Robert E. Lucas Jr. Speaks at the World Bank on Technology Diffusion

November 15, 2007

The Industrial Revolution has seen steady growth of close to 2 percent a year in the world’s most successful economies for over two centuries now—adding up over time to a more than forty-fold increase in GDP per capita in Europe, North America and Japan.

But this growth has given rise to a historically unprecedented level of inequality between the countries of the world. While some poorer countries, many in East Asia, have indeed seen miraculous growth, several others in Africa and Asia have stagnated or even shown negative growth.
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In delivering the annual Development Economics Lecture at the World Bank on November 15, 2007, Nobel Laureate Robert E. Lucas Jr. said: “A study of economic growth in the world as a whole must be a study of the diffusion of the industrial revolution across economies, a study of the cross-country flows of production-related knowledge from successful to unsuccessful ones.”

The lecture, titled “Trade and the Diffusion of the Industrial Revolution,” focused on proving that these flows (of production-related knowledge) are the main force for reducing income inequality and for the convergence of incomes to a common, growing level.  Watch lecture video 

“Hearing what Professor Lucas has to say about the diffusion of technology since the industrial revolution was invaluable—his insights and the evidence he presents suggest yet again that more open countries tend to succeed,” said Uri Dadush, Director, International Trade and Development Prospects Group, World Bank.

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The speech was directly related to a forthcoming World Bank report, the next Global Economic Prospects which will be published January 2008. This report will have the special topic ‘Technology Diffusion in Developing Countries,’ and will present solid evidence on the importance of trade, FDI and diasporas in the dissemination of technology.

“It is an honor that Professor Lucas delivered this year’s Development Economics Lecture at the Bank. His contribution to economic theory and policy has expanded our understanding of how to achieve economic development,” said Boris Pleskovic, Research Manager in the Bank’s Capacity Building, Partnerships and Outreach unit.

Lucas, Professor of Economics at the University of Chicago, where he has taught since 1975, has a reputation built on methodological acumen and graceful writing. He won the Nobel Prize in Economic Sciences in 1995, for developing and applying the hypothesis of rational expectations, which transformed macroeconomic analysis.

As an intellectual leader, Lucas has contributed to several fields of economics.  These include financial economics, monetary theory, public finance, and the role of human capital accumulation in economic growth. 

In a 1999 paper “Nobel Laureate Robert E. Lucas, Jr.: Architect of Modern Macroeconomics”, V.V. Chari wrote of Lucas: “Economists today routinely analyze systems in which agents operate in complex probabilistic environments to understand interactions about which the great theorists of an earlier generation could only speculate. This sea change is due primarily to Lucas.”