Creating a Learning Society

Abstract

This book assesses how learning helps countries grow, develop, and become more productive. It looks at what government can do to promote learning and casts light on the significance of learning for economic theory and policy. It explains that the thing that truly separates developed from less-developed countries is not just a gap in resources or output but a gap in knowledge. It shows that the pace at which developing countries grow is largely a function of the pace at which they close this knowledge gap. The book takes as its starting point Kenneth J. Arrow's 1962 paper “Learning by Doing,” and explains why the production of knowledge differs from that of other goods and why market economies alone typically do not produce and transmit knowledge efficiently. It shows that closing knowledge gaps and helping laggards learn are central steps to growth and development. It also argues that creating a learning society is crucial if we are to sustain improved living standards in advanced countries. It provides new models of “endogenous growth” and shows how well-designed government trade and industrial policies can help create a learning society, while poorly designed intellectual property regimes can retard learning. It also explains how virtually every government policy has effects, both positive and negative, on learning. It argues that free trade may lead to stagnation whereas broad-based industrial protection and exchange rate interventions may bring benefits—not just to the industrial sector, but to the entire economy.