THE ACCUMULATION OF WEALTH AND THE CYCLICAL GENERATION OF NEW TECHNOLOGIES - A SEARCH THEORETIC APPROACH

In this paper sustained technological progress results from the feedba ck between technical change and the accumulation of wealth. The produc tion technology is affected by a productivity factor which ensues from research and development. The research and development process is des cribed as a sequential search problem in which optimal decisions depen d on current levels of wealth and technology. The resulting growth pat h displays invention cycles. A discovery of a significant technologica l improvement at the end of a ''search'' phase is followed by periods of growth without search. Eventually sufficient wealth is accumulated, research and development resumes and a new cycle begins.