In an interview, Paul Romer noted that in the traditional theory of international trade, trade between England and Portugal benefits both countries because the countries will have a comparative advantage in producing different goods. Romer notes that in the new growth theory, “if there’s more people—even more people that are remote from me: I don’t know all of them, I don’t like ’em—it may still be good to have them around because . . . they might discover something valuable.” And he draws this conclusion: “And the usual story about gains from trade says it’s good that Portugal exists. The new insight is that ‘It’s good that the Portuguese exist.’”

a. Briefly explain Romer’s reasoning.

b. Is the existence of the Portuguese more important in the new growth theory or in Robert Solow’s original growth model? Briefly explain.