4.6 Economic Development as Self-Discovery

Self-Discovery Theory

The idea that countries develop by discovering which industries or goods they can produce efficiently and competitively.

Entrepreneurial Experimentation

The process of testing new products or production methods to identify profitable opportunities.

Discovery Externality

When one firm’s discovery of a new profitable activity benefits others, who can imitate the innovation without bearing the initial cost.

Information Externality

When knowledge generated by one firm or individual spills over to others, creating social benefits greater than private returns.

Industrial Policy

Government strategies that support key industries to promote self-discovery and structural transformation.

Institutional Innovation

Creating or reforming institutions (laws, regulations, incentives) to foster entrepreneurship and innovation.

Public Support for Experimentation

Government programs or policies that reduce the risks entrepreneurs face in testing new ideas.