How Learning Creates Growth

Joseph E. Stiglitz and Bruce C. Greenwald explain how the key to economic innovation and prosperity lies within each of us — and within entire societies
Sharon Kahn |  May 20, 2015
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From Roman days to around 1820, over 90 percent of the world’s population ate only staples such as wheat, rice, and other grains. They lived next to their animals and received medical care no better than what their animals got. Their only entertainment was procreation.

But today, almost all people live better than the kings of previous years, said Bruce C. Greenwald, coauthor, along with Joseph E. Stiglitz, of “Creating a Learning Society: A New Approach to Growth, Development, and Social Progress” 2015, Columbia University Press). The authors were given the George S. Eccles Award for Excellence in Economic Writing in May and appeared at a talk organized by the Chazen Institute.

The book postulates that higher living standards became possible not just because new technologies ushered in by the industrial revolution increased productivity but because people learned to think differently. Individuals and companies decided that following best practices was no longer enough. Instead, every year, mindsets shifted to the idea that economic progress should be better than what was achieved in the previous year. Growth became about “improvement, not optimization,” said Stiglitz.

Their book acknowledges that such thinking required human beings to continually learn new methods and develop new technologies and practices. Learning became a shared endeavor that had a cascading effect as advances in one sector spilled over to adjacent industries and from one country to the next.

Education versus Learning

Stiglitz and Greenwald emphasize that formal education only lays the groundwork for learning. “The book doesn't call for creating an education society, but a learning one,” said Greenwald. Instead of cramming students’ heads with knowledge over the course of a few years, they said, learning must be a lifelong, hands-on pursuit.

“You can’t make steel by reading a book,” Stiglitz elaborated. Instead, the authors champion learning by doing, a phrase coined in 1962 by the economist Kenneth Arrow. (“Creating a Learning Society” is actually an extension of the Kenneth J. Arrow Lecture Series the co-authors headed at Columbia.)

Policy Priorities

The book has enormous policy implications, according to the International Monetary Fund. Since markets don't embrace long-term policies that promote learning — much less create a noncompetitive environment conducive to knowledge sharing — it’s up to governments and institutions to prepare the groundwork for learning, say the authors.

Developed countries and emerging markets alike can set the stage for a learning society in certain areas, including:

  • Assuring the basics: A social safety net frees the populace to concentrate beyond the basics to pursue learning.
  • Information accessibility: Rather than erect a walled society, governments should encourage the free flow of information that leads to learning spillovers.
  • Research and development: Although not advocating for government research, the authors said legislation and policies can encourage investment and R&D. One particularly tricky area is intellectual property legislation. “Patents should provide an incentive without stifling the exchange of information,” Stiglitz said. “Stronger intellectual property regimes may be associated with a slower pace of innovation.”
  • Trade: Although governments should not get so specific as to favor individual industries, both developed and emerging economies can change their competitive stance through broad trade barriers or managing the exchange rate. Imports depress the learning curve since no domestic production is taking place. On the other hand, exports provide a monetary incentive to become more productive and increase profit margins. An exception may involve trade blocs such as NAFTA or the European Union, which create a larger playing field for learning.
  • Education: Although a learning society requires more than a formal education, the authors also called for a better model at the primary and secondary levels, particularly in the United States.

In fact, Greenwald called for the US government to quit meddling in education. “America has the best university system in the world mainly because government has left educators to decide on the approach to college. Elementary and secondary education policy is determined not by learning models but by what's acceptable.” His formula for increasing the effectiveness of early education is “wall-to-wall charter schools and vouchers.”

Stiglitz noted that society has evolved beyond the agricultural considerations which shaped US education 150 years ago. “If we were designing an education system from scratch, would we give students three months off in the summer? No one would design it that way now.”

Indeed, that lesson holds true across all areas of learning, according to the authors. Dynamic conditions call for constant revision of the way things are done. In an era of digital access and global political change, the case for ongoing learning models is more crucial than ever.

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