building, etc. because institutions no longer supported entrepreneurship. After the
Ming dynasty replaced the Mongol dynasty in the year 1368, the earlier interested
and enlightened emperors did encourage technological progress; but, one decision
maker was enough to deal a death assault. During the later Ming period, the rulers
clearly preferred a stable and easily controllable environment, where innovators and
carriers of foreign ideas were looked upon as potential troublemakers to be
discouraged.
Although such rulers were equally present in Europe, no single one controlled the
whole continent. This enabled innovators to move from one area to another. This
connects to the Renaissance period where Columbus was born in Italy, lived and
married in Portugal and was financed by Spain for his voyage to discover a westward
route to the East Indies (India, etc).
Between 1870 and World War II, the income of Japan stagnated around 25% of
U.S. income. Following significant reforms set up after the war, Japan’s current GDP
per capita is nearly two thirds that of USA.
Argentina has shown a reverse trend. Although just before the twentieth century,
it was as rich as most western European countries, Argentina’s current GDP per
capita is barely 20% that of USA, the decline being largely attributed to disastrous
policy reforms.
2.3.6 Infrastructure v/s Growth
Canning and Bennathan (2000) and Lucas (1988) studied the complementarity and
substitutability pattern between inputs into the production function. They found that
(1) individually, different types of infrastructure have rapidly diminishing returns
(2) there is, thus, no evidence of growth being led just by infrastructure
(3) infrastructure is a strong complement to both physical and human capital
(4) there is no valid reason for increasing infrastructure availability, just for its own
sake
(5) the rate of return with infrastructure projects follow a marginal pattern – highest
when infrastructure shortages are present with respect to their levels of human
and physical capital, and in countries where infrastructure construction costs are
low (cf. Samli (2011) in Sect. 2.1.1).
2.4 The Process of Production
2.4.1 Classifications
Public sector departments or business firms process the available resources into
goods or services to benefit mankind by changing a natural material into a more
44
2 Infrastructure and Economic Growth
Ming dynasty replaced the Mongol dynasty in the year 1368, the earlier interested
and enlightened emperors did encourage technological progress; but, one decision
maker was enough to deal a death assault. During the later Ming period, the rulers
clearly preferred a stable and easily controllable environment, where innovators and
carriers of foreign ideas were looked upon as potential troublemakers to be
discouraged.
Although such rulers were equally present in Europe, no single one controlled the
whole continent. This enabled innovators to move from one area to another. This
connects to the Renaissance period where Columbus was born in Italy, lived and
married in Portugal and was financed by Spain for his voyage to discover a westward
route to the East Indies (India, etc).
Between 1870 and World War II, the income of Japan stagnated around 25% of
U.S. income. Following significant reforms set up after the war, Japan’s current GDP
per capita is nearly two thirds that of USA.
Argentina has shown a reverse trend. Although just before the twentieth century,
it was as rich as most western European countries, Argentina’s current GDP per
capita is barely 20% that of USA, the decline being largely attributed to disastrous
policy reforms.
2.3.6 Infrastructure v/s Growth
Canning and Bennathan (2000) and Lucas (1988) studied the complementarity and
substitutability pattern between inputs into the production function. They found that
(1) individually, different types of infrastructure have rapidly diminishing returns
(2) there is, thus, no evidence of growth being led just by infrastructure
(3) infrastructure is a strong complement to both physical and human capital
(4) there is no valid reason for increasing infrastructure availability, just for its own
sake
(5) the rate of return with infrastructure projects follow a marginal pattern – highest
when infrastructure shortages are present with respect to their levels of human
and physical capital, and in countries where infrastructure construction costs are
low (cf. Samli (2011) in Sect. 2.1.1).
2.4 The Process of Production
2.4.1 Classifications
Public sector departments or business firms process the available resources into
goods or services to benefit mankind by changing a natural material into a more
44
2 Infrastructure and Economic Growth