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This paper is an exploratory analysis of the role that banks play in supporting what Jevons called the "mechanism of exchange." It considers a model economy in which exchange activities are facilitated and coordinated by a self-organizing network of entrepreneurial trading firms. Collectively, these firms play the part of the Walrasian auctioneer, matching buyers with sellers and helping the economy to reach prices at which peoples' trading plans are mutually compatible. Banks affect macroeconomic performance in this economy because their lending activities facilitate the entry and influence the exit decisions of trading firms. Both entry and exit have ambiguous effects on performance, and we resort to computational analysis to understand how they are resolved. Our analysis draws an important distinction between normal and worst-case scenarios, with the economy experiencing systemic breakdowns in the latter. We show that banks can provide a "financial stabilizer" that more than counteracts the familiar financial accelerator, and that the stabilizing role of the banking system is particularly apparent in worst-case scenarios. In line with this result, we also find that under less restrictive lending standards banks are able to more effectively improve macroeconomic performance in the worst-case scenarios.

International audience; Can a country grow faster by saving more? The paper addresses this question both theoretically and empirically. In the theoretical model, growth results from innovations that allow local sectors to catch up with frontier technology. In poor countries, catching up requires the cooperation of a foreign investor who is familiar with the frontier technology and a domestic entrepreneur who is familiar with local conditions. In such a country, domestic savings matters for innovation, and therefore growth, because it enables the local entrepreneur to put equity into this cooperative venture, which mitigates an agency problem that would otherwise deter the foreign investor from participating. In rich countries, domestic entrepreneurs are already familiar with frontier technology and therefore do not need to attract foreign investment to innovate, so domestic savings does not matter for growth.A cross-country regression shows that lagged savings is positively associated with productivity growth in poor countries but not in rich countries.

International audience; For at least 5000 years, people have created, modified and used financial instruments, markets and intermediaries. Whether it was the use of money and debt to facilitate specialization and investment in Babylonia in 3000 BC (Van de Mieroop, 2005), the creation of market-traded securities in ancient Rome to mobilize capital for immense minig projets (Rostovotzeff, 1957; Malmendier, 2005).

In this review, we argue that the Schumpeterian growth paradigm, which models growth as resulting from innovations involving creative destruction, sheds light on several aspects of the growth process that cannot be properly addressed by alternative theories. We focus on three important aspects for which Schumpeterian growth theory delivers predictions that distinguish it from other growth models, namely, (a) the role of competition and market structure, (b) firm dynamics, and (c) the relationship between growth and development.

By operationalizing the notion of creative destruction, Schumpeterian growth theory generates distinctive predictions on important microeconomic aspects of the growth process (competition, firm dynamics, firm size distribution, cross-firm and cross-sector reallocation) which can be confronted using rich micro data. In this process the theory helps reconcile growth with industrial organization and development economics.

In this paper we introduce capital accumulation in the Schumpeterian growth framework. A first main result is that capital accumulation and innovation are both essential inputs to long-run growth. More innovation stimulates capital accumulation by raising the marginal product of capital. More capital accumulation stimulates innovation by raising the profits accruing to a successful innovator. This result runs counter to the conventional belief to the effect that innovation alone determines the long-run growth rate while capital accumulation determines only the level of the long-run growth path. In the second part of the paper we discuss the implication of merging capital accumulation and innovation-led growth for growth accounting.

The energy of patients and members of the public worldwide who care about improving health is a huge, but still largely unrecognized and untapped, resource. The aim of patient engagement is to shift the clinical paradigm from determining "what is the matter?" to discovering "what matters to you?" This article presents four case studies from around the world that highlight the proven and potential abilities of increased patient engagement to improve health outcomes and reduce costs, while extending the reach of treatment and diagnostic programs into the community. The cases are an online mental health community in the United Kingdom, a genetic screening program in the United Arab Emirates, a World Health Organization checklist for new mothers, and a hospital-based patient engagement initiative in the United States. Evidence from these and similar endeavors suggests that closer collaboration on the part of patients, families, health care providers, health care systems, and policy makers at multiple levels could help diverse nations provide more effective and population-appropriate health care with fewer resources.

The World Health Organization recommends that all countries develop a cancer control program. Qatar is the first country in the Gulf Cooperation Council to develop such a plan, with its National Cancer Strategy 2011-2016. Three years into implementation, meaningful progress has been made, particularly in reducing patient waiting times, creating a multidisciplinary approach to cancer treatment, and fostering international research collaboration. Challenges include attracting sufficient numbers of trained health care workers, reaching a diverse population with messages tailored to their needs, and emphasizing cancer prevention and early detection in addition to research and treatment. Qatar's example shows that best practices developed in North America, Western Europe, and Australasia can be assimilated in a very different demographic and cultural context when such approaches are tailored to local characteristics and circumstances.

