Economic growth

Economic growth

Overview

In economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity
Productivity
Productivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it. Usually this ratio is in the form of an average, expressing the total output divided by the total input...

, which lowers the inputs (labor, capital, material, energy, etc.) for a given amount of output. Lowered costs increase demand
Demand
- Economics :*Demand , the desire to own something and the ability to pay for it*Demand curve, a graphic representation of a demand schedule*Demand deposit, the money in checking accounts...

 for goods and services. Economic growth is also the result of population growth and of the introduction of new products and services.

Economists distinguish between short-run economic changes in production and long-run economic growth.
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In economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity
Productivity
Productivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it. Usually this ratio is in the form of an average, expressing the total output divided by the total input...

, which lowers the inputs (labor, capital, material, energy, etc.) for a given amount of output. Lowered costs increase demand
Demand
- Economics :*Demand , the desire to own something and the ability to pay for it*Demand curve, a graphic representation of a demand schedule*Demand deposit, the money in checking accounts...

 for goods and services. Economic growth is also the result of population growth and of the introduction of new products and services.

Economic growth versus the business cycle


Economists distinguish between short-run economic changes in production and long-run economic growth. Short-run variation in economic growth is termed the business cycle
Business cycle
The term business cycle refers to economy-wide fluctuations in production or economic activity over several months or years...

. Briefly, the business cycle is made up of booms and busts in production that occur over a period or months or years. The most recent example of a business cycle was the global boom starting in approximately 2002 that ended with the bust of 2008–9. As discussed in the article on the business cycle
Business cycle
The term business cycle refers to economy-wide fluctuations in production or economic activity over several months or years...

, economists attribute the ups and downs in the business cycle to a number of causes including: overproduction of goods followed by large inventories that can't be readily sold, overexpansion of credit resulting in piling up of debt that inhibits purchasing; speculative bubbles, and shocks—like wars, political upheavals, and so on.

In contrast, the topic of economic growth is concerned with the long-run trend in production due to basic causes such as industrialization. The business cycle moves up and down, creating fluctuations in the long-run trend in economic growth.

Economic growth per capita


Often, the concern about economic growth focuses on the desire to improve a country's standard of living
Standard of living
Standard of living is generally measured by standards such as real income per person and poverty rate. Other measures such as access and quality of health care, income growth inequality and educational standards are also used. Examples are access to certain goods , or measures of health such as...

—the level of goods and services that, on average, individuals purchase or otherwise gain access to. It should be noted that if population has grown along with economic production, increases in GDP do not necessarily result in an improvement in the standard of living. When the focus is on standard of living, economic growth is expressed on a per capita basis.

Economic growth per capita is primarily driven by improvements in productivity
Productivity
Productivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it. Usually this ratio is in the form of an average, expressing the total output divided by the total input...

, also called economic efficiency. Increased productivity means producing more goods and services with the same inputs of labour, capital, energy, and/or materials. For example, labour and land productivity in agriculture were increased during the Green Revolution
Green Revolution
Green Revolution refers to a series of research, development, and technology transfer initiatives, occurring between the 1940s and the late 1970s, that increased agriculture production around the world, beginning most markedly in the late 1960s....

. The Green Revolution of the 1940s to 1970s introduced new grain hybrids, which increased yields around the world.

However, there is not necessarily a long term one-to-one relationship between improvements in productivity and improvements in average standard of living. Among other factors that might prevent a long-term improvement in standard of living despite economic growth is the potential for population growth matching or outstripping productivity improvements. When increased food supplies spur population growth rather an improvement in the standard of living, people are said to be caught in the "Malthusian trap
Malthusian trap
The Malthusian trap, named after political economist Thomas Robert Malthus, suggests that for most of human history, income was largely stagnant because technological advances and discoveries only resulted in more people, rather than improvements in the standard of living...

," named for Thomas Robert Malthus, the first observer to detail out this dilemma. There is considerable controversy, for example, as to whether the Green Revolution resulted in long-term improvements in the standard of living as it was accompanied by rapid population growth creating population sizes that may be unsustainable.

Economic growth can also be of interest without reference to per capita changes in standard of living. An example of this is the economic growth in England during the Industrial Revolution
Industrial Revolution
The Industrial Revolution was a period from the 18th to the 19th century where major changes in agriculture, manufacturing, mining, transportation, and technology had a profound effect on the social, economic and cultural conditions of the times...

. Certainly, per capita increases in productivity occurred due to the replacement of hand labour by machines. However, economic growth during this period was in large part so dramatic because England's population simultaneously increased very rapidly (1700 A.D. – 1860 A.D.). The two factors together, more production per worker combined with many more workers, resulted in a sixfold increase in production between 1700 and 1860. Population growth alone accounted for most of this increase.

Measuring economic growth


Economic growth is measured as a percentage change in the Gross Domestic Product
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....

 (GDP) or Gross National Product (GNP). These two measures, which are calculated slightly differently, total the amounts paid for the goods and services that a country produced. As an example of measuring economic growth, a country which creates $9,000,000,000 in goods and services in 2010 and then creates $9,090,000,000 in 2011, has a nominal economic growth rate of 1% for 2011.

In order to compare per capita economic growth among countries, the total sales of the countries to be compared may be quoted in a single currency. This requires converting the value of currencies of various countries into a selected currency, for example U.S. dollars. One way to do this conversion is to rely on exchange rates among the currencies, for example how many Mexican pesos buy a single U.S. dollar? Another approach is to use the purchasing power parity
Purchasing power parity
In economics, purchasing power parity is a condition between countries where an amount of money has the same purchasing power in different countries. The prices of the goods between the countries would only reflect the exchange rates...

 method. This method is based on how much consumers must pay for the same "basket of goods" in each country.

Inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...

 or deflation can make it difficult to measure economic growth. If GDP, for example, goes up in a country by 1% in a year, was this due solely to rising prices (inflation) or because more goods and services were produced and saved? To express real growth rather than changes in prices for the same goods, statistics on economic growth are often adjusted for inflation or deflation.

For example, a table may show changes in GDP in the period 1990 to 2000, as expressed in 1990 U.S. dollars. This means that the single currency being used is the U.S. dollar with the purchasing power it had in the U.S. in 1990. The table might mention that the figures are "inflation-adjusted" or real. If no adjustment were made for inflation, the table might make no mention of inflation-adjustment or might mention that the prices are nominal.

The power of annual growth


Over long periods of time, even small rates of growth, like a 2% annual increase, will have large effects. For example, the United Kingdom experienced a 1.97% average annual increase in inflation-adjusted GDP between 1830 and 2008. In 1830, the GDP was 41,373 million pounds. It grew to 1,330,088 million pounds by 2008. (Figures are adjusted for inflation and stated in 2005 values for the pound.) A growth rate which averaged 1.97% over 178 years resulted in a 32-fold increase in GDP by 2008.

The large impact of a relatively small growth rate over a long period of time is due to the power of compounding
Compound interest
Compound interest arises when interest is added to the principal, so that from that moment on, the interest that has been added also itself earns interest. This addition of interest to the principal is called compounding...

 (also see exponential growth
Exponential growth
Exponential growth occurs when the growth rate of a mathematical function is proportional to the function's current value...

). A growth rate of 2.5% per annum leads to a doubling of GDP within 29 years, whilst a growth rate of 8% per annum (an average exceeded by China
Historical GDP of the People's Republic of China
This article includes a list of China's historical gross domestic product values, the market value of all final goods and services produced by a nation in a given year. The GDP dollar estimates presented here are calculated at market or government official exchange rates and derived from...

 between 2000 and 2010) leads to a doubling of GDP within 10 years. Thus, a small difference in economic growth rates between countries can result in very different standards of living for their populations if this small difference continues for many years.

Historical growth


During colonial times, what ultimately mattered for economic growth were the institutions and systems of government imported through colonization. There is a clear reversal of fortune between the poor and wealthy countries, which is evident when comparing the method of colonialism
Colonialism
Colonialism is the establishment, maintenance, acquisition and expansion of colonies in one territory by people from another territory. It is a process whereby the metropole claims sovereignty over the colony and the social structure, government, and economics of the colony are changed by...

 in a region. Geography and endowments of natural resources are not the sole determinants of GDP. In fact, those that were blessed with good factor endowments experienced colonial extraction which only provided limited rapid growth; whereas, countries that were less fortunate in their original endowments experienced European settlement, relative equality, and demand for rule of law
Rule of law
The rule of law, sometimes called supremacy of law, is a legal maxim that says that governmental decisions should be made by applying known principles or laws with minimal discretion in their application...

. These initially poor colonies end up developing an open franchise, equality, and broad public education, which helps them experience greater economic growth than the colonies that had exploited their economies of scale
Economies of scale
Economies of scale, in microeconomics, refers to the cost advantages that an enterprise obtains due to expansion. There are factors that cause a producer’s average cost per unit to fall as the scale of output is increased. "Economies of scale" is a long run concept and refers to reductions in unit...

.

Since the Industrial Revolution
Industrial Revolution
The Industrial Revolution was a period from the 18th to the 19th century where major changes in agriculture, manufacturing, mining, transportation, and technology had a profound effect on the social, economic and cultural conditions of the times...

