Group Alpha1 Technology, Driver of Growth

2. ||  3.1 Economic Growth  3.2 Technology, the Driver of Growth  3.2.1 Solow’s Surprise  3.2.2 Schumpeter: The Entrepreneur  3.2.3 Capitalism  3.3 Technology and Growth in Modern Times  Summary  Q&A 04.03.15Group Alpha2 Agenda

3. ||  Growth is the most important factor in economic success  Living standards, as measured by GDP, depend on its productivity 04.03.15Group Alpha3 3.1 Economic Growth +21.4% +456.9%

4. || Factors of production:  Natural resources  Human capital  Physical capital  Technological knowledge The relationship between these factors is often described in the Aggregate Production Function 04.03.15Group Alpha4 3.1 Economic Growth

5. || Drivers  Technology improvement  Science  Problems  Fashion  Cost reduction  Laws Human nature pushes the frontier of the possible... 04.03.15Group Alpha5 3.2 Technology, the Driver of Growth

6. || 04.03.15Group Alpha6 3.2 Technology, the Driver of Growth - Example

7. ||  Output Y(t) = F(K(t),L(t)*T(t)) [L*T effectiveness of labour]  Output growth = ¾ labour growth + ¼ capital growth + technological growth  50% of growth rate is due to technological innovation  Economic Growth  not only producing more of the same  more replace existing goods by new innovative ones  Technological growth  Innovation (can be dributive)  Society (political stability)  Education  Infrastructure (logistics)  Entrepreneurs 04.03.15Group Alpha7 3.2.1 Solow’s Surprise

8. || Neither capital nor labour makes the difference in economic growth, it is all about technology! 04.03.15Group Alpha8 3.2.1 Solow’s Surprise - Example

9. || 04.03.15Group Alpha9 3.2.2 Schumpeter: The Entrepreneur  Innovation in free market  Temporary Monopolies  Gives resources for R&D leads to new innovation  Self-perpetuating cycle (cycles are shorter due to technological progress)  Big companies can drive innovation in high risk fields

10. || 04.03.15Group Alpha10 3.2.2 Schumpeter: The Entrepreneur - Example

11. || Capitalism  Social system based on competition  “Time is money”, “the strong eat the weak” Innovation drivers in capitalism  Oligopolistic competition  Routinization  Productive entrepreneurship  The rule of law (Contracts, IP)  Technology selling and trading (licensing) 04.03.15Group Alpha11 3.2.3 Capitalism

12. || 04.03.15Group Alpha12 3.2.3 Capitalism - Example

13. || 04.03.15Group Alpha13 3.3 Technology and Growth in Modern Times

14. || Only technological progress generates sustainable economic growth. 04.03.15Group Alpha14 Summary

15. || 04.03.15Group Alpha15 Q & A