Beginning in Chapter One, I have been constructing the argument and presenting evidence as to why the major disruption in the economy is a shift from markets governed by competitive rules based on productivity to coordination by interorganizational networks. Nor have I been the only one. A new group of evolutionary economists in Britain and Scandinavia (Archibugi and Lundvall 2001; Fagerberg 2003; Metcalfe 2002)— who stress the idea of the learning economy— have been attempting to lay the foundation for a new economic growth theory that we can build upon. It starts with major changes in the consumer values of postmodern individuals, spurred by the increasing importance of science in many products and services and facilitated by new organizational forms and interorganizational networks. The need to recognize these new competitive rules is compounded by the growing importance of globalization in trade with less advanced economies not only able to produce standardized products and services at lower cost but also to compete in high- tech sectors. Therefore, advanced industrialized economies now need to quickly develop radical innovations to protect their employment, spur economic growth, and ensure a more equable distribution. What is to be done?

Before answering this question, we need to understand why the neoclassical model has been so successful for several centuries (starting with Smith 1776).1 The first section reviews the familiar tenets of this model including some important updates by Romer (1986, 1990; Warsh 2006). I can appreciate how difficult it is to give up such a success story, especially with a Nobel Prize now attached to it.2 In times of crisis, it is normal for many segments of the population to look back to the past for inspiration rather than to discern that the sources of current difficulties emanates from these same institutional patterns and models of thinking. Individuals raised in traditional localities are the most prone to having this reaction.