This paper proposes and studies a theory of adaptive consumption behavior under income uncertainty and liquidity constraints. We assume that consumption is governed by a linear function of wealth, whose coefficients are revised each period by a procedure, which, although sophisticated, places few informational or computational demands on the consumer. We show that under a variety of settings, our procedure converges quickly to a set of coefficients with low welfare cost relative to a fully optimal nonlinear consumption function.

This paper analyses the relationship between trade liberalization and economic growth using a Schumpeterian framework of technological innovation and applies it to sector-level South African data. The framework examines direct and indirect effects of trade liberalization on productivity growth. Indirect impacts operate through a differential impact of trade liberalization on firms conditional on their distance from the international technological frontier. Results confirm positive direct impacts of trade liberalization. Results confirm also that the greatest positive impact of trade liberalization will be on sectors that are close to the international technological frontier and that experienced a low level of product market competition before liberalization.

Is more intense product market competition and imitation good or bad for growth? This question is addressed in the context of an endogenous growth model with “step-by-step†innovations, in which technological laggards must first catch up with the leading-edge technology before battling for techno- logical leadership in the future. In contrast to earlier Schumpeterian models in which innovations are always made by outsider firms who earn no rents if they fail to innovate and become monopolies if they do innovate, here we find: first, that the usual Schumpeterian effect of more intense product market competition (PMC) is almost always outweighed by the increased in- centive for firms to innovate in order to escape competition, so that PMC has a positive effect on growth; second, that a little imitation is almost always growth-enhancing, as it promotes more frequent neck-and-neck competition, but too much imitation is unambiguously growth-reducing. The model thus points to complementary roles for competition (anti-trust) policy and patent policy.

Expectations matter. Many economic and financial decisions depend on the perception of future incomes and prices. The evolution of expectations, and how correct they are over time, determines the stability of the system.

In this essay I argue that modern macroeconomic theory has fallen behind the practice of central banking. After briefly summarizing the current state of macro theory, I focus on what strikes me as the two most important developments in monetary policy in the last two decades – inflation targeting and dealing with financial crises. My analysis rejects the claims made by several authors to the effect that the proliferation of inflation-targeting regimes around the globe represents an application of well-established principles of macroeconomic theory. As for how monetary policy can promote financial stability, a subject on which most economists agree modern theory has been of little help, I argue that macroeconomics has lost touch with the fundamental raison d’etre of central banking. My diagnosis is that macroeconomic theory has become distracted by its preoccupation with states of equilibrium, a preoccupation that inhibits analysis of a market economy’s coordination mechanisms. I conclude with a plea for a more diverse ecology of approaches to macroeconomic theory, one that finds room for agent-based computational economics as well as for more conventional equilibrium theories.

This paper emphasizes the importance of considering the mechanisms that coordinate economic transactions in a decentralized economy, namely the role played by a self-organizing network of entrepreneurial trading firms, for theories aimed at guiding macroeconomic policy. We review a research program that aims to understand how, and how well, trading activities are coordinated in various circumstances by employing agent-based computational (ACE) models of stylized economies where these activities take place in a self-organizing network of markets created and operated by profit-seeking business firms. We discuss how such a research program can yield important policy-relevant insights, beyond those that can be offered by conventional dynamic stochastic general equilibrium (DSGE) models, into several macroeconomic phenomena including the emergence of monetary equilibria in a decentralized economy, the microfoundations of the multiplier process, the costs of a higher trend rate of inflation, and the role of the banking system in economic crises.

This paper revisits the relationship between health and growth in light of modern endogenous growth theory. We propose a unified framework that encompasses the growth effects of both, the accumulation and the level of health. Based on cross-country regressions where we instrument for both variables, we find that a higher initial level and a higher rate of improvement in life expectancy both have a significantly positive impact on per capita GDP growth. JEL classification codes: E20, I10, O40, J11.

David Colander has been writing about economic methodology for over 30 years, but he goes out of his way to emphasize that he does not see himself as a methodologist. His pragmatic methodology is applicable to what economists are doing and attempts to answer questions that all economists face as they go about their work. The articles collected in this volume are divided, with the first part providing a framework underlying Colander’s methodology and introducing Colander’s methodology for economic policy within that framework. Part two presents Colander’s view on the methodology for microeconomics, while part three looks at Colander’s methodology for macroeconomics. The book closes with discussions of broader issues.

