Financial Crisis and Great Stagnation - Essay Example

?First Article Summary Despite the return of boom in the Silicon valley, some consider the place stagnant and find the rate of innovation slackening.The recent financial crisis masked Great Stagnation that hindered the growth of incomes in the rich economies. The argument of world’s existence on a technological plateau goes along three lines; growth statistics, the extent of invention going on, and the evidence of senses. Growth is of extensive and intensive type. Growth of real output in America per person continued to decline since the mid 20th century. The recent innovations would not change the world of work substantially. Higher literacy rate and increased research intensity majorly caused the growth of income in the later half of the 20th century. Finiteness of growth of these elements is a cause of halt in income growth. The rate of progress today is very slow compared to what it was from the start to the mid 20th century. Computer age is omnipresent but has failed to increase productivity like the innovations of the late 19th century did until the quarter of the 20th century. Innovation and technology are used interchangeably but the two terms are different. A hindrance in future innovation is poorly crafted regulations. The role of government as well as energy has changed in the transition from the late 20th to the 21st century. Globalization is one of the factors that caused the productivity slowdown since 1970s, though it also serves as an opportunity since any idea generated spreads world over. The real risk for advanced economies is the rigidity of institutions toward accommodation of changes that are truly revolutionary rather than the slow pace of innovation. Reflection I think that the pace of innovation has not slowed down. In fact, the speed with which the research and development is taking place today far exceeds any achieved in the past centuries. This article has more discussed the effect of innovation and new technologies on business, commerce, and everyday life rather than innovation itself. Considering the innovation aspect, the fact that every year brings along with it new models and upgraded specifications of almost every gadget that we have ranging from the cars to mobile phones provides evidence of the speed of innovation. So saying that innovation is not happening any more would be far from reality. Nevertheless, it is undoubtedly true that human life has never been impacted as much by innovation and new technology as it has been impacted from the start till the first quarter of the 20th century. The reason behind the decline in the impact of innovation on human life in the present age compared to the past is not just limited to the rigid attitude of the organizations and institutions toward sustaining the traditional ways of working. While it is an important factor, the reasons for the decline in innovation’s impact on human life extend beyond it to include the fact that the merits of adjusting the systems according to new technologies today are not as enormous as they were in the past. This is because of the fact that the general lifestyle of people a century ago or before that and the systems of trade and commerce were far less advanced than what they are today and had a lot of room for adjustment and improvement. Therefore, the decline has basically not happened in the speed of innovation. Instead, the decline has happened in the tendency of the systems to be improved probably because the existing systems address the fundamental needs of the society in many ways. Although there is growing concern about the safety of environment, yet this fact cannot be denied that the practices that have led to deterioration of the environmental health and safety are addressing the economic and various other needs of the society. One point that has been made in the article and which I disagree with is that the omnipresence of computer age has not increased the productivity the way the 19th century’s innovations did. Saying this is unfair because it undermines all the improvement in organizational productivity caused by the integration of computers into work setups. The factor that makes the difference is that the 19th century’s innovations were very visible in that they were physical objects like oven and car etcetera whereas modern innovation is more sophisticated but not visible physically e.g. upgradation of softwares. Second article summary Different countries export different kinds of products that play a role in its economic performance. According to the fathers of development economics, the type of products matter in the country’s economic performance considering the creation of spillover benefits by the industrialization that result in the economic growth. However, the mainstream economic theory cannot accommodate these ideas. A country’s specialization pattern is explained by two approaches, the first of which emphasizes upon the relative proportion among the factors of production whereas the second approach focuses upon the differences of technology. A country contains numerous firms that use its capital to produce goods that are different from the ones that are being produced currently. The orientation of a country and the structure of its space are very important in the development of the countries. Factors that can create relatedness between the products include but are not limited to closeness between trees, the extent of technological sophistication, and the inputs and outputs in the value chain of a product. Proximity formalizes the concept that a country’s ability to make a product relies on its ability to make other products. Distribution of the relative increase in the products’ density underwent a transition with respect to the undeveloped products. Upgradation of the products produced and exported by the countries plays a very important role in their growth. Some products provide the countries with more ease of adaptation of the capital, technology, skills, and institutions required for the newer productions as compared to other products. Economies empirically develop products similar to the ones that they product presently and thus advance through the product space. Most countries traverse the infrequent distances empirically to reach the core, that is the fundamental reason why the poor countries encounter issues in the development of more competitive exports and yet cannot manage to converge to the rich economies’ levels of income. Reflection This article explores the network of relatedness among different products. Lack of connectedness in the product space helps explain the complications experienced by the countries as they attempt to converge to the rich countries’ income levels when the rich countries may not manage to experience the structural transformation because of extremely low proximities. The key finding of the study is that products that are increasingly sophisticated are found in core that is heavily interconnected whereas the products that are not as sophisticated have a lesser connected periphery. The findings of the authors have some very significant effects particularly for the economic policy since the incentives for the advancement of the structural transformation in the proximate opportunities’ existence are very different from the incentives needed if an economy reaches the dead end. Production in the present age cannot switch to the products that are distant in the space. This is one factor that makes the policies that advance the large jumps very complicated. The very long jumps result in subsequent convergence, advancement, and transformation. In this article, the authors have made a very different approach by studying the impact of the conditions of product space on the development of nations unlike the conventional approaches in which the development of nations is linked to such factors as innovation, literacy rate, and advancement of technology. One of the strengths of this article is that the authors have compared different countries in support of their assertions e.g. comparison of Malaysia and Colombia to show the way the product space’s structure impacts the pattern of specialization of a country. Works Cited: Hidalgo, C. A., Klinger, B., Barabasi,A. L., and Hausmann, R. “The Product Space Conditions the Development of Nations.” Science. Vol. 317. No. 482. pp. 482-487. Read More