ABSTRACT

Economists’ recognition of innovation and technology is often ascribed to the contribution of Schumpeter ( 1934 ), spelled out in The Theory of Economic Development, conveying the message that without innovations the market economy would settle in a stationary Walrasian equilibrium. Precisely the same message was delivered by Solow ( 1957 ), declaring that in equilibrium GDP per capita of a competitive economy will grow only to the extent that technology improves over time. A novel element was that the Solow model prescribed a way to calculate the size of the yearly change of technology.