Paul Romer on Growth

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4.7 • 4.3K Ratings

🗓️ 27 August 2007

⏱️ 77 minutes

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Summary

Paul Romer, Stanford University professor and Hoover Institution Senior Fellow talks with EconTalk host Russ Roberts about growth, China, innovation, and the role of human capital. Also discussed are ideas in creating growth, the idea that ideas allow for increasing returns, and intellectual property and how it should be treated. This 75 minute podcast is a wonderful introduction to thinking about what creates and sustains our standard of living in the modern world.

Transcript

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0:00.0	Welcome to Econ Talk, part of the Library of Economics and Liberty. I'm your host Russ Roberts
0:13.9	of George Mason University and Stanford University's Hoover Institution. Our website is econtalk.org
0:21.2	where you can subscribe, find other episodes, comment on this podcast, and find links to
0:26.5	another information related to today's conversation. Our email address is mailadicontalk.org. We'd
0:33.6	love to hear from you. My guest today is Paul Romer. Paul is the
0:39.2	stanco 25 professor of economics in the graduate school of business at Stanford University and
0:44.9	a senior fellow at the Hoover Institution. He's the founder of Aplia, which develops and
0:49.2	applies technologies for improving student learning and his research has revolutionized
0:54.3	the theory of economic growth. And that's our subject for today. Paul, welcome to Econ Talk.
0:58.1	This is great to be here. Well, let's start by talking about the importance of growth as you do in
1:03.7	your article for the concise encyclopedia of economics. You have an article there, economic growth.
1:09.1	Why do small changes in growth rates matter? What's important about that? This is a classic
1:16.4	application of the power of compounding. If you have a slightly higher growth rate, then there's
1:23.7	growth rates when they compound over many years lead to dramatically higher levels of income.
1:29.5	So, for example, at 2.1% rate of growth per year, income per capita in a nation can increase
1:38.3	by a factor of about 8 over 100 years. So if... To big increase? Yeah. So if income per
1:42.8	capita is about $30,000 per person in the United States, just around numbers. In 100 years,
1:47.8	it could be $240,000 per person. Now, imagine you had a slightly faster growth rate. Suppose it
1:53.9	was 2.6% instead of 2.1%. Then it could increase by a factor of 13 instead of 8. So you'd end up
2:01.2	with $390,000 per person instead of... Instead of 240. So small differences, half a percent per
2:10.9	year, accumulate into very large differences in standards of living. And no matter what a nation
2:17.2	wants to do with those extra resources, spend it on education, spend it on more vacations, more
	...

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