Economic Development and the Accumulation of Know-how

Abstract

Economic development depends on the accumulation of know-how. The theory of economic growth has long emphasised the importance of something called technical progress, but what that is, and how it grows has not been well elucidated. Technical progress is really based on three separate aspects: tools, or embodied knowledge, recipes or blueprints or codified knowledge and know-how or tacit knowledge. While tools can be shipped and codes can be e-mailed, know-how exists only as a particular wiring of the brain and as such it is hard to move around. That is why the growth of know-how can easily become the binding constraint on the development process.