P r ROCEEDINGS OF THE WORLD BANK ANNUAL CONFERENCE ON DEVELOPMENT ECONOMICS 1992- Two Strategies for Economic Development: Using Ideas and Producing Ideas

The key step in understanding economie growth is to think carefully about ideas. This requires careful attention to the meaning of the words that we use and to the metaphors that we invoke when we construct mathematical models of growth. After addressing these issues, this paper describes two different ways in which ideas can contribute to economic development. The history of Mauritius shows how a poor economy can benefit by using ideas from industrial countries within its borders. The history of Taiwan (Chinza) shows how a developing economy can be pushed forward into the ranks of those that produce ideasfor sale on world markets. The central claim of this paper is that the difference between the economics of ideas and the economics of objects is important for our understanding of growth and development. A subsidiary claim is that academic and policy discussions in these areas might be more fruitful if we spent less time working out solutions to systems of equations and more time defining precisely what the words we use mean. The notion that ideas are different from oblects is both familiar and obvious. In the economic analysis of patents, for example, there is a long tradi