Morning Must-Read: Richard Mayhew: Rural Hospitals, DSH Payments, and Vegas Hotels
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Lunchtime Must-Read: Ricardo Hausmann: Technological Diffusion and Economic Theory

Ricardo Hausmann: Technological Diffusion and Economic Theory: "One idea about which economists agree almost unanimously is that...

...huge income difference between rich and poor countries [are] attributable to neither capital nor education, but rather to “technology”... [which] sounds more meaningful than confessing our ignorance, [but] it really is not.... Devices can be put in a container and shipped around the world, while recipes, blueprints, and how-to manuals can be posted online.... So the Internet and free trade should make the ideas and devices that we call “technology” available everywhere.... Daron Acemoglu and James Robinson’s book Why Nations Fail... [argues] essentially that technology does not diffuse because the ruling elite does not want it to.... I am also struck by how often governments that embrace the goal of shared growth--post-apartheid South Africa is a good example--fail to achieve it. Such governments promote schooling, free trade, property rights, social programs, and the Internet, and yet their countries’ economies remain stuck. If technology is just devices and ideas, what is holding them back?

The problem is that a key component of technology is knowhow, which... neither involves nor can be acquired through comprehension... tacit knowledge... an ability to recognize patterns and respond with effective actions.... Knowhow moves to new areas when the brains that hold it move there. Once there, they can train others. Moreover, now that knowhow is becoming increasingly collective, not individual, diffusion is becoming even slower.... Progress happens by moving into what the theoretical biologist Stuart Kauffman calls the “adjacent possible”... technology does not diffuse because of the nature of technology itself.