Exhibit 1

Evolution of the Production Function

Exemplar Economy

Leading Sector

Production Function

Accreting Factors of Production

Spain

16th, 17th to mid-18th centuries

Primary

farming, fishing, forestry & mining

Y = f (K)

K = gold, silver, land & slave labour

England

late 18th to mid-19th centuries

Secondary

manufacturing

Y = f (K, L)

K = manufacturing plant & equipment

L = division & specialization of free labourers

U.S.A.

late 19th to mid-20th century

Tertiary Services

communication, energy, financial, transportation

Y = f (K, L, T)

K = private financial capital & limited liability corp.

L = organized labour

T = disembodied, endogenous

Japan

mid- to late 20th century

 

Government

 

Y = f (K, L, T) G

K = public & private capitalization

L = automated labour

T = embodied, exogenous

G = government coordinates public & private sectors through macro- & micro-economic or industrial policies

Global

late 20th & early

21st centuries

Quaternary

Marketable Knowledge = Intellectual Property Rights

 Copyright, Patent, Registered Industrial Design, Trademark, ‘Know-How’, Trade Secrets, Sui Generis Rights

Y = f (K, L, T P, O, D) G

K = knowledge capital

L = knowledge workers

P = physical technology

O = organizational technology

D = design technology

G = national innovation system to ensure rapid commercial exploitation of  academic/pure research

 

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