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Review of The Free-Market Innovation Machine: Analyzing the Growth Miracle of Capitalism by William J. Baumol

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Tags Free Markets

07/30/2014Randall G. Holcombe

 

Volume 7, No.1 (Spring 2004)

 

The fundamental idea behind this book, as its title suggests, is that innovation is the driving force behind the remarkable growth miracle of capitalism. Yet, Baumol notes, innovation is at best a peripheral part of the standard theory of the firm and has received only slightly more attention in modern growth theory. Many of the basic ideas in this book are based on Schumpeter’s work, and Baumol cites Schumpeter frequently. Baumol also draws on his first-hand experience in consulting work, and discussions with corporate decision-makers, for insights on the way that firms actually do behave in a competitive environment. The result is a theory of economic growth substantially more insightful than the reigning neoclassical growth theory. Still, Baumol is quite reluctant to find fault with contemporary growth theory. He praises the work of Romer, Lucas, and others, but says that he is interested in different questions.

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Contact Randall G. Holcombe

Randall G. Holcombe is an Associated Scholar of the Mises Institute, DeVoe Moore Professor of Economics at Florida State University, past President of the Public Choice Society, and past President of the Society for the Development of Austrian Economics. He received his Ph.D. in economics from Virginia Tech, and has taught at Texas A&M University and Auburn University. Dr. Holcombe is also Senior Fellow at the James Madison Institute and was a member of the Florida Governor’s Council of Economic Advisors. His books include From Liberty to Democracy: The Transformation of American Government (2002), Producing Prosperity (2013), and Political Capitalism: How Economic and Political Power Is Made and Maintained (2018). His primary areas of research are public finance and the economic analysis of public policy issues.

Cite This Article

Holcombe, Randall G. "Review of The Free-Market Innovation Machine: Analyzing the Growth Miracle of Capitalism by William J. Baumol." The Quarterly Journal of Austrian Economics 7, No. 1 (Spring 2004): 79–84.

 

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