Models of Technical Progress and the Golden Rule of Research

Edmund Phelps

No 176, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: The primary purpose of this paper is to present a model of technical progress and economic growth from which one can derive a Golden Rule of Research quite analogous to the Golden Rule of Accumulation. The secondary purpose is to discuss various models of technical progress. That there might exist a Golden Rule for research is not surprising since research is a kind of investment -ñ investment in technology -- just as "accumulation" denotes investment in tangible capital. Nevertheless "capital" and "technology" differ in important aspects. If, given the technology, the production of commodities is homogeneous of degree one in labor and capital goods, as is frequently postulated, then production cannot be homogeneous of degree one in labor, capital and "technology" (or the appropriate index of past research effort). Further, the production of technical progress, unlike the production of investment goods, seems unlikely to exhibit constant returns to scale in capital and labor, given the technology. Hence technology cannot be treated as an ordinary capital good. Because of this novelty that our subject presents, this paper must be highly tentative and conjectural.

Pages: 27 pages
Date: 1964
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