Investing in Knowledge: Knowledge, Human Capital and Institutions for the Long Run Growth

The essay aims at arguing that investing in knowledge is one of the main cause of the deep transformations in the structure of modern economies and also a strategic engine for the long run growth. In the recent years a clear long-standing trend in the OECD area have emerged, which is reflected in the expansion of knowledge-related investments and activities, thus transforming the industrial economies into knowledge-based economies. This paper, which is sympathetic with a Schumpeterian view that looks at the modern economic growth as a knowledge-driven process, shows that long run growth is a complex process that cannot be explained by one factor alone. Whereas in the Schumpeterian economy technological progress is the driver of economic growth, so goods are produced under conditions of substantial increasing returns to scale, and innovation becomes the principle source of wealth, in this work the former view is enriched with the idea that institutions have an important role to play in the creation and diffusion of new knowledge and in the process of growth, even if it is difficult to establish ex ante the nature of these relations. The topics of the paper concern scientific and technological knowledge and its relationship with human capital, the issue of open science and the necessary setting of appropriate institutions for knowledge creation. Moreover, an examination of OECD data related to investment in knowledge in OECD countries, with particular attention to human capital, is carried out to evaluate their economic performances. In such a context, the need of a long term growth policy for the EU economies consistent with the Lisbon Agenda is set forth; therefore the paper tries to suggest some proposals for a long term growth policy of the EU economies in this direction.