Developing regional strategy is lacking in modern healthcare systems (Porter and Teisberg 2006).

L’article discute du programme de recherche dont Axel Leijonhufvud s’est fait l’avocat pour etudier le processus de coordination dans une economie de marche decentralisee. La recherche utilise une modelisation fondee sur le comportement des agents, une approche qui suppose des regles exogenes pour un comportement adaptatif. Cette hypothese assure, effectivement, leur autonomie aux agents, en leur permettant d’agir sans la supervision du modelisateur. Par opposition, les agents du modele d’equilibre avec anticipations rationnelles ont besoin d’etre informes de certaines caracteristiques de leur environnement, avant d’etre capables d’agir. L’article soutient aussi qu’une approche fondee sur le comportement des agents confere a l’individu plus d’intelligence que ne le fait l’approche classique en termes d’optimisation. Ceci parce que dans des situations ou les individus manquent de l’information qui leur permet de former des anticipations rationnelles, des regles simples sont plus robustes et permettent une adaptation plus rapide que les regles impliquees par la theorie bayesienne standard, qui sont fixees sur la base de croyances prealables. L’analyse met l’accent sur le role des firmes comme agents de coordination qui organisent les activites d’echange. Leur role dans l’analyse est analogue a celui du commissaire-priseur de l’analyse neo-walrasienne, mais ici ils font face a de reels couts en ressources et operent en situation de vraie incertitude. Les simulations montrent qu’un reseau d’entreprises specialisees dans le commerce peut emerger de l’autarcie quand les individus suivent de simples regles myopes. Les interactions entre entreprises commerciales et menages donnent lieu a un processus de multiplication entraine par la faillite des entreprises commerciales, qui peut parfois se produire en cascade. Enfin, l’analyse peut egalement etre utilisee pour illustrer de possibles effets destabilisateurs d’une flexibilite excessive des prix et des salaires ; en effet, quand l’economie est affectee par la faillite d’une entreprise commerciale, les ajustements de prix et de salaire sont de peu de secours pour retablir un etat coordonne, ce qui requiert l’entree d’une nouvelle firme et la creation de nouvelles relations commerciales, et non des ajustements de prix.

Edmund Phelps helped change the way we think about macroeconomic theory and policy, by introducing imperfect information and costly communication into the theory, and deriving their implications for the dynamics of inflation and unemployment.' Phelps treated macroeconomics as a social science, whose subject matter is not just the choices people make but how people interact in groups. His pioneering efforts in developing a formal theory of the coordination mechanisms governing interactions led the way to a new kind of macroeconomics, one that was based on the interplay between the actions and expectations of individual actors, instead of being based on postulated relationships between macro aggregates. Mainstream macroeconomics today projects a view of the economy that differs in important respects from Phelps's original vision. Whereas he portrayed economic interactions as being problematical and uncertain, leading to outcomes that intelligent people can adapt to but not anticipate, much of macroeconomics now is about the representative agent, content to interact with only himself and nature, or perhaps at arm's length with "the market" through an unspecified agency that calculates equilibrium prices and executes preharmonized transactions. And people are typically portrayed now as understanding completely, up to stochastic error with known distribution, all economic forces. Indeed, Phelps himself has changed his view on the significance of imperfect anticipation, having adopted a structural approach to unemployment that attaches only momentary importance to disappointed expectations as a driving force. Even so, macroeconomics today has a connection with microeconomic reasoning that it never did before Phelps and a handful of others transformed the subject, and many of the concepts that Phelps himself introduced while making these contributions in the 1960s and 1970s remain in

In this paper we show how moving from the neoclassical model to the more recent endogenous growth paradigm can lead to markedly different interpretations of the same growth accounting data. In neoclassical theory, even if between 30 and 70 per cent of the growth of output per worker in OECD countries can be 'accounted for' by capital accumulation, yet in the long run all of the growth in output per worker is caused by technological progress. Next, we develop a hybrid model in which capital accumulation takes place as in the neoclassical model, but productivity growth arises endogenously, as in the Schumpeterian model. The hybrid model is consistent with the empirical evidence on growth accounting, as is the neoclassical model. But the causal explanation that it provides for economic growth is quite different from that of the neoclassical model.