, a major factor of productivity
Productivity
Productivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it. Usually this ratio is in the form of an average, expressing the total output divided by the total input...

 was the substitution of energy from water and wind power for human and animal labor. Since that replacement, the great expansion of total power was driven by continuous improvements in energy conversion efficiency. Other major historical sources of productivity
Productivity improving technologies (historical)
Productivity improving technologies date back to antiquity, with rather slow progress until the late Middle Ages. Technological progress was aided by literacy and the diffusion of knowledge that accelerated after the spinning wheel spread to Western Europe in the 13th century...

 were mechanization
Mechanization
Mechanization or mechanisation is providing human operators with machinery that assists them with the muscular requirements of work or displaces muscular work. In some fields, mechanization includes the use of hand tools...

, transportation infrastructures (canals, railroads, and highways), new materials (steel) and power, which includes steam and internal combustion engines and electricity
Electrification
Electrification originally referred to the build out of the electrical generating and distribution systems which occurred in the United States, England and other countries from the mid 1880's until around 1940 and is in progress in developing countries. This also included the change over from line...

. Other productivity
Productivity
Productivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it. Usually this ratio is in the form of an average, expressing the total output divided by the total input...

 improvements included mechanized agriculture and scientific agriculture including chemical fertilizer
Fertilizer
Fertilizer is any organic or inorganic material of natural or synthetic origin that is added to a soil to supply one or more plant nutrients essential to the growth of plants. A recent assessment found that about 40 to 60% of crop yields are attributable to commercial fertilizer use...

s and livestock and poultry management, and the Green Revolution
Green Revolution
Green Revolution refers to a series of research, development, and technology transfer initiatives, occurring between the 1940s and the late 1970s, that increased agriculture production around the world, beginning most markedly in the late 1960s....

. Interchangeable parts
Interchangeable parts
Interchangeable parts are parts that are, for practical purposes, identical. They are made to specifications that ensure that they are so nearly identical that they will fit into any device of the same type. One such part can freely replace another, without any custom fitting...

 made with machine tools powered by electric motors evolved into mass production
Mass production
Mass production is the production of large amounts of standardized products, including and especially on assembly lines...

, which is universally used today.

Great sources of productivity improvement in the late 19th century were the railroads, steam ships, horse-pulled reaper
Reaper
A reaper is a person or machine that reaps crops at harvest, when they are ripe.-Hand reaping:Hand reaping is done by various means, including plucking the ears of grains directly by hand, cutting the grain stalks with a sickle, cutting them with a scythe, or with a later type of scythe called a...

s and combine harvesters, and steam
Steam engine
A steam engine is a heat engine that performs mechanical work using steam as its working fluid.Steam engines are external combustion engines, where the working fluid is separate from the combustion products. Non-combustion heat sources such as solar power, nuclear power or geothermal energy may be...

-powered factories. The invention of processes for making cheap steel
Steel
Steel is an alloy that consists mostly of iron and has a carbon content between 0.2% and 2.1% by weight, depending on the grade. Carbon is the most common alloying material for iron, but various other alloying elements are used, such as manganese, chromium, vanadium, and tungsten...

 were important for many forms of mechanization
Mechanization
Mechanization or mechanisation is providing human operators with machinery that assists them with the muscular requirements of work or displaces muscular work. In some fields, mechanization includes the use of hand tools...

 and transportation. By the late 19th century, power and machinery were creating overproduction, which eventually caused a reduction of the hourly work week. Prices fell because less labor, materials, and energy were required to produce and transport goods; however, workers real pay rose, allowing workers to improve their diet and buy consumer goods and better housing.

Mass production
Mass production
Mass production is the production of large amounts of standardized products, including and especially on assembly lines...

 of the 1920s created overproduction, which was arguably one of several causes of the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...

 of the 1930s. Following the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...

, economic growth resumed, aided in part by demand for entirely new goods and services, such as household electricity
Electricity
Electricity is a general term encompassing a variety of phenomena resulting from the presence and flow of electric charge. These include many easily recognizable phenomena, such as lightning, static electricity, and the flow of electrical current in an electrical wire...

, telephones, radio, television, automobiles, and household appliances, air conditioning, and commercial aviation (after 1950), creating enough new demand to stabilize the work week. Building of highway infrastructures also contributed to post World War II growth, as did capital investments in manufacturing and chemical industries. The post World War II economy also benefited from the discovery of vast amounts of oil around the world, particularly in the Middle East.

Economic growth in Western nations slowed after 1973, but growth in Asia has been strong since then, starting with Japan and spreading to Korea, China, the Indian subcontinent
Indian subcontinent
The Indian subcontinent, also Indian Subcontinent, Indo-Pak Subcontinent or South Asian Subcontinent is a region of the Asian continent on the Indian tectonic plate from the Hindu Kush or Hindu Koh, Himalayas and including the Kuen Lun and Karakoram ranges, forming a land mass which extends...

 and other parts of Asia. The Japanese economy has been growing very slowly since about 1990.

Origins of the concept


In 1377, the Arabian economic
Islamic economics in the world
Islamic economics in practice, or economic policies supported by self-identified Islamic groups, has varied throughout its long history. Traditional Islamic concepts having to do with economics included...

 thinker Ibn Khaldun
Ibn Khaldun
Ibn Khaldūn or Ibn Khaldoun was an Arab Tunisian historiographer and historian who is often viewed as one of the forerunners of modern historiography, sociology and economics...

 provided one of the earliest descriptions of economic growth in his Muqaddimah
Muqaddimah
The Muqaddimah , also known as the Muqaddimah of Ibn Khaldun or the Prolegomena , is a book written by the Maghrebian Muslim historian Ibn Khaldun in 1377 which records an early view of universal history...

(known as Prolegomena in the Western world
Western world
The Western world, also known as the West and the Occident , is a term referring to the countries of Western Europe , the countries of the Americas, as well all countries of Northern and Central Europe, Australia and New Zealand...

):
In the early modern period
Early modern period
In history, the early modern period of modern history follows the late Middle Ages. Although the chronological limits of the period are open to debate, the timeframe spans the period after the late portion of the Middle Ages through the beginning of the Age of Revolutions...

, some people in Western European nations developed the idea that economies could "grow", that is, produce a greater economic surplus, which could be expended on something other than mere subsistence. This surplus could then be used for consumption, warfare, or civic and religious projects. The previous view was that only increasing either population or tax rates could generate more surplus money for the Crown or country.

Later, it was theorized that economic growth also corresponds to a process of continual rapid replacement and reorganization of human activities facilitated by investment motivated to maximize returns. This exponential
Exponential growth
Exponential growth occurs when the growth rate of a mathematical function is proportional to the function's current value...

 evolution of our self-organized life-support and cultural systems is remarkably creative and flexible, but highly unpredictable in many ways. As there are difficulties in modelling complex self-organizing systems, various efforts to model the long term evolution of economies have produced mixed results.

During much of the "Mercantilist"
Mercantilism
Mercantilism is the economic doctrine in which government control of foreign trade is of paramount importance for ensuring the prosperity and security of the state. In particular, it demands a positive balance of trade. Mercantilism dominated Western European economic policy and discourse from...

 period, growth was seen as involving an increase in the total amount of specie, that is circulating medium such as silver and gold, under the control of the state. This "Bullionist"
Bullionism
Bullionism is an economic theory that defines wealth by the amount of precious metals owned. Bullionism is an early or primitive form of mercantilism...

 theory led to policies to force trade through a particular state, the acquisition of colonies to supply cheaper raw materials, which could then be manufactured and sold.

Later, such trade policies were justified instead simply in terms of promoting domestic trade and industry. The post-Bullionist insight that it was the increasing capability of manufacturing, which led to policies in the 18th century to encourage manufacturing in itself, and the formula of importing raw materials and exporting finished goods. Under this system, high tariffs were erected to allow manufacturers to establish "factories
Factory
A factory or manufacturing plant is an industrial building where laborers manufacture goods or supervise machines processing one product into another. Most modern factories have large warehouses or warehouse-like facilities that contain heavy equipment used for assembly line production...

". Local markets would then pay the fixed costs of capital growth, and then allow them to export abroad, undercutting the prices of manufactured goods.

Under this theory of growth, to foster growth was to grant monopolies, which would give an incentive for an individual to exploit a market or resource, confident that he would make all of the profits when all other extra-national competitors were driven out of business. The "Dutch East India company
Dutch East India Company
The Dutch East India Company was a chartered company established in 1602, when the States-General of the Netherlands granted it a 21-year monopoly to carry out colonial activities in Asia...

" and the "British East India company
British East India Company
The East India Company was an early English joint-stock company that was formed initially for pursuing trade with the East Indies, but that ended up trading mainly with the Indian subcontinent and China...

" were examples of such state-granted trade monopolies
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...

.

In this period, the view was that growth was gained through "advantageous" trade in which specie would flow into the country, but to trade with other nations on equal terms was disadvantageous. It should be stressed that Mercantilism was not simply a matter of restricting trade. Within a country, it often meant breaking down trade barriers, building new roads, and abolishing local toll booths, all of which expanded markets. This corresponded to the centralization of power in the hands of the Crown (or "Absolutism"). This process helped produce the modern nation-state
Nation-state
The nation state is a state that self-identifies as deriving its political legitimacy from serving as a sovereign entity for a nation as a sovereign territorial unit. The state is a political and geopolitical entity; the nation is a cultural and/or ethnic entity...

 in Western Europe.

Internationally, Mercantilism led to a contradiction: growth was gained through trade, but to trade with other nations on equal terms was disadvantageous.

