Ricardo Hausman: Tacit Knowledge Is a Key Component of Productivity; That Means Prosperity Depends on Allowing Skilled Immigration--Especially into Poor Countries

My graduate school contemporary Lant Pritchett interviews Ricardo Hausman. In a 5-minute video, Ricardo talks about how "technology" as measured by total factor productivity (or purified TFP) is really a combination of: 

  1. knowledge embodied in machines
  2. knowledge embodied in books or digital files
  3. knowledge embodied in human brains only in a nonconscious, tacit way

That means that to improve "technology," one should allow into one's country not only advanced machines, books and digital information, but also skilled individuals who have have important tacit knowledge. Remarkably, many poor countries are very restrictive in allowing skilled immigration. Ricardo argues that this not only hurts economic growth, it exacerbates inequality. 

I have a closely related blog post that you might also be interested in:

I should also mention that the YouTube page the video above is on has a wealth of other intriguing videos.