Whether Canadians talk about income inequality, regional growth or technological change, it is clear that economic growth is not uniformly spread across the country. Canada is not unique in this regard: modern economic growth theory shows that economies grow like mushrooms, not yeast. Instead of expanding uniformly like bread in the oven, economic growth pops up sporadically like mushrooms in the forest bed. Economic growth is a process of unpredictable “creative destruction” in which there will be winners and losers. The policy discussion around this kind of growth has often focused on the consequences for those left behind by change. It is often easier to identify those who lose from technological changes, while the winners are diffuse. Policymakers should also think more about harnessing uneven economic growth. From international trade to education policy, this Commentary shows how governments should think about the mix of targeted and economy-wide policies they should introduce to grow the Canadian economy. With increased international trade, Canadians as a whole will benefit not only from lower prices, but also from the more rapid productivity growth that will result from increased innovation by domestic firms as they seek to compete against foreign firms that can enter the Canadian market. Exchange-rate movements have many conflicting and uncertain effects on both the level and growth rate of domestic productivity. Since monetary policy cannot affect the real exchange rate in the long run, the Bank of Canada should continue to focus not on the exchange rate, but on its inflation target. Existing small business tax preferences are unlikely to promote productivity growth. Job creation is fostered not by small businesses per se, but by the young businesses that are the agents of creative destruction. The Canadian telecommunications industry is ideally suited to benefit from enhanced innovation and productivity growth in the event of a serious threat of entry by foreign firms large enough to enjoy significant scale economies. To take advantage of that possibility, the federal government should eliminate foreign ownership restrictions in the industry. Universities should also pursue independent research programs that foster basic science. Community colleges should focus on giving workers the skills they need to work with the most up-to-date technologies. With growth comes change, and it is time that Canadian policymakers think about how that change occurs and how best to use it for the benefit of Canadians.

This paper considers how competition can affect aggregate innovative activity through its effects on firms' decision whether or not to vertically integrate. A moderate increase in competition enhances innovation incentives and too much competition discourages innovative effort. These effects generate an inverted-U relationship between competition and innovation and between competition and the incentive to vertically integrate. Preliminary evidence finds that there is a nonlinear relationship between competition and the propensity of firms to vertically integrate. These results seem to be more consistent with the Property Right Theory of vertical integration than with the Transaction Cost Economics approach.

A theoretical foundation for the Keynesian multiplier process is derived from a simple model in which economic interactions are coordinated by a decentralized and self-organizing network of adaptive business enterprises. Deviation amplification arises from business failures that interrupt the flow of trading, and does not depend directly on lack of price-flexibility. Numerically the model produces almost the same hump-shaped impulse-response pattern as exhibited by GDP data in the United States.

This paper is part of a research program analyzing how competition affects aggregate innovative activity through its effects on firms’ organization. In previous work (Aghion et al., 2005a), we found an inverted-U shaped relationship between competition and innovation. Our explanation emphasized the “composition effect” of competition on the steady-state distribution of technological gaps across industries. Our focus here is on firms’ decisions whether or not to integrate vertically with their suppliers. We provide evidence of a U-shaped relationship between competition and vertical integration. Our explanation is based on the following idea: a moderate increase in product market competition will reduce a producer’s incentive to integrate by improving the outside options of her nonintegrated suppliers and hence raising their incentive to innovate. Too much competition will raise the producer’s incentive to integrate, however, by allowing nonintegrated suppliers to capture most of the innovation surplus. Finding a U-shaped relationship between competition and vertical integration sheds light on the debate over the “Transaction Cost Economics” (TCE) approach to vertical integration pioneered by Oliver Williamson (1975, 1985) versus the “Property Right Theory” (PRT) approach developed by Sanford Grossman and Oliver Hart (1986) and by Hart and John Moore (1990). According to the TCE approach, vertical integration is a way for contracting parties involved in a specific relationship to limit ex post bargaining inefficiencies due to holdup and thereby minimize the loss in ex ante investment that would result from it. This approach thus predicts a positive correlation between vertical integration and the degree of relation specificity. According to the PRT approach, the ownership structure will affect not so much the ex post bargaining efficiency as the relative bargaining powers of the (two) contracting parties, and therefore their relative ex ante investment incentives. Thus, while vertical integration should enhance both parties’ investments positively in the TCE approach by reducing the extent of ex post inefficiency, in the PRT approach ownership by one party, say the buyer, will enhance the buyer’s ex ante incentives at the expense of the seller’s, as it enhances the buyer’s bargaining power ex post at the expense of the seller’s. Thus, the TCE approach predicts that increased competition on the producer’s (or supplier’s) market, which reduces the overall degree of asset specificity, should therefore reduce the need for vertical integration in order to preserve ex ante investment incentives by either party. On the other hand, as we show below, the PRT approach allows the U-shaped relationship between vertical integration and competition that we find empirically. † Discussants: Sam Kortum, University of Minnesota; Mark Duggan, University of Maryland; Joel Waldfogel, University of Pennsylvania; Shane Greenstein, Northwestern University.

