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Chapter 10. The main challenges for macroeconomic theory are to explain the long-term economic growth and the short-term business fluctuations observed in the real world. This book offers an introduction to advanced economic analysis of these issues and seeks to bridge the gap between the typical intermediate macroeconomics text and the more advanced texts used at the graduate level. Each chapter ends with an extended summary highlighting the main points to be learned and is followed by a number of exercises intended to deepen the student''s understanding of the material covered. Chapter 10: In the previous chapter we argued that technological progress results from ideas, and that ideas are the intended output of research and development (R&D). However, we sidestepped an explicit formulation of the economics of ideas. The new feature in the present chapter is that we will face the public goods nature of ideas explicitly and develop the somewhat subtle microeconomics associated with the production of ideas. This should lead to a better understanding of the sources of technological progress and economic growth. A main conclusion will be that the macro model of Chapter 9 was an appropriate short cut in the sense that its steady state coincides with the steady state of the microfounded model set up in this chapter. There will be one difference, though: in this chapter, the R&D share will be endogenous, that is, it will be explained by the model''s basic behavioural and technical parameters. This is a very important further step, given the crucial impact of the R&D share on the growth process that we found in Chapter 9.