Volume 12, No. 2 (2009)
Andrew Young (2009) suggests a capital-based theory for secular growth that is consistent with Austrian capital theory. He argues that investment in intangible capital can create secular growth through a combination of external effects (because intangible capital is nonrivalrous), and opening paths for further innovation (“standing on the shoulders of giants”). In reality, all that is required for secular growth is that some form of nondepreciating capital is produced. So, the central insight from Young — that “technological change [is] the output of intangible investments and, therefore, a capital-based engine of sustainable secular growth” — is stronger and simpler than Young suggests. To demonstrate this, I will present two examples styled after Salerno (2001).