Am odel offiat money is constructed in which spatial separation and the logistics of communication are made explicit as in search theory, but in which exchange is organized by profit-seeking business enterprises as in all market economies. Firms mitigate search costs by opening shops that are easily located. The model endogenizes the number of shops and which objects are traded in each shop. It permits the double coincidence of wants and deals easily with divisible commodities. Equilibria may exist in which fiat money is used as a universal medium of exchange. When such an equilibrium exists, fiat money is essential, in the sense that it is the universal medium of exchange in any efficient network of shops. The model provides a foundation to cash-in-advance theory, without specifying in advance that one object will be used as the universal medium of exchange.

Many economists have argued that the observed increase in wage inequality in developed economies over the past 30 years is due to skill-biased technical progress. In this paper we put forward a somewhat different technology-based argument, namely that the increased inequality was caused by technical change linked to the pervasive innovation wave associated with the New Economy. This technical change was not skill-biased in the usual sense, but rather raised the reward to adaptability. This alternative approach based on the notion of ‘general-purpose technology’ can shed light on a number of outstanding puzzles on the evolution of wage inequality both between and within educational groups.

I construct and analyse a simple general equilibrium model with an active credit market in which borrowers and lenders form expectations adaptively. Except for expectation formation the model is a small open economy variant of the standard Lucas (1978) tree model. To abstract from institutional detail there is just a representative investor/borrower and a representative lender (rest of the world), both of whom are learning from experience. The point is to show that even in this fairly standard model financial crises can occur, and to examine the conditions, with respect to policy, institutions and other aspects of the environment, that affect the likelihood of crises in the model.

A multicountry Schumpeterian growth model is constructed. Because of technology transfer, R&D-performing countries converge to parallel growth paths; other countries stagnate. A parameter change that would have raised a country's growth rate in standard Schumpeterian theory will permanently raise its productivity and per capita income relative to other countries and raise the world growth rate. Transitional dynamics are analyzed for each country and for the world economy. Steady-state income differences obey the same equation as in neoclassical theory, but since R&D is positively correlated with investment rates, capital accumulation accounts for less than estimated by neoclassical theory. (JEL E10, O40)

A model of decentralized markets is studied, in which transactors follow simple adaptive rules. Transactions are coordinated by specialist trading firms that bear the costs of market disequilibrium. Starting from an initially autarkic situation in which none of the institutions that support exchange exist, computer simulation shows that for a wide range of parameter values a fully developed market economy will emerge spontaneously. Moreover, in virtually every case where a market economy develops, one of the commodities traded will emerge as a universal medium of exchange, being traded by every firm and changing hands in every act of exchange.

This paper analyses how a General Purpose Technology (GPT) diffuses throughout the various sectors of an economy. The model outlined in this paper can account for a number of empirical observations: in particular, the existence of delays followed by acceleration phases in the experimentation and implementation of a new GPT, and the occurrence of productivity slow-downs and wage inequality increases during the acceleration phase of the logistic diffusion curve.

This paper presents a Schumpeterian endogenous growth model in which a steady state exists with a constant growth rate even though population and the inputs to R. & D. are growing. The scale effect of rising population is nullified by product proliferation that fragments the growing demand for intermediate prodcuts, thus preventing the reward to any specific innovation from rising with population. All the ususal comparitive statics results of Schumpeterian growth theory are valid, including the positive effect of R. & D. subsidies on growth.

We study capital accumulation and innovation as determinants of long-run growth by adding capital to our earlier model of creative destruction. No special functional forms are imposed on the aggregate production function. The equations describing perfect foresight equilibrium are identical to those of the augmented Ramsey-Cass-Koopmans model, except that the rate of technological change is a function of the stock of capital per effective worker. Contrary to previous models, a subsidy to capital accumulation will raise the long-run growth rate. The key assumption is that capital is used in R and D. Some evidence is presented on the capital intensity of R and D.

Recent empirical work has pointed to a positive correlation between product market competition and productivity growth . In this lecture we try to reconcile this evidence with the Schumpterian growth paradigm. Three alternative explanations are successively considered, respectively based upon agency considerations, the tacit nature of knowledge, and the decomposition of R and D activities into research and development. Journal of Economic Literature Classification Numbers: O4, D4.

