Excerpt: “The hero of the second half of Mr Warsh’s book is Paul Romer, of Stanford University, who took up the challenge ducked by Mr Solow. If technological progress dictates economic growth, what kind of economics governs technological advance? In a series of papers, culminating in an article in the Journal of Political Economy in 1990, Mr Romer tried to make technology “endogenous”, to explain it within the terms of his model.

Excerpt: “How do you weigh the economic benefit of the thoughts in Bill Gates' head? The sand on a beach can be measured, but how do you calibrate the value of the idea that turned those silica grains into silicon microchips? Though they sound like questions from a Mensa parlor game, they’re actually from the work of economist Paul Romer, and his answers may just revolutionize the study of economics. A sage for the silicon age, Romer is upgrading the dismal science to keep pace with the digital revolution.

Excerpt: “Ideas are different. Ideas have special properties,” Romer says. While things such as land, machinery and capital are scarce, Romer argues that ideas and knowledge build on each other and can be reproduced cheaply or at no cost at all. In other words, ideas don’t obey the law of diminishing returns – where adding more inputs like labor, machinery or money eventually results in the trailing away of additional output.