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Unformatted text preview: The Global Economy and World Politics
Professor Edward Weisband Lecture 5: Sectoral Synergy, Invention, Innovation, Value Addedness, and Productivity First Cut Specialization Across Economic Sectors Specialization occurs across economic sectors Through applications of knowledge and technology Aimed at conversion dynamics By which some sets of economic values are transformed into outputs representing sets of higher economic values Sector to sector, industry to industry, service to service Invention: the creation of new products, product lines, and services Innovation: the application of new knowledge in the production of more efficient products, product lines, and services Invention, Innovation, and Productivity The dynamics of invention and innovation Promote economic productivity and growth within national economies By allowing those economies to apply inventions and innovations in one economic sector or industry To promote GDP growth across other sectors, industries, or services Conversion Dynamics, Invention, and Innovation The key to economic growth and prosperity is The ability of a national economy to generate inventions and to apply them in innovative ways Designed to permit conversion dynamics that transform specialized capital inputs into higher economic values Within industries and services Conversion dynamics that incorporate invention and innovation Across diversified economic sectors Must operate synergistically To promote higher levels of productivity--WHY? The Links Between Productivity and Sectoral Synergy Economic growth and productivity require sectoral diversification combined with sectoral synergy Because only through sectoral diversification and synergy Can specialized capital inputs Become mutually supportive Across and within economic sectors This economic intermeshing allows advances in one sector, industry, or service To "spill over" into others In ways that promote profitability and reduce opportunity costs associated with expanding production possibilities Sectoral Synergy While sectoral diversification is the measure of specialization across economic sectors within a national economy Sectoral synergy refers to linkages among those economic sectors Sectoral synergy denotes the extent to which Advances in specialized capital inputs in one sector Promote advances in other sectors, industries, and services Example: The advances in information technologies Revolutionizes agricultural and manufacturing industries Thus increasing worker productivity and the overall value of economic outputs Sectoral Diversification and Synergy & Invention and Innovation: Travels of a T-Shirt in the Global Economy
Sectoral Diversification + Invention + Innovation + Sectoral Synergy = Productivity Primary: Farming Cotton Secondary: Manufacturing Farm Equipment Tractors Textiles Tertiary: Services Insurance Lobbying Transportation Quaternary: R & D University Research Human Capital Cotton Gin Spinning Jenny Steam engine Internal combustion engine Chemical freezing Pesticides Fertilizers Industrial textiles Industrial agriculture Tractors Pickers Production of cotton seed oil and bran Cotton gin promotes industrialization in textiles Internal combustion engine promotes mechanization of agriculture Production of cotton seed oil revolutionizes food production Greater output Fewer farm workers Reduced risk More control over final harvests Greater profits from more diversified outputs The Conversion Process of Specialized Capital Inputs The history of economic growth and increasing productivity reflects Successive technological waves of conversions Of specialized sectoral capital inputs Into increasingly more highly valued economic outputs Research and Technological DevelopmentChemical Freezing, Genetic Modifications, etc. ServicesLobbying, Insurance, and Transportation ManufacturingTextile and Farming Equipment AgricultureCotton Farming Second Cut Value Addedness as a Measure of Specialized Capital Inputs Productivity defines a relationship between specialized capital inputs and GDP outputs How do we measure the quality of specialized capital inputs? Answer: Value Addedness Value Addedness is a measure of the specialized nature of capital inputs into the conversion processes that generate GDP output The more specialized the capital inputs the higher the levels of value addedness Value Added as a Scale of Measure What does value added mean? Value added is a measure of the inventive and innovative capacities Of specialized capital inputs Into the conversion dynamics Necessary for GDP growth and efficiency Value addedness measures Specialized capital inputs In the production of goods and services Across and within diversified and synergistic economic sectors Value Addedness, Invention, and Innovation Because knowledge and technology advanced by invention and innovation Value addedness is a measure of the extent to which invention and innovation operate as capital inputs In the generation of GDP outputs on a competitive basis Sector to Sector Industry to Industry Economy to economy Thus we speak of conversion dynamics Designed to promote national economic productivity By increasing the value addedess of GDP outputs Based on sectoral diversification Combined with sectoral synergies from primary to quaternary Productivity Up Scales of Value Addedness
Quaternary Tertiary Secondary Primary
Sectoral Diversification Across Synergistic Industries and Services C O N V E R S I O N D Y N A M I C S GDP Outputs At Increasing Levels of Value Addedness Post-WWII Japanese Production and Increasing Economic Competitiveness
GDP Outputs At Increasing Levels of Value Addedness Luxury Cars & Hybrids Automobiles Cameras Bicycles C O N V E R S I O N D Y N A M I C S Tin Cans (Tuna Fish, Sardines, etc.) Sectoral Diversification Across Articulted Industries and Services The Bottom Line in Productivity: The Linkage Between Inputs to Outputs Productivity is a function Of value added capital inputs That reflect productivity standards That apply the introduction of new technologies Through invention and innovation Value addedness thus measures the extent to which Inventive and innovative capital inputs Contribute to competitiveness of GDP outputs Measured in terms of Profitability Efficiency Sectoral Diversification & Synergy Intensifying Productivity Specialized Capital Inputs At Higher Levels of Value Addedness Competitiveness ...
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- Spring '08