Classical growth theory


The modern conception of economic growth began with the critique of Mercantilism, especially by the physiocrats
Physiocrats
Physiocracy is an economic theory developed by the Physiocrats, a group of economists who believed that the wealth of nations was derived solely from the value of "land agriculture" or "land development." Their theories originated in France and were most popular during the second half of the 18th...

 and with the Scottish Enlightenment
Scottish Enlightenment
The Scottish Enlightenment was the period in 18th century Scotland characterised by an outpouring of intellectual and scientific accomplishments. By 1750, Scots were among the most literate citizens of Europe, with an estimated 75% level of literacy...

 thinkers such as David Hume
David Hume
David Hume was a Scottish philosopher, historian, economist, and essayist, known especially for his philosophical empiricism and skepticism. He was one of the most important figures in the history of Western philosophy and the Scottish Enlightenment...

 and Adam Smith
Adam Smith
Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...

, and the foundation of the discipline of modern political economy
Political economy
Political economy originally was the term for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth, including through the budget process. Political economy originated in moral philosophy...

. The theory of the physiocrats was that productive capacity, itself, allowed for growth, and the improving and increasing capital to allow that capacity was "the wealth of nations". Whereas they stressed the importance of agriculture and saw urban industry as "sterile", Smith extended the notion that manufacturing was central to the entire economy.

David Ricardo
David Ricardo
David Ricardo was an English political economist, often credited with systematising economics, and was one of the most influential of the classical economists, along with Thomas Malthus, Adam Smith, and John Stuart Mill. He was also a member of Parliament, businessman, financier and speculator,...

 argued that trade was a benefit to a country, because if one could buy a good more cheaply from abroad, it meant that there was more profitable work to be done here. This theory of "comparative advantage
Comparative advantage
In economics, the law of comparative advantage says that two countries will both gain from trade if, in the absence of trade, they have different relative costs for producing the same goods...

" would be the central basis for arguments in favor of free trade
Free trade
Under a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from...

 as an essential component of growth.

The neoclassical growth model


The notion of growth as increased stocks of capital goods (means of production
Means of production
Means of production refers to physical, non-human inputs used in production—the factories, machines, and tools used to produce wealth — along with both infrastructural capital and natural capital. This includes the classical factors of production minus financial capital and minus human capital...

) was codified as the Solow-Swan Growth Model
Exogenous growth model
The neoclassical growth model, also known as the Solow–Swan growth model or exogenous growth model, is a class of economic models of long-run economic growth set within the framework of neoclassical economics...

, which involved a series of equations which showed the relationship between labor-time, capital goods, output, and investment. According to this view, the role of technological change
Technological change
Technological change is a term that is used to describe the overall process of invention, innovation and diffusion of technology or processes. The term is synonymous with technological development, technological achievement, and technological progress...

 became crucial, even more important than the accumulation of capital
Capital accumulation
The accumulation of capital refers to the gathering or amassing of objects of value; the increase in wealth through concentration; or the creation of wealth. Capital is money or a financial asset invested for the purpose of making more money...

. This model, developed by Robert Solow
Robert Solow
Robert Merton Solow is an American economist particularly known for his work on the theory of economic growth that culminated in the exogenous growth model named after him...

  and Trevor Swan
Trevor Swan
Trevor Winchester Swan was an Australian economist. He is best known for his work on the neoclassical model of economic growth, published simultaneously with that of Robert Solow, for his work on integrating internal and external balance, represented by the Swan diagram and for pioneering work in...

 in the 1950s, was the first attempt to model long-run growth analytically. This model assumes that countries use their resources efficiently
Efficiency (economics)
In economics, the term economic efficiency refers to the use of resources so as to maximize the production of goods and services. An economic system is said to be more efficient than another if it can provide more goods and services for society without using more resources...

 and that there are diminishing returns
Diminishing returns
In economics, diminishing returns is the decrease in the marginal output of a production process as the amount of a single factor of production is increased, while the amounts of all other factors of production stay constant.The law of diminishing returns In economics, diminishing returns (also...

 to capital and labor increases. From these two premises, the neoclassical model makes three important predictions. First, increasing capital relative to labor creates economic growth, since people can be more productive given more capital. Second, poor countries with less capital per person will grow faster because each investment in capital will produce a higher return than rich countries with ample capital. Third, because of diminishing returns to capital, economies will eventually reach a point at which any increase in capital will no longer create economic growth. This point is called a "steady state".

The model also notes that countries can overcome this steady state and continue growing by inventing new technology. In the long run, output per capital depends on the rate of saving, but the rate of output growth should be equal for any saving rate. In this model, the process by which countries continue growing despite the diminishing returns is "exogenous" and represents the creation of new technology that allows production with fewer resources. Technology improves, the steady state level of capital increases, and the country invests and grows. The data does not support some of this model's predictions, in particular, that all countries grow at the same rate in the long run, or that poorer countries should grow faster until they reach their steady state. Also, the data suggests the world has slowly increased its rate of growth.

However, modern economic research shows that the baseline version of the neoclassical model of economic growth is not supported by the evidence.

Endogenous growth theory



Growth theory advanced again with the theories of economist Paul Romer
Paul Romer
Paul Michael Romer is an American economist, entrepreneur, and activist. He is currently the Henry Kaufman Visiting Professor at New York University Stern School of Business and will be joining NYU as a full time professor beginning in 2011...

 and Robert Lucas, Jr.
Robert Lucas, Jr.
Robert Emerson Lucas, Jr. is an American economist at the University of Chicago. He received the Nobel Prize in Economics in 1995 and is consistently indexed among the top 10 economists in the Research Papers in Economics rankings. He is married to economist Nancy Stokey.He received his B.A. in...

 in the late 1980s and early 1990s.

Unsatisfied with Solow's explanation, economists worked to "endogenize" technology in the 1980s. They developed the endogenous growth theory
Endogenous growth theory
Endogenous growth theory holds that economic growth is primarily the result of endogenous and not external force. In Endogenous growth theory investment in human capital, innovation and knowledge are significant contributors to economic growth. The theory also focus on positive externalities and...

 that includes a mathematical explanation of technological advancement. This model also incorporated a new concept of human capital
Human capital
Human capitalis the stock of competencies, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience...

, the skills and knowledge that make workers productive. Unlike physical capital
Physical capital
In economics, physical capital or just 'capital' refers to any already-manufactured asset that is applied in production, such as machinery, buildings, or vehicles. In economic theory, physical capital is one of the three primary factors of production, also known as inputs in the production function...

, human capital has increasing rates of return. Therefore, overall there are constant returns to capital, and economies never reach a steady state. Growth does not slow as capital accumulates, but the rate of growth depends on the types of capital a country invests in. Research done in this area has focused on what increases human capital
Human capital
Human capitalis the stock of competencies, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience...

 (e.g. education
Education
Education in its broadest, general sense is the means through which the aims and habits of a group of people lives on from one generation to the next. Generally, it occurs through any experience that has a formative effect on the way one thinks, feels, or acts...

) or technological change (e.g. innovation
Innovation
Innovation is the creation of better or more effective products, processes, technologies, or ideas that are accepted by markets, governments, and society...

).

John Joseph Puthenkalam's research aims at the process of economic growth theories that lead to economic development. After analyzing the existing capitalistic growth-development theoretical apparatus, he introduces the new model which integrates the variables of freedom, democracy and human rights into the existing models and argue that any future economic growth-development of any nation depends on this emerging model as we witness the third wave of unfolding demand for democracy in the Middle East. He develops the knowledge sector in growth theories with two new concepts of 'mirco knowledge' and 'macro knowledge'. Micro knowledge is what an individual learns from school or from various existing knowledge and macro knowledge is the core philosophical thinking of a nation that all individuals inherently receive. How to combine both these knowledge would determine further growth that leads to economic development of developing nations. For further reading, please refer to "Integrating Freedom, Democracy and Human Rights into Theories of Economic Growth" (1998,2000&2009).

Theory of cognitive wealth (cognitive capitalism)


The theory of "Cognitive capitalism" asserts that cognitive ability is the crucial factor which creates wealth in modern economies, and that the geographical factors which have been necessary in ancient societies are no longer so important. The average cognitive ability of a nation determines its wealth, each IQ point increase boosting a country's average GDP by $229. Of even more significance, the IQ of the brightest 5% of people in the nation (the cognitive elite) boosts GDP by $468 per IQ point. The cognitive elite support general efficiency, technological innovation, efficient administration, independent institutions, and economic freedom. Via these factors intelligence and knowledge stimulate growth leading to national wealth, which in turn may boost cognitive ability in a virtuous circle.
The theory was developed by the two psychologists Heiner Rindermann and James Thompson. The theory is related to human capital theory.

Unified growth theory


Unified growth theory
Unified growth theory
Unified growth theory was developed to address the inability of endogenous growth theory to explain key empirical regularities in the growth processes of individual economies and the world economy as a whole. Endogenous growth theory was satisfied with accounting for empirical regularities in the...

 was developed by Oded Galor
Oded Galor
-Work:Galor has made significant contributions to the study of income distribution and economic growth, the transition from stagnation to growth, and human evolution and economic development...

 and his co-authors to address the inability of endogenous growth theory to explain key empirical regularities in the growth processes of individual economies and the world economy as a whole. Endogenous growth theory was satisfied with accounting for empirical regularities in the growth process of developed economies over the last hundred years. As a consequence, it was not able to explain the qualitatively different empirical regularities that characterized the growth process over longer time horizons in both developed and less developed economies. Unified growth theories are endogenous growth theories that are consistent with the entire process of development, and in particular the transition from the epoch of Malthusian stagnation that had characterized most of the process of development to the contemporary era of sustained economic growth.

