A Tale of Two Capitals: Modeling the Interaction between Ideas, Physical Capital, and Growth

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See all articles by Santiago Jose Gangotena

Santiago Jose Gangotena

Universidad San Francisco de Quito USFQ

Ryan Safner

Hood College

Date Written: January 28, 2021

Abstract

This paper models the relationship between innovation and sustained economic growth through as being mediated by institutions that calibrate a 'structure of technological production' analogous to capital-based models of the structure of production. Our framework discusses two types of capital: physical capital and ethereal capital (productivity-enhancing ideas). We cast these two structures in a network, the structure of which is determined by the institutions of a society. Predictions derived from this model may resolve some puzzles in the history of economic growth, such as ancient inventions 'far ahead of their time' failing to stimulate sustained growth, the phenomena of simultaneous independent invention, and failures of technology transfers.

Keywords: Innovation, technology, economic growth, institutions, capital theory, invention

JEL Classification: O43, O30

Suggested Citation

Gangotena, Santiago Jose and Safner, Ryan, A Tale of Two Capitals: Modeling the Interaction between Ideas, Physical Capital, and Growth (January 28, 2021). Available at SSRN: https://ssrn.com/abstract=

Santiago Jose Gangotena

Universidad San Francisco de Quito USFQ ( email )

Diego de Robles y Vía Interoceánica
Campus Cumbayá
QUITO, PICHINCHA 17-1200-84
Ecuador

Ryan Safner (Contact Author)

Hood College ( email )

401 Rosemont Avenue
Frederick, MD 21701
United States

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