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Ideas and Innovation  \nLevi Crews  \nSpring 2026  \nRecap  \n• “endogenous growth” ≡ long-run gy > 0 determined by modeled choices  \nRecap  \n• “endogenous growth” ≡ long-run gy > 0 determined by modeled choices  \n• three key features of NGM combine to prevent endogenous growth:  \n• diminishing returns to capital (α \u003C 1)  \n• neoclassical assumptions: perfect competition, F (·, ·) is CRS w/ Inada conditions  \n• exogenous technological progress: no modeled choices determine gA  \nRecap  \n• “endogenous growth” ≡ long-run gy > 0 determined by modeled choices  \n• three key features of NGM combine to prevent endogenous growth:  \n• diminishing returns to capital (α \u003C 1)  \n• neoclassical assumptions: perfect competition, F (·, ·) is CRS w/ Inada conditions  \n• exogenous technological progress: no modeled choices determine gA  \n• last time: AK models generate sustained growth thru broadened K  \n• vanilla AK model: k˙ =   k b/c α = 1  \n• Uzawa-Lucas model: h˙ =   h w/ CRS in {K, h}  \n• pure externality model: B = AK 1 −α → collapses to vanilla AK  \nRecap  \n• “endogenous growth” ≡ long-run gy > 0 determined by modeled choices  \n• three key features of NGM combine to prevent endogenous growth:  \n• diminishing returns to capital (α \u003C 1)  \n• neoclassical assumptions: perfect competition, F (·, ·) is CRS w/ Inada conditions  \n• exogenous technological progress: no modeled choices determine gA  \n• last time: AK models generate sustained growth thru broadened K  \n• vanilla AK model: k˙ =   k b/c α = 1  \n• Uzawa-Lucas model: h˙ =   h w/ CRS in {K, h}  \n• pure externality model: B = AK 1 −α → collapses to vanilla AK  \n• but, at best, innovation is accidental → what if it’s deliberate?  \nNext two weeks  \n• focus on ideas → a special kind of economic good  \n• “instructions for mixing raw materials together”  \n• will require dropping neoclassical assumptions  \nNext two weeks  \n• focus on ideas → a special kind of economic good  \n• “instructions for mixing raw materials together”  \n• will require dropping neoclassical assumptions  \n• build (semi-)endogenous growth models w/ costly , deliberate idea accumulation  \n• share aggregate dynamics in which A grows endogenously    \n•... b/c firms invent new varieties of goods (Romer, 1990) [Week 6]  \n•... b/c firms invent better varieties of goods (Aghion and Howitt, 1992) [Week 7]  \nNext two weeks  \n• focus on ideas → a special kind of economic good  \n• “instructions for mixing raw materials together”  \n• will require dropping neoclassical assumptions  \n• build (semi-)endogenous growth models w/ costly , deliberate idea accumulation  \n• share aggregate dynamics in which A grows endogenously    \n•... b/c firms invent new varieties of goods (Romer, 1990) [Week 6]  \n•... b/c firms invent better varieties of goods (Aghion and Howitt, 1992) [Week 7]  \n• disclaimer: these are models of “frontier” economies  \n• discuss how technology diffuses to the rest of the world [Week 8]  \nThe Idea Diagram  \nIdeas → Nonrivalry → Increasing returns → Imperfect competition  \nWhat is an idea?  \n“instructions for mixing raw materials together”→ how to do more/better with less","cbCaibF9zQwdKtFQ","https://ap.wps.com/l/cbCaibF9zQwdKtFQ","pdf",1701988,113,"English","# Recap\n## Why NGM prevents endogenous growth\n## AK models and sustained growth\n# Deliberate innovation\n## Focus on ideas as an economic good\n## (Semi-)endogenous growth with costly idea accumulation\n# Next two weeks outlook\n## Ideas, variety creation, and frontier economies\n## Technology diffusion","[{\"question\":\"What prevents endogenous growth in the NGM framework discussed in the recap?\",\"answer\":\"The notes attribute it to diminishing returns to capital (α \\u003c 1), neoclassical assumptions like perfect competition with CRS and Inada conditions, and exogenous technological progress where no modeled choices determine gA.\"},{\"question\":\"How do AK models generate sustained growth in the lecture?\",\"answer\":\"They allow sustained growth through capital broadening; the vanilla AK model implies k˙ = k when α = 1, producing ongoing dynamics.\"},{\"question\":\"What is the new direction starting in the next two weeks?\",\"answer\":\"The lecture shifts toward ideas as a special economic good, proposing (semi-)endogenous growth models where innovation is deliberate and idea accumulation is costly, with A growing endogenously.\"}]","ECON 164 - Theory of Economic Growth - Week 6 - Ideas and Innovation | PDF",1789743269,285]