The big push


Theories of economic growth, the mechanisms that let it take place and its main determinants are abound. One popular theory in the 1940s
1940s
File:1940s decade montage.png|Above title bar: events which happened during World War II : From left to right: Troops in an LCVP landing craft approaching "Omaha" Beach on "D-Day"; Adolf Hitler visits Paris, soon after the Battle of France; The Holocaust occurred during the war as Nazi Germany...

, for example, was that of the "Big Push
Big Push Model
The big push model is a concept in development economics or welfare economics that emphasizes the fact that a firm's decision whether to industrialize or not depends on its expectation of what other firms will do...

" which suggested that countries needed to jump from one stage of development to another through a virtuous cycle, in which large investments in infrastructure and education coupled with private investments would move the economy to a more productive stage, breaking free from economic paradigms appropriate to a lower productivity stage.

Creative destruction and economic growth



Many economists view entrepreneurship
Entrepreneurship
Entrepreneurship is the act of being an entrepreneur, which can be defined as "one who undertakes innovations, finance and business acumen in an effort to transform innovations into economic goods". This may result in new organizations or may be part of revitalizing mature organizations in response...

 as having a major influence on a society's rate of technological progress and thus economic growth. Joseph Schumpeter
Joseph Schumpeter
Joseph Alois Schumpeter was an Austrian-Hungarian-American economist and political scientist. He popularized the term "creative destruction" in economics.-Life:...

 was a key figure in understanding the influence of entrepreneurs on technological progress. In Schumpeter's Capitalism, Socialism and Democracy
Capitalism, Socialism and Democracy
Capitalism, Socialism and Democracy is the most famous book by Joseph Schumpeter in which he deals with capitalism, socialism and creative destruction...

, published in 1942, an entrepreneur is a person who is willing and able to convert a new idea or invention
Invention
An invention is a novel composition, device, or process. An invention may be derived from a pre-existing model or idea, or it could be independently conceived, in which case it may be a radical breakthrough. In addition, there is cultural invention, which is an innovative set of useful social...

 into a successful innovation
Innovation
Innovation is the creation of better or more effective products, processes, technologies, or ideas that are accepted by markets, governments, and society...

. Entrepreneurship forces "creative destruction
Creative destruction
Creative destruction is a term originally derived from Marxist economic theory which refers to the linked processes of the accumulation and annihilation of wealth under capitalism. These processes were first described in The Communist Manifesto and were expanded in Marx's Grundrisse and "Volume...

" across markets and industries, simultaneously creating new products and business models. In this way, creative destruction is largely responsible for the dynamism of industries and long-run economic growth. Former Federal Reserve
Federal Reserve System
The Federal Reserve System is the central banking system of the United States. It was created on December 23, 1913 with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907...

 chairman Alan Greenspan
Alan Greenspan
Alan Greenspan is an American economist who served as Chairman of the Federal Reserve of the United States from 1987 to 2006. He currently works as a private advisor and provides consulting for firms through his company, Greenspan Associates LLC...

 has described the influence of creative destruction on economic growth as follows: "Capitalism expands wealth primarily through creative destruction—the process by which the cash flow from obsolescent, low-return capital is invested in high-return, cutting-edge technologies."

Transformational growth


Transformational growth describes the changes in both institutions and the working of markets, as growth and innovation take place. Edward J. Nell
Edward J. Nell
Edward J. Nell is an American economist and a professor at the New School for Social Research . Nell has been a member of the New School faculty since 1969, and has held the rank of Malcolm B...

 (The New School, NY) is the originator of the General Theory of Transformational Growth, which traces the pattern of capitalist development through a succession of stages, in each of which markets adjust differently, and in doing so, give rise to market pressures leading to innovations, which move the system to the next stage. In each stage, the working of markets will be governed in part by the structure of costs and the pattern of growth in demand, both of which depend on technology and innovation. The approach draws on the empirical work of Simon Kuznets
Simon Kuznets
Simon Smith Kuznets was a Russian American economist at the Wharton School of the University of Pennsylvania who won the 1971 Nobel Memorial Prize in Economic Sciences "for his empirically founded interpretation of economic growth which has led to new and deepened insight into the economic and...

, and makes use of Nicholas Kaldor
Nicholas Kaldor
Nicholas Kaldor, Baron Kaldor was one of the foremost Cambridge economists in the post-war period...

’s notion of stylized facts; it also draws on the work of W. Arthur Lewis and Gunnar Myrdal
Gunnar Myrdal
Karl Gunnar Myrdal was a Swedish Nobel Laureate economist, sociologist, and politician. In 1974, he received the Nobel Memorial Prize in Economic Sciences with Friedrich Hayek for "their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the...

 in regard to stages of development. It is, however, consistent only in part with Robert Solow
Robert Solow
Robert Merton Solow is an American economist particularly known for his work on the theory of economic growth that culminated in the exogenous growth model named after him...

’s neo-Classical approach; as in that construction the substitution of capital for labor is crucial. However, transformational growth rejects the idea of a steady state and presents a model of multiple sectors regularly changing in size and importance. On the other hand, Douglass North’s emphasis on institutions is echoed here.

Nell (1988, p. xiii) argued that
We do not live in a Free Market
Free market
A free market is a competitive market where prices are determined by supply and demand. However, the term is also commonly used for markets in which economic intervention and regulation by the state is limited to tax collection, and enforcement of private ownership and contracts...

 system. This is not because such a system has become overburdened, or because labor unions and monopolies have usurped its functions, or because the market has become tangled in regulations and red tape. It is because the fundamental institutions of economic society have changed: crafts have become industries, firms have become corporations, and markets are administratered. These are not 'imperfections' or examples of 'market failure'; as the basic institutions changed, the market itself came to work differently. An economy of family firms and family farms might once have functioned like an Idealized Free Market
Free market
A free market is a competitive market where prices are determined by supply and demand. However, the term is also commonly used for markets in which economic intervention and regulation by the state is limited to tax collection, and enforcement of private ownership and contracts...

. But the modern system of corporate industry does not. It behaves differently in regard both to output and employment and to pricing: output and employment are adjusted to current sales, but prices are planned with an eye to the financing of investment, so are governed by long-term considerations, and tend to be unresponsive to shot term changes. So, the automatic and anonymous rule of supply and demand
Supply and demand
Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers , resulting in an...

 in the market came to be replaced by a form of private administration. Moreover, where the earlier economic system had grown slowly, and by accretion, so that it functioned according to static principles, the corporate industry that replaced it depended on an internal dynamic. It either grew, or collapsed. But this Growth was not a simple expansion- it was developmental. The economic system was transformed. And then this Transformational Growth faltered, as it did in the 1930s, in the 1980s and again recently, the system malfunctioned in a wide variety of ways. Finally, the transformation from a craft economy to modern industry is world-wide. It cannot be understood and policy cannot be planned. This is especially true with the development of transnational corporations and international capital.


The full development of the theory of transformational growth came in the 90s, and was published Edward J. Nell
Edward J. Nell
Edward J. Nell is an American economist and a professor at the New School for Social Research . Nell has been a member of the New School faculty since 1969, and has held the rank of Malcolm B...

 as The General Theory of Transformational Growth (Cambridge University Press, 1998), starting from a critique of equilibrium –supporting creative destruction instead – working through methodological and philosophical questions about the role of contracts and obligations in understanding the persistence of institutional structures, to the circulation of money, understanding productivity and the structure of production – especially the relationship between the wage bill of capital goods and the capital requirements in consumer goods – then going on to dynamics, and from there to aggregate demand and the business cycle.

Nell has explored the move from ‘Replicative growth,’ governed by the price mechanism, where growth proceeds by new firms replicating old, to ‘Innovative growth’, regulated by the multiplier-accelerator, where firms invest in expanding and improving their own facilities, and the role of prices is chiefly found in long-term capital planning. Replicative growth describes the result of investment in the same technology and same pattern of firms and firm sizes, where the new firms produce the same list of goods and services, with the same composition of labor and means of production. The economy simply replicates itself, following the incentives offered by the price system. In the short run a Marshallian production function is assumed – applying additional labor to given plant and equipment yields diminishing returns, a more or less plausible idea in craft and agricultural conditions. The long-run is thus characterized by constant returns, but in the short run, adjustments of employment with given equipment will show diminishing returns. This is essentially the neo-Classical picture of the 19th Century economy.

By contrast, the standard neo-Classical growth model, based on Solow, 1956, (and also Swan, 1956) projects diminishing marginal returns into the long run – without explanation – assuming that each point on the function represents a different fully adjusted capital structure. It also fails to provide a role for prices in adjusting output to changes in demand. Indeed, aggregate demand plays no role at all; full employment, that is, full utilization of capacity, is explicitly assumed, rather than demonstrated, and prices are assumed to be constant. Saving governs investment. Banishing both prices and demand leaves the model hopelessly one-sided; it deals only with the growth-consumption- relative size aspect of the economy, ignoring the wages-prices-profits complex. But Solow assumed diminishing returns and that the marginal productivity conditions will be met – in the absence of price flexibility! If marginal products diminish, marginal costs rise, and in competitive markets prices must change as output changes. And if prices change there should be effects on demand. There is a problem. To correct it we will study a simple system of ‘growth as replication’, based on a Keynesian-Marshallian price adjustment mechanism, operating in the short run. Replication means that, for theoretical purposes, this kind of growth can be measured in units of the optimal sized firm, which, if the technology is what we call ‘Marshallian’, will be the size indicated by the minimum of a U-shaped average cost curve. (Austin Robinson, 1931) Moreover, the economy replicates itself following the incentives generated by a price mechanism that puts the burden of adjustment to demand fluctuations on profits. In Hicks’ terms, this is a ‘flexprice’ system. Such flexibility, in turn, creates pressures that lead to Transformational Growth, changing the system to one of Intensive Growth.

