Knowledge and economic development

The theme of the October 29-31, 1990, ORSA/TIMS meeting in Philadelphia was ‘Productivity and Global Competition.’ This paper, which is an address given there, pursues this theme by emphasizing the importance of knowledge in contrast to natural resources as the critical ingredient in economic development in the future, and stresses the rapidity with which knowledge is transferred across national boundaries and the impossibility of restraining it. It forecasts that the competition among nations will lead to a situation in which no nation dominates international trade the way the United States did from the end of World War II until the early 1970s. Rather, the leadership will change in a pattern in which one nation innovates and others begin to follow and erode that innovation. Thus, in the long run, the critical ingredient will be the proportion of the GNP that a nation is willing to devote to research.