Schumpeterian growth theory has .operationalized. Schumpeter’s notion of creative destruction by developing models based on this concept. These models shed light on several aspects of the growth process that could not be properly addressed by alternative theories. In this survey, we focus on four important aspects, namely: (i) the role of competition and market structure; (ii) firm dynamics; (iii) the relationship between growth and development with the notion of appropriate growth institutions; and (iv) the emergence and impact of long-term technological waves. In each case Schumpeterian growth theory delivers predictions that distinguish it from other growth models and which can be tested using micro data.

A thought-provoking book by Boldrin and Levine (2009) argues that patents are always detrimental to competition and thereby to innovation. To provide support to their analysis these two authors built a growth model where innovation and growth can occur under perfect competition. The model is then used to argue that monopoly rents and therefore patents are not needed for innovation and growth: on the contrary, patents are detrimental to innovation because they reduce competition. That reducing competition can be detrimental to innovation, is a sound idea which could not be accounted for by the new growth models of Romer (1990) and Aghion and Howitt(1992). In these models, competition is detrimental for innovation and growth for exactly the same reason for why patent protection (IPRs) is good for innovation: namely because competition reduces (post innovation) rents whereas patent protection increases these rents. In this note we argue that this latter conclusion is not robust to considering more elaborated models of competition and innovation. In particular we show below that in a step-by-step innovation model, where a laggard firm needs to catch up with the current leader in its sector (and therefore go through a neck-and-neck stage) before it could later become a leader itself, not only can competition enhance innovation as in Boldrin and Levine’s model, but also and perhaps more importantly competition and IPRs become complementary policies. Why? Because the incentive to innovate depends on the gap between the post-innovation rent and the pre-innovation rent, call it the net innovation rent. And typically, what competition does is to lower pre-innovation rents, and also maybe post-innovation rents, although the difference between postand preinnovation rents may still increase with competition, and all the more so with stronger patents to protect post-innovation rents. In contrast, in our earlier Schumpeterian models where innovations are made by outsiders who then leapfrog incumbent firms, the pre-innovation rent is always equal to zero, thus all ∗Harvard University †Brown University ‡University of Cologne

Technological and scientific research are crucial to long-term economic growth. Canadians are three times as rich today as 50 years ago thanks to new products and processes. The source of technological innovation is research and development (R&D), most of which takes place in the private sector of the economy. University research, however, is the source of the basic building blocks of many of the core sectors of the economy, in everything from information technology to pharmaceuticals to much more. It is crucial for economic growth that the innovations that occur at Canadian universities get commercialized and find their way into the rest of economy. Canadian universities lag behind their US counterparts in generating technology transfer between academic research and companies. With innovation and productivity at the forefront of the Canadian public policy agenda, it is crucial that governments create the right incentives for university researchers to pursue research that can eventually be commercialized. Rather than governments directing researchers to pursue business-related research, the overarching priority for Canada should be to attract the best researchers in the world. Though it may seem paradoxical, the evidence supports the view that the greatest benefit to society will come from scientists for whom practical utility and individual financial reward are minor considerations. The best way to attract such scientists to Canada is to redirect our research support towards the problems that are most challenging from a scientific point of view, not towards those that bureaucrats view as most likely to lead to commercial success. Although the federal and provincial governments are taking steps to encourage the commercialization of research, they should go further by: • requiring that all federally funded research papers appear in open access online repositories; • developing a template available to all university researchers that outlines the terms of commercialization – such as intellectual property rights or revenues – between universities, researchers and their business partners; and • building on recent reforms to the National Research Council that make it more business-oriented, but with the eventual goal of making it a pan-Canadian technology transfer institution, leaving federal funding for research to granting organizations. Since business R&D has been falling as a share of the Canadian economy, and is a critical input to the commercialization of university research, it is also important that Canadian governments take measures to encourage Canadian businesses to invest in the commercialization process.

Schumpeterian growth theory has "operationalized" Schumpeter’s notion of creative destruction by developing models based on this concept. These models shed light on several aspects of the growth process that could not be properly addressed by alternative theories. In this survey, we focus on four important aspects, namely: (i) the role of competition and market structure; (ii) firm dynamics; (iii) the relationship between growth and development with the notion of appropriate growth institutions; and (iv) the emergence and impact of long-term technological waves. In each case Schumpeterian growth theory delivers predictions that distinguish it from other growth models and which can be tested using micro data.