Replicative growth displays what might be called the ‘Victorian pattern’ of growth, in which shares are constant, as is the rate of profit, because the proportional change in the capital-output ratio just matches that in labor productivity, which, in turn, just equals the proportional change in the real wage. The move to innovative growth comes about as firms try to make their costs more flexible, to lighten the burden of adjustment. They invest in themselves. In the process they engage in innovation, reap economies of scale, and basically work their way beyond Craft technology to newly invented systems of Mass Production, and the Victorian pattern no longer holds. In the new system the assumption of generalized diminishing returns makes no sense; instead returns to and expanded level of employment appear to be constant over a broad range. In these circumstances there is no price mechanism; Kaldor’s effort to introduce price flexibility and adjustment at full employment appears to be misguided.

Transformational growth and business cycles


Transformational growth had a major impact on government and government policy, bringing about a countercyclical federal budget, and important changes in the agenda of government. To study these policy changes called for further development of the simple theory of effective demand. Changes in the flexibility of prices required study of pricing, and competition among corporations. Profits functioned as business saving, becoming more important in the US than household saving, and had to be understood in relation to prices (markups) and investment, to which they were closely linked, both in theory and in fact.

Nell published in 1998 (Transformational Growth and the Business Cycle, London: Routledge, 1998). The book contained the work of a study group of New School students, testing the empirical validity of the approach, by examining the time series of prices, wages, employment, output, and productivity in six countries. About the same time Nell wrote a book in 1996 (Making Sense of a Changing Economy, London: Routledge, 1996) and laying out the ‘paradoxes of individualism’, and providing both a critique of the social philosophy of individualism and suggestions for a more satisfactory approach.

Useful work growth theory



The useful work growth theory
Useful work growth theory
The Useful work growth theory, also called the Ayres-Warr model, states that physical and chemical work performed by energy, or more correctly exergy, has historically been the most important driver of economic growth...

, also called the Ayres-Warr model, states that physical and chemical work performed by energy, or more correctly exergy, has historically been the most important driver of economic growth.
Key support for this theory is a mathematical model showing that the efficiency of electrical generation is a good proxy for the Solow residual
Solow residual
The Solow residual is a number describing empirical productivity growth in an economy from year to year and decade to decade. Robert Solow defined rising productivity as rising output with constant capital and labor input...

, or technological progress, that is, the portion of economic growth that is not attributable to capital, labor, or materials.

Useful work theory provides a greatly improved explanation of economic growth over previous production functions. The theory relates the slowing of economic growth to energy conversion efficiencies approaching thermodynamic limits, and cautions that declining resource quality could bring an end to economic growth in a few decades.

The useful work theory is part of a body of economic research and analysis sponsored by the International Institute for Applied Systems Analysis (IIASA) and INSEAD
INSEAD
INSEAD is an international graduate business school and research institution. It has campuses in Europe , Asia , and the Middle East , as well as a research center in Israel...

 and is cited by the International Energy Agency.

The classical theory


Inequality has a positive effect on economic development. The marginal propensity to save increases with wealth and inequality increases savings, capital accumulation, and economic growth.

The neoclassical theory


The neoclassical theory ignores the relevance of income distribution for macroeconomic analysis. It interprets the observed relationship between inequality and economic growth as a reflection of the growth process on the distribution of income.

The modern theory


The modern theory suggests that income distribution, plays an important role in the determination of aggregate economic activity and economic growth.

The credit market imperfection approach, developed by Galor and Zeira (1993), demonstrates that inequality in the presence of credit market imperfections has a long lasting detrimental effect on human capital formation and economic development.

The political economy approach, developed by Alesina and Rodrik 1994) and Persson and Tabellini (1994), suggests that inequality is harmful for economic development because inequality generates a pressure to adopt redistributive policies that have an adverse effect on investment and economic growth.

Evidence


Perotti (1996) examines of the channels through which inequality may affect economic growth. He shows that in accordance with the credit market imperfection approach, inequality is associated with lower level of human capital formation and higher level of fertility, while lower level of human capital is associated with lower growth and lower levels of economic growth. In contrast, his examination of the political economy channel refutes the political economy mechanism. He demonstrates that inequality is associated with lower levels of taxation, while lower levels of taxation, contrary to the theories, are associated with lower level of economic growth

The effect of growth on inequality


Economist Xavier Sala-i-Martin
Xavier Sala-i-Martin
Xavier Sala-i-Martin is a professor of economics at Columbia University.Sala-i-Martin earned his degree from the Autonomous University of Barcelona in 1985 and his Ph.D. from Harvard University in 1990, both in economics...

 argues that global income inequality is diminishing
Kuznets curve
A Kuznets curve is the graphical representation of Simon Kuznets' hypothesis that economic inequality increases over time while a country is developing, and then after a certain average income is attained, inequality begins to decrease....

, and the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...

 argues that the rapid reduction in global poverty is in large part due to economic growth. The decline in poverty has been the slowest where growth performance has been the worst (i.e. in Africa).

Finance and economic growth


Substantial academic literature and government strategies support the finance-led growth hypothesis, based on an observation first made almost a century ago by Joseph Schumpeter that financial markets significantly boost real economic growth and development. Schumpeter asserted that finance had a positive impact on economic growth as a result of its effects on productivity growth and technological change. As early as 1989 the World Bank also endorsed the view that financial deepening matters for economic growth "by improving the productivity of investment". A number of case studies on Asia and Southern African countries show the positive nexus between development of financial intermediation and economic growth.

Institutions and growth


According to Acemoğlu
Daron Acemoglu
Kamer Daron Acemoğlu is a Turkish-American economist of Armenian origin. He is currently the Elizabeth and James Killian Professor of Economics at Massachusetts Institute of Technology and winner of the 2005 John Bates Clark Medal. He is among the in the world according to IDEAS/RePEc...

, Johnson
Simon Johnson (economist)
Simon Johnson is a British American economist. He is the 'Ronald A. Kurtz Professor of Entrepreneurship at the MIT Sloan School of Management and a senior fellow at the Peterson Institute for International Economics. He has held a wide variety of academic and policy-related positions, including...

 and Robinson, the positive correlation between high income and cold climate is a by-product of history. Europeans adopted very different colonization policies in different colonies, with different associated institutions. In places where these colonizers faced high mortality rates (e.g., due to the presence of tropical diseases), they could not settle permanently, and they were thus more likely to establish extractive institutions, which persisted after independence; in places where they could settle permanently (e.g. those with temperate climates), they established institutions with this objective in mind and modeled them after those in their European homelands. In these 'neo-Europes' better institutions in turn produced better development outcomes. Thus, although other economists focus on the identity or type of legal system of the colonizers to explain institutions, these authors look at the environmental conditions in the colonies to explain institutions. For instance, former colonies have inherited corrupt governments and geo-political boundaries (set by the colonizers) that are not properly placed regarding the geographical locations of different ethnic groups, creating internal disputes and conflicts which in turn hinder development. In another example, societies that emerged in colonies without solid native populations established better property rights and incentives for long-term investment than those where native populations were large.

Human capital and growth


One ubiquitous element of both theoretical and empirical analyses of economic growth is the role of human capital
Human capital
Human capitalis the stock of competencies, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience...

. The skills of the population enter into both neoclassical and endogenous growth models. The most commonly used measure of human capital is the level of school attainment in a country, building upon the data development of Robert Barro
Robert Barro
Robert Joseph Barro is an American classical macroeconomist and the Paul M. Warburg Professor of Economics at Harvard University. The Research Papers in Economics project ranked him as the 4th most influential economist in the world as of August 2011 based on his academic contributions...

 and Jong-Wha Lee. This measure of human capital, however, requires the strong assumption that what is learned in a year of schooling is the same across all countries. It also presumes that human capital is only developed in formal schooling, contrary to the extensive evidence that families, neighborhoods, peers, and health also contribute to the development of human capital. In order to measure human capital more accurately, Eric Hanushek
Eric Hanushek
Eric Alan Hanushek is a Paul and Jean Hanna Senior Fellow at the Hoover Institution of Stanford University. He is also an expert on educational policy. His main area of interest is the economics of education, focusing on controversial areas of education policy including the class size reduction,...

 and Dennis Kimko introduced measures of mathematics and science skills from international assessments into growth analysis. They found that quality of human capital was very significantly related to economic growth. This approach has been extended by a variety of authors, and the evidence indicates that economic growth is very closely related to the cognitive skills of the population.

Quality of life


Happiness has been shown to increase with a higher GDP per capita, at least up to a level of $15,000 per person.

Economic growth has the indirect potential to alleviate poverty, as a result of a simultaneous increase in employment opportunities and increase labour productivity. A study by researchers at the Overseas Development Institute
Overseas Development Institute
The Overseas Development Institute is one of the leading independent think tanks on international development and humanitarian issues. Based in London, its mission is "to inspire and inform policy and practice which lead to the reduction of poverty, the alleviation of suffering and the achievement...

