This final chapter (before the conclusions) deals with the role of education, in particular with issues: (i) knowledge as a public good that produces externalities; (ii) the “low-skill, low-tech map”; and (iii) education, unemployment, and structural change.

In Solow's (1956) neoclassical model, saving rates do not affect longrun growth. The latter is determined by the exogenously given rate of technological progress. Diminishing returns to capital in this model mean that higher savings lead to a decrease in interest rates to the point where the economy saves to keep up with technological progress. Therefore, no matter what the incentives to save are, long-run growth will be at the rate of technological progress. The key issue here is whether diminishing returns to capital do set in. The so-called new theories of growth developed since the 1980s claim that this is not the case if one considers capital in a broader sense. One possible cause is that people have incentives to accumulate human capital, e.g., knowledge of new technologies that economize on labor.