The Division of Labor and Knowledge is Limited by the Division of Ownership Over the Ultimate Resource: The Role of Economies of Scope in Julian Simon

The Review of Austrian Economics, Forthcoming

GMU Working Paper in Economics No. 21-36

31 Pages Posted: 16 Nov 2021 Last revised: 3 Dec 2021

See all articles by Rosolino Candela

Rosolino Candela

George Mason University - Mercatus Center

Date Written: September 22, 2021

Abstract

Julian Simon famously argued that economic growth is correlated with population growth. The basis for this correlation is what Simon refers to as the “ultimate resource,” namely the human mind and the collective stock of dispersed, tacit, and inarticulate knowledge among individuals. Though not incorrect, this simple rendition of his argument does not do full justice to the inspiration that Simon took from the mainline of economic thought. The purpose of this paper is to situate Julian Simon’s The Ultimate Resource as part of the mainline of development economics. I do so by developing an implicit and underappreciated relationship between entrepreneurship and economic growth in Simon’s The Ultimate Resource. I argue that this correlation between economic growth and population growth is predicated on what Simon refers to as “economies of scope.” This implies twofold. First, that a Smithian division of labor and a Hayekian division of knowledge emerge simultaneously, but are inherently predicated on a Misesian division of private property rights. Secondly, population growth is a proximate cause of economic growth, and therefore a by-product of a more fundamental institutional foundation: an ever-increasing scope in the ability of individuals to exchange ideas, goods, and services.

Keywords: Julian Simon, Economies of Scope, Increasing Returns, Property Rights

JEL Classification: B53, N70, O31, R40

Suggested Citation

Candela, Rosolino, The Division of Labor and Knowledge is Limited by the Division of Ownership Over the Ultimate Resource: The Role of Economies of Scope in Julian Simon (September 22, 2021). The Review of Austrian Economics, Forthcoming , GMU Working Paper in Economics No. 21-36, Available at SSRN: https://ssrn.com/abstract=3929041 or http://dx.doi.org/10.2139/ssrn.3929041

Rosolino Candela (Contact Author)

George Mason University - Mercatus Center ( email )

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Arlington, VA 22201
United States

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