Chapter 1 Economic Growth

BUS 435Rick Christoph

Technology Innovation The impact of all Innovations from

day 1 have been forecast incorrectly

The Internet seems to have missed the mark – is this true?

Example: When radio was first commercialized, David Sarnof wondered how to make money with it. How did he?

The story of radio Radio began in the late 1800’s but

with very limited use Sent a “spark” – long spark was a

dash, short a dot It was mathematically proved that

radio signals could only go 50 miles due to curve of earth

In 1901, Marconi proved ‘em wrong

Radio Still, sparks were not very exciting! In 1911, DeForest was sued for

selling shares in a fraudulent concept … what was it? It enabled voice and music to be sent!

By 1923, Sarnof was trying to popularize the radio. He set up a small company called …..

Radio How could Sarnof make money with

radio? List your ideas. What does this mean to us?

Technology advances are unpredictable Advances build on each other in

unexpected ways. To be successful, you must have an

open mind to failure.

Other examples Bridge construction The railroad The automobile self-starter The telephone The computer The impact of all have been poorly

forecast. Why?

Economic Growth How does growth happen? What if we run out of resources? Has it ever happened? How about over-population?

Haven’t you heard that you consume too much gas, food, air, etc.?

Finally, can innovation create growth?

The key may be Economics How are resources allocated in a

market society? Supply and demand, right? How?

But what if we run out?? This becomes a classic economics

problem.

The Gas Crisis (1974) We had huge lines to get gas. Rationing began!

We were out of gas, right? Well, it went way up in price! How much was a new car – a

Chevelle? How much is a new Lumina today? How about gas?

The Limits to Growth In the ’70’s, the Club of Rome

predicted doom, and gloom by the year 2000

We would be hungry, cold, poor! The environment would be a disaster! Over population would cause huge

wars, famine, disease! What really happened? Why?

What happened? In a word, Productivity! Most of this was caused by innovations

unheard of in the ’70’s! Consider agriculture. Who ever heard of

“Roundup Ready” beans in 1970? An “economy car in 1970 (VW Beetle)

got 25 mpg and was a hazard to drive. Today, cars like that get 40+ and are

much safer.