Tales of Increasing Returns

  Read Chapter 8, “Tales of Increasing Returns.” From Easterly W., The Elusive Quest for Growth. MIT Press, 2001. Referring to evidence from the chapter, answer the following questions: 1. How is knowledge different from physical capital? What are the special characteristics of knowledge that make it so useful for growth? How can knowledge help a country grow? Make sure to use examples from the chapter to support your answers. 2. Describe what the chapter means by “traps” by the author. Why “traps” do occur in the economy? What are some government policies that could be used to alleviate the effects of “traps”. Please provided a detailed description of these policies.