 (ODI) of 24 countries that experienced growth found that in 18 cases, poverty was alleviated. However, employment is no guarantee of escaping poverty
Poverty
Poverty is the lack of a certain amount of material possessions or money. Absolute poverty or destitution is inability to afford basic human needs, which commonly includes clean and fresh water, nutrition, health care, education, clothing and shelter. About 1.7 billion people are estimated to live...

, the International Labour Organisation (ILO) estimates that as many as 40% of workers as poor, not earning enough to keep their families above the $2 a day poverty line. For instance, in India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...

 most of the chronically poor are wage earners in formal employment, because their jobs are insecure and low paid and offer no chance to accumulate wealth to avoid risks. This appears to be the result of a negative relationship between employment creation and increased productivity, when a simultaneous positive increase is required to reduced poverty. According to the UNRISD, increasing labour productivity appears to have a negative impact on job creation: in the 1960s, a 1% increase in output per worker was associated with a reduction in employment growth of 0.07%, by the first decade of this century the same productivity increase implies reduced employment growth by 0.54%.

Increases in employment without increases in productivity leads to a rise in the number of "working poor", which is why some experts are now promoting the creation of "quality" and not "quantity" in labour market policies. This approach does highlight how higher productivity has helped reduce poverty in East Asia
East Asia
East Asia or Eastern Asia is a subregion of Asia that can be defined in either geographical or cultural terms...

, but the negative impact is beginning to show. In Viet Nam, for example, employment growth has slowed while productivity growth has continued. Furthermore, productivity increases do not always lead to increased wages, as can be seen in the US, where the gap between productivity and wages has been rising since the 1980s. The ODI study showed that other sectors were just as important in reducing unemployment, as manufacturing
Manufacturing
Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...

. The services sector is most effective at translating productivity growth into employment growth. Agriculture
Agriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...

 provides a safety net for jobs and economic buffer when other sectors are struggling. This study suggests a more nuanced understanding of economic growth and quality of life and poverty alleviation.

Negative effects of economic growth


A number of critical arguments have been raised against economic growth.

It may be that economic growth improves the quality of life up to a point, after which it doesn't improve the quality of life, but rather obstructs sustainable living. Historically, sustained growth has reached its limits (and turned to catastrophic decline) when perturbations to the environmental system last long enough to destabilise the bases of a culture.

Consumerism


Growth may lead to consumerism
Consumerism
Consumerism is a social and economic order that is based on the systematic creation and fostering of a desire to purchase goods and services in ever greater amounts. The term is often associated with criticisms of consumption starting with Thorstein Veblen...

 by encouraging the creation of what some regard as artificial needs: Industries cause consumers to develop new taste, and preferences for growth to occur. Consequently, "wants are created, and consumers have become the servants, instead of the masters, of the economy."

Resource depletion


Many earlier predictions of resource depletion, such as Thomas Malthus
Thomas Malthus
The Reverend Thomas Robert Malthus FRS was an English scholar, influential in political economy and demography. Malthus popularized the economic theory of rent....

' 1798 predictions about approaching famines in Europe, The Population Bomb
The Population Bomb
The Population Bomb was a best-selling book written by Paul R. Ehrlich and his wife, Anne Ehrlich , in 1968. It warned of the mass starvation of humans in the 1970s and 1980s due to overpopulation, as well as other major societal upheavals, and advocated immediate action to limit population growth...

(1968), Limits to Growth
Limits to Growth
The Limits to Growth is a 1972 book modeling the consequences of a rapidly growing world population and finite resource supplies, commissioned by the Club of Rome. Its authors were Donella H. Meadows, Dennis L. Meadows, Jørgen Randers, and William W. Behrens III. The book used the World3 model to...

(1972), and the Simon–Ehrlich wager (1980) did not materialize, nor has diminished production of most resources occurred so far, one reason being that advancements in technology and science have allowed some previously unavailable resources to be produced. In some cases, substitution of more abundant materials, such as plastics for cast metals, lowered growth of usage for some metals. In the case of the limited resource of land, famine was relieved firstly by the revolution in transportation caused by railroads and steam ships, and later by the Green Revolution
Green Revolution
Green Revolution refers to a series of research, development, and technology transfer initiatives, occurring between the 1940s and the late 1970s, that increased agriculture production around the world, beginning most markedly in the late 1960s....

 and chemical fertilizers, especially the Haber process
Haber process
The Haber process, also called the Haber–Bosch process, is the nitrogen fixation reaction of nitrogen gas and hydrogen gas, over an enriched iron or ruthenium catalyst, which is used to industrially produce ammonia....

 for ammonia synthesis.

In the case of minerals, lower grades of mineral resources are being extracted, requiring higher inputs of capital and energy for both extraction and processing. An example is natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...

 from shale and other low permeability rock, which can be developed with much higher inputs of energy, capital, and materials than conventional gas in previous decades. Another example is offshore oil and gas, which has exponentially increasing cost as water depth increases.

However, some "Malthusians", such as William R. Catton, Jr.
William R. Catton, Jr.
William R. Catton, Jr. is an American sociologist best known for his scholarly work inenvironmental sociology and human ecology. His intellectual approach is broad and interdisciplinary. Catton's repute extends beyond academic social science due primarily to his 1980 book, . Catton has written...

, author of the 1980 book "Overshoot," are skeptical of these various advancements in technology which make available previously inaccessible or lower grade resources. The counter-argument is that such advances as well as increases in efficiency merely accelerate the drawing down of finite resources. Catton has referred to the contemporary increases in rates of resource extraction as "stealing ravenously from the future." The apparent and temporary "increase" of resource extraction with the use of new technology leads to the popular perception that resources are infinite or can be substituted without limit, but this perception fails to consider that ultimately, even lower quality resources are finite and become uneconomic to extract when the ore quality is too low. Because of cultural lag, the perception of infinite resources and substitutes may linger on for generations, and may not change, since the inevitable resource bankruptcy is passed on to posterity. Catton has called the faith in technology a form of "cargoism," which takes its meaning from various "Cargo Cults" in Melanesia and Micronesia. Furthermore, Joseph Tainter
Joseph Tainter
Joseph A. Tainter is a U.S. anthropologist and historian.Tainter studied anthropology at the University of California and Northwestern University, where he received his Ph.D. in 1975. He is currently a professor in the Department of Environment and Society at Utah State University...

, anthropologist, historian and author of the book "The Collapse of Complex Societies," has pointed out that each new addition of complexity to technology can only be sustained if there is a good enough return to justify the technology, and that over time, increases in complexity have improved productivity at an ever decreasing rate. As an example, in the early 1900's when much of the world's oil was untapped, it was sufficient to drill a few metres into the ground and install inexpensive rigs to extract oil at rapid rates. At the beginning of the 21st century, in order to achieve the same flowrates or less, oilfields must be drilled much deeper and managed with sophisticated techniques and equipment costing many hundreds of millions of dollars. If such trends continue, there may arrive a time when it becomes uneconomic to increase complexity in order to access lower grade resources with no net improvement in productivity.

Environmental impact


Some critics argue that a narrow view of economic growth, combined with globalization, is creating a scenario where we could see a systemic collapse of our planet's natural resources.
Other critics draw on archaeology
Archaeology
Archaeology, or archeology , is the study of human society, primarily through the recovery and analysis of the material culture and environmental data that they have left behind, which includes artifacts, architecture, biofacts and cultural landscapes...

 to cite examples of cultures they claim have disappeared because they grew beyond the ability of their ecosystems to support them.
Concerns about possible negative effects of growth on the environment and society led some to advocate lower levels of growth, from which comes the ideas of uneconomic growth
Uneconomic growth
Uneconomic growth, in human development theory, welfare economics , and some forms of ecological economics, is economic growth that reflects or creates a decline in the quality of life. The concept is attributed to the economist Herman Daly, though other theorists can also be credited for the...

 and de-growth
De-growth
Degrowth is a political, economic, and social movement based on environmentalist, anti-consumerist and anti-capitalist ideas...

, and Green parties which argue that economies are part of a global society and a global ecology and cannot outstrip their natural growth without damaging them.

Canadian scientist, David Suzuki
David Suzuki
David Suzuki, CC, OBC is a Canadian academic, science broadcaster and environmental activist. Suzuki earned a Ph.D in zoology from the University of Chicago in 1961, and was a professor in the genetics department of the University of British Columbia from 1963 until his retirement in 2001...

 stated in the 1990s that ecologies can only sustain typically about 1.5–3% new growth per year, and thus any requirement for greater returns from agriculture
Agriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...

 or forestry
Forestry
Forestry is the interdisciplinary profession embracing the science, art, and craft of creating, managing, using, and conserving forests and associated resources in a sustainable manner to meet desired goals, needs, and values for human benefit. Forestry is practiced in plantations and natural stands...

 will necessarily cannibalize the natural capital
Natural capital
Natural capital is the extension of the economic notion of capital to goods and services relating to the natural environment. Natural capital is thus the stock of natural ecosystems that yields a flow of valuable ecosystem goods or services into the future...

 of soil
Soil
Soil is a natural body consisting of layers of mineral constituents of variable thicknesses, which differ from the parent materials in their morphological, physical, chemical, and mineralogical characteristics...

 or forest
Forest
A forest, also referred to as a wood or the woods, is an area with a high density of trees. As with cities, depending where you are in the world, what is considered a forest may vary significantly in size and have various classification according to how and what of the forest is composed...

