Paul Romer

Paul Romer’s most important work is in the field of economic growth. Economists studied long-run growth extensively during the 1950s and 1960s.

Romer is credited with the witty quote, “A crisis is a terrible thing to waste.” This quote became a sounding horn by economists and consultants looking to make a positive take away from the economic downturn of 2007-2009.

His dominant theme

“Economic growth occurs whenever people take resources and rearrange them in ways that are more valuable. A useful metaphor for production in an economy comes from the kitchen. To create valuable final products, we mix inexpensive ingredients together according to a recipe. The cooking one can do is limited by the supply of ingredients, and most cooking in the economy produces undesirable side effects. If economic growth could be achieved only by doing more and more of the same kind of cooking, we would eventually run out of raw materials and suffer from unacceptable levels of pollution and nuisance. History teaches us, however, that economic growth springs from better recipes, not just from more cooking. New recipes generally produce fewer unpleasant side effects and generate more economic value per unit of raw material.

Every generation has perceived the limits to growth that finite resources and undesirable side effects would pose if no new recipes or ideas were discovered. And every generation has underestimated the potential for finding new recipes and ideas. We consistently fail to grasp how many ideas remain to be discovered. Possibilities do not add up.

I had much pleasure listening to Paul Romer for a solid hour on FORA.tv. I really enjoy the positive views he has of the future in his New Growth Theory which gives me the necessary boost to the negativity that comes out of the present media.

The presentation was introduced with the following comments:  Paul Romer is an economist who gets invoked a lot, and the reasons are that he is the primary founder and formulator of what is called New Growth Theory, and New Growth Theory was a formal and persuasive way to make sure that economic growth realizes the economic understanding realizes the power of ideas. So always talking about resources and various economic balances and so on. But ideas in their own right are a powerful source of the creation of wealth. For a while now, I guess a couple of years, he has been working up on a new formulation, which is modestly calling a theory of history and this is the launch of that, there will be a series of presentations that he will be making, putting this idea forth and putting it into application. So please welcome the first look at that set of ideas from Paul Romer.