Stanford Graduate School of Business Professor joined us on Monday, April 3, 2023, for his talk, “Recipes and Economic Growth: A Combinatorial March Down an Exponential Tail.”
New ideas are often combinations of existing ideas, a point emphasized by Romer (1993) and Weitzman (1998). But this insight is largely absent from state-of-the-art models. Separately, Kortum (1997) created a new framework for modeling growth, one where ideas are draws from a probability distribution, and argued that the Pareto distribution plays an essential role. What happened to the Romer-Weitzman observation that combinations matter, and do we really need to make such a strong distributional assumption to get growth? This paper shows that combinatorial increases in the number of draws from standard thin-tailed distributions leads to exponential economic growth. More broadly, the paper provides a theorem linking the behavior of the max extreme value to the number of draws and the shape of the upper tail for probability distributions.
Charles I. Jones is The STANCO 25 Professor of Economics at Stanford Graduate School of Business and a research associate of the National Bureau of Economic Research. Professor Jones has been honored as a member of the American Academy of Arts and Sciences, a fellow of the Econometric Society, and a co-editor of Econometrica. He is currently the area coordinator for the economics group at Stanford GSB.
Professor Jones is the author of numerous research papers as well as two textbooks, Introduction to Economic Growth (2013) and Macroeconomics (2020).