Tuesday, December 24, 2013

Directed Technological Change and Resources

Why Nations Fail: ...dirty technologies are more advanced than clean technologies based on wind, solar power or geothermal (and even, more controversially, nuclear power). Given this state, directed technological change implies that private incentives will encourage firms and researchers to invest more in using and improving these dirty technologies — clean technologies are just too far behind and won’t be competitive, so it wouldn’t make private sense for people to invest much in them... Though the market without intervention fails and fails badly (think environmental disaster), government intervention can be hugely powerful because it leverages the endogeneity of technology and, as Simon posited, the power of the market to generate new technologies. If the government intervenes and subsidizes clean research, then this can powerfully stave off an environmental disaster...

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