. Some think this argument can be applied even to more developed economies.

Those more optimistic about the environmental impacts of growth believe that, although localized environmental effects may occur, large scale ecological effects are minor. The argument as stated by commentators Julian Lincoln Simon
Julian Lincoln Simon
Julian Lincoln Simon was a professor of business administration at the University of Maryland and a Senior Fellow at the Cato Institute at the time of his death, after previously serving as a longtime business professor at the University of Illinois at Urbana-Champaign.Simon wrote many books and...

 states that if these global-scale ecological effects exist, human ingenuity will find ways of adapting to them.

Equitable growth


While acknowledging the central role economic growth can potentially play in human development
Human development (humanity)
Human development in the scope of humanity, specifically international development, is an international and economic development paradigm that is about much more than the rise or fall of national incomes. People are the real wealth of nations...

, poverty reduction
Poverty reduction
Poverty is the state of human beings who are poor. That is, they have little or no material means of surviving—little or no food, shelter, clothes, healthcare, education, and other physical means of living and improving one's life....

 and the achievement of the Millennium Development Goals
Millennium Development Goals
The Millennium Development Goals are eight international development goals that all 193 United Nations member states and at least 23 international organizations have agreed to achieve by the year 2015...

, it is becoming widely understood amongst the development community that special efforts must be made to ensure poorer sections of society are able to participate in economic growth. For instance, with low inequality a country with a growth rate of 2% per head and 40% of its population living in poverty, can halve poverty in ten years, but a country with high inequality would take nearly 60 years to achieve the same reduction. In the words of the Secretary General of the United Nations Ban Ki-Moon
Ban Ki-moon
Ban Ki-moon is the eighth and current Secretary-General of the United Nations, after succeeding Kofi Annan in 2007. Before going on to be Secretary-General, Ban was a career diplomat in South Korea's Ministry of Foreign Affairs and in the United Nations. He entered diplomatic service the year he...

:
"While economic growth is necessary, it is not sufficient for progress on reducing poverty."

Researchers at the Overseas Development Institute
Overseas Development Institute
The Overseas Development Institute is one of the leading independent think tanks on international development and humanitarian issues. Based in London, its mission is "to inspire and inform policy and practice which lead to the reduction of poverty, the alleviation of suffering and the achievement...

 compares situations such as in Uganda, where during a period of annual growth of 2.5% between 2000 and 2003, the percentage of people living in poverty actually increased by 3.8%. The ODI thus emphasises the need to ensure social protection is extended to allow universal access and that policies are introduced to encourage the private sector to create new jobs as the economy grows (as opposed to jobless growth) and seek to employ people from disadvantaged groups.

Implications of global warming

see Economics of global warming
Economics of global warming
-Definitions:In this article, the phrase “climate change” is used to describe a change in the climate, measured in terms of its statistical properties, e.g., the global mean surface temperature. In this context, “climate” is taken to mean the average weather. Climate can change over period of time...



Up to the present there are close correlations of economic growth with carbon dioxide
Carbon dioxide
Carbon dioxide is a naturally occurring chemical compound composed of two oxygen atoms covalently bonded to a single carbon atom...

 emissions across nations, although there is also a considerable divergence in carbon intensity (carbon emissions per GDP). The Stern Review
Stern Review
The Stern Review on the Economics of Climate Change is a 700-page report released for the British government on 30 October 2006 by economist Nicholas Stern, chair of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and also chair of the Centre...

 notes that the prediction that "under business as usual, global emissions will be sufficient to propel greenhouse gas concentrations to over 550ppm e by 2050 and over 650–700ppm by the end of this century is robust to a wide range of changes in model assumptions". The scientific consensus is that planetary ecosystem functioning without incurring dangerous risks requires stabilization at 450–550 ppm.

As a consequence, growth-oriented environmental economists propose massive government intervention into switching sources of energy production, favouring wind, solar, hydroelectric, and nuclear. This would largely confine use of fossil fuels to either domestic cooking needs (such as for kerosene burners) or where carbon capture and storage technology can be cost-effective and reliable. The Stern Review
Stern Review
The Stern Review on the Economics of Climate Change is a 700-page report released for the British government on 30 October 2006 by economist Nicholas Stern, chair of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and also chair of the Centre...

, published by the United Kingdom Government in 2006, concluded that an investment of 1% of GDP would be sufficient to avoid the worst effects of climate change, and that failure to do so could risk climate-related costs equal to 20% of GDP. Because carbon capture and storage is as yet widely unproven, and its long term effectiveness (such as in containing carbon dioxide 'leaks') unknown, and because of current costs of alternative fuels, these policy responses largely rest on faith of technological change.

On the other hand, Nigel Lawson
Nigel Lawson
Nigel Lawson, Baron Lawson of Blaby, PC , is a British Conservative politician and journalist. He was a Member of Parliament representing the constituency of Blaby from 1974–92, and served as the Chancellor of the Exchequer in the government of Margaret Thatcher from June 1983 to October 1989...

 claimed that people in a hundred years' time would be "seven times as well off as we are today", therefore it is not reasonable to impose sacrifices on the "much poorer present generation".

Prominent growth economists



  • Frank P. Ramsey
    Frank P. Ramsey
    Frank Plumpton Ramsey was a British mathematician who, in addition to mathematics, made significant and precocious contributions in philosophy and economics before his death at the age of 26...

  • Joseph Schumpeter
    Joseph Schumpeter
    Joseph Alois Schumpeter was an Austrian-Hungarian-American economist and political scientist. He popularized the term "creative destruction" in economics.-Life:...

  • Roy Harrod
    Roy Harrod
    Sir Henry Roy Forbes Harrod was an English economist. He is best known for his biography of John Maynard Keynes and the development of the Harrod–Domar model, which he and Evsey Domar developed independently...

  • Evsey Domar
    Evsey Domar
    Evsey David Domar was a Russian American economist, famous as co-author of the Harrod–Domar model.- Life :Evsey Domar was born on April 16, 1914 in the Polish city of Łódź, which belonged to Russia at that time...

  • Simon Kuznets
    Simon Kuznets
    Simon Smith Kuznets was a Russian American economist at the Wharton School of the University of Pennsylvania who won the 1971 Nobel Memorial Prize in Economic Sciences "for his empirically founded interpretation of economic growth which has led to new and deepened insight into the economic and...

  • Nicholas Kaldor
    Nicholas Kaldor
    Nicholas Kaldor, Baron Kaldor was one of the foremost Cambridge economists in the post-war period...

  • Robert Solow
    Robert Solow
    Robert Merton Solow is an American economist particularly known for his work on the theory of economic growth that culminated in the exogenous growth model named after him...

  • Edward J. Nell
    Edward J. Nell
    Edward J. Nell is an American economist and a professor at the New School for Social Research . Nell has been a member of the New School faculty since 1969, and has held the rank of Malcolm B...



  • Sir Arthur Lewis
  • Paul Romer
    Paul Romer
    Paul Michael Romer is an American economist, entrepreneur, and activist. He is currently the Henry Kaufman Visiting Professor at New York University Stern School of Business and will be joining NYU as a full time professor beginning in 2011...

  • Robert Lucas, Jr.
    Robert Lucas, Jr.
    Robert Emerson Lucas, Jr. is an American economist at the University of Chicago. He received the Nobel Prize in Economics in 1995 and is consistently indexed among the top 10 economists in the Research Papers in Economics rankings. He is married to economist Nancy Stokey.He received his B.A. in...

  • Robert J. Barro
  • Xavier Sala-i-Martin
    Xavier Sala-i-Martin
    Xavier Sala-i-Martin is a professor of economics at Columbia University.Sala-i-Martin earned his degree from the Autonomous University of Barcelona in 1985 and his Ph.D. from Harvard University in 1990, both in economics...

  • Oded Galor
    Oded Galor
    -Work:Galor has made significant contributions to the study of income distribution and economic growth, the transition from stagnation to growth, and human evolution and economic development...

  • Trevor Swan
    Trevor Swan
    Trevor Winchester Swan was an Australian economist. He is best known for his work on the neoclassical model of economic growth, published simultaneously with that of Robert Solow, for his work on integrating internal and external balance, represented by the Swan diagram and for pioneering work in...

  • Daron Acemoglu
    Daron Acemoglu
    Kamer Daron Acemoğlu is a Turkish-American economist of Armenian origin. He is currently the Elizabeth and James Killian Professor of Economics at Massachusetts Institute of Technology and winner of the 2005 John Bates Clark Medal. He is among the in the world according to IDEAS/RePEc...



See also



  • Boom and bust
    Boom and bust
    A credit boom-bust cycle is an episode characterized by a sustained increase in several economics indicators followed by a sharp and rapid contraction. Commonly the boom is driven by a rapid expansion of credit to the private sector accompanied with rising prices of commodities and stock market index...

  • Capital accumulation
    Capital accumulation
    The accumulation of capital refers to the gathering or amassing of objects of value; the increase in wealth through concentration; or the creation of wealth. Capital is money or a financial asset invested for the purpose of making more money...

  • Demographic economics
    Demographic economics
    Demographic economics or population economics is the application of economics to demography, the study of human populations, including size, growth, density, distribution, and vital statistics.Analysis includes economic determinants and consequences of:...

  • Development economics
    Development economics
    Development Economics is a branch of economics which deals with economic aspects of the development process in low-income countries. Its focus is not only on methods of promoting economic growth and structural change but also on improving the potential for the mass of the population, for example,...

  • Eco-sufficiency
    Eco-sufficiency
    Eco-sufficiency requires a reduction of the level of production/consumption in those parts of the world with the highest standards of living beyond reducing the use of natural resources as well as waste and emissions per unit of production/consumption...

  • Ecological economics
    Ecological economics
    Image:Sustainable development.svg|right|The three pillars of sustainability. Clickable.|275px|thumbpoly 138 194 148 219 164 240 182 257 219 277 263 291 261 311 264 331 272 351 283 366 300 383 316 394 287 408 261 417 224 424 182 426 154 423 119 415 87 403 58 385 40 368 24 347 17 328 13 309 16 286 26...

  • Economic determinism
    Economic determinism
    Economic determinism is the theory which attributes primacy to the economic structure over politics in the development of human history. It is usually associated with the theories of Karl Marx, although many Marxist thinkers have dismissed plain and unilateral economic determinism as a form of...

  • Economic development
    Economic development
    Economic development generally refers to the sustained, concerted actions of policymakers and communities that promote the standard of living and economic health of a specific area...

  • Export-led growth
    Export-led growth
    Export-led growth is an economic strategy used by some developing countries. This strategy seeks to find a niche in the world economy for a certain type of export. Industries producing this export may receive governmental subsidies and better access to the local markets...

  • FORGE Program
    FORGE Program
    FORGE is a United States based nonprofit organization that works with displaced communities in Africa. FORGE was founded by Stanford University graduate Kjerstin Erickson at the age of 20 in 2003. Since its founding, FORGE has implemented over sixty community development projects that have served...

  • Growth accounting
    Growth accounting
    Growth accounting is a procedure used in economics to measure the contribution of different factors to economic growth and to indirectly compute the rate of technological progress, measured as a residual, in an economy...

  • Growth elasticity of poverty
    Growth Elasticity of Poverty
    Growth elasticity of poverty is the percentage reduction in poverty rates associated with a percentage change in mean income.Mathematically;where PR is a poverty measure and y is per capita income...

  • Human development theory
    Human development theory
    Human development theory is a theory that merges older ideas from ecological economics, sustainable development, welfare economics, and feminist economics. It seeks to avoid the overt normative politics of most so-called "green economics" by justifying its theses strictly in ecology, economics and...



  • Index of Leading Indicators
    Index of Leading Indicators
    The Conference Board Leading Economic Index is an American economic leading indicator intended to forecast future economic activity. It is calculated by The Conference Board, a non-governmental organization, which determines the value of the index from the values of ten key variables. These...

  • Investment
    Investment
    Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...

  • Investment-specific technological progress
    Investment specific technological progress
    Investment-specific technological progress refers to progress that requires investment in new equipment and structures embodying the latest technology in order to realize its benefits.-Introduction:...

  • The Limits to Growth
  • List of countries by GDP (real) growth rate
  • Malthusian trap
    Malthusian trap
    The Malthusian trap, named after political economist Thomas Robert Malthus, suggests that for most of human history, income was largely stagnant because technological advances and discoveries only resulted in more people, rather than improvements in the standard of living...

  • Measures of national income
  • Production-possibility frontier
  • Stagflation
    Stagflation
    In economics, stagflation is a situation in which the inflation rate is high and the economic growth rate slows down and unemployment remains steadily high...

  • Steady state economy
  • Sustainability
    Sustainability
    Sustainability is the capacity to endure. For humans, sustainability is the long-term maintenance of well being, which has environmental, economic, and social dimensions, and encompasses the concept of union, an interdependent relationship and mutual responsible position with all living and non...

  • Unified growth theory
    Unified growth theory
    Unified growth theory was developed to address the inability of endogenous growth theory to explain key empirical regularities in the growth processes of individual economies and the world economy as a whole. Endogenous growth theory was satisfied with accounting for empirical regularities in the...

  • Zero growth
    Zero growth
    Zero growth is a theory that all economic activities and policies should be oriented towards achieving a state of equilibrium, a steady state economy....



Further reading

  • Edward J. Nell
    Edward J. Nell
    Edward J. Nell is an American economist and a professor at the New School for Social Research . Nell has been a member of the New School faculty since 1969, and has held the rank of Malcolm B...

     (1980) Growth, Profits and Property, edited by E.J. Nell, Cambridge: Cambridge University Press, 1980.
  • Edward J. Nell
    Edward J. Nell
    Edward J. Nell is an American economist and a professor at the New School for Social Research . Nell has been a member of the New School faculty since 1969, and has held the rank of Malcolm B...

     (1988) Prosperity and Public Spending: Transformational Growth and the Role of the State, London, UK: Unwin and Hyman.
  • Joseph Halevi, David Laibman and Edward J. Nell
    Edward J. Nell
    Edward J. Nell is an American economist and a professor at the New School for Social Research . Nell has been a member of the New School faculty since 1969, and has held the rank of Malcolm B...

     (eds.) (1992) Beyond the Steady State: Essays in the Revival of Growth Theory, edited with , London, UK:
  • Barro, Robert J. (1997) Determinants of Economic Growth: A Cross-Country Empirical Study. MIT Press: Cambridge, MA.
  • Edward J. Nell
    Edward J. Nell
    Edward J. Nell is an American economist and a professor at the New School for Social Research . Nell has been a member of the New School faculty since 1969, and has held the rank of Malcolm B...

     (1998) The General Theory of Transformational Growth: Keynes After Sraffa. Cambridge University Press, 1998.
  • Edward J. Nell
    Edward J. Nell
    Edward J. Nell is an American economist and a professor at the New School for Social Research . Nell has been a member of the New School faculty since 1969, and has held the rank of Malcolm B...

     (1998) Transformational Growth and the Business Cycle, London, Routledge.
  • Argyrous, G., Forstater, M and Mongiovi, G. (eds.) (2004) Growth, Distribution, And Effective Demand: Essays in Honor of Edward J. Nell. New York: M.E. Sharpe.
  • Galor, O. (2005) From Stagnation to Growth: Unified Growth Theory. Handbook of Economic Growth, Elsevier.
  • Jones, Charles I. (2002) Introduction to Economic Growth 2nd ed. W. W. Norton & Company: New York, N.Y.
  • Kirzner, Israel. (1973) Competition and Entrepreneurship
  • Edward J. Nell
    Edward J. Nell
    Edward J. Nell is an American economist and a professor at the New School for Social Research . Nell has been a member of the New School faculty since 1969, and has held the rank of Malcolm B...

     and Willi Semmler (eds.) (1991) Nicholas Kaldor and Mainstream Economics: Confrontation and Convergence, edited with Willi Semmler, Essays from the Kaldor Conference, London, UK: Macmillan, 1991.
  • Puthenkalam, John Joseph, "Integrating Freedom, Democracy and Human Rights into Theories of Economic Growth", Manila, 1998.
  • Lucas, Robert E., Jr.
    Robert Lucas, Jr.
    Robert Emerson Lucas, Jr. is an American economist at the University of Chicago. He received the Nobel Prize in Economics in 1995 and is consistently indexed among the top 10 economists in the Research Papers in Economics rankings. He is married to economist Nancy Stokey.He received his B.A. in...

     (2003) The Industrial Revolution: Past and Future, Federal Reserve Bank of Minneapolis, Annual Report online edition
  • Mises, Ludwig E. (1949) Human Action 1998 reprint by the Mises Institute
  • Schumpeter, Jospeph A. (1912) The Theory of Economic Development 1982 reprint, Transaction Publishers
  • Weil, David N. (2008) Economic Growth 2nd ed. Addison Wesley.
  • Vladimir N. Pokrovskii (2011) Econodynamics. The Theory of Social Production, Springer, Berlin.

Articles and lectures

  • Economic Growth by Paul Romer, The Concise Encyclopedia of Economics.
  • "Economic growth." Encyclopædia Britannica. 2007. Encyclopædia Britannica Online. 17 November 2007.
  • Beyond Classical and Keynesian Macroeconomic Policy. Paul Romer
    Paul Romer
    Paul Michael Romer is an American economist, entrepreneur, and activist. He is currently the Henry Kaufman Visiting Professor at New York University Stern School of Business and will be joining NYU as a full time professor beginning in 2011...

    's plain-English explanation of endogenous growth theory.
  • Does Economic Growth increase Living Standards?
  • Who's afraid of economic growth? Essay by Daniel Ben-Ami on the contemporary anxiety about economic growth.
  • CEPR Economics Seminar Series Two seminars on the importance of growth with economists Dean Baker
    Dean Baker
    Dean Baker is an American macroeconomist and co-founder of the Center for Economic and Policy Research, with Mark Weisbrot. He previously was a senior economist at the Economic Policy Institute and an assistant professor of economics at Bucknell University. He has a Ph.D...

     and Mark Weisbrot
    Mark Weisbrot
    Mark Weisbrot is an American economist, columnist and co-director, with Dean Baker, of the Center for Economic and Policy Research in Washington, D.C. As a commentator, he contributes to publications such as New York Times, the UK's The Guardian, and Brazil's largest newspaper, Folha de S...

  • On global economic history by Jan Luiten van Zanden. Explores the idea of the inevitability of the Industrial Revolution.
  • The Economist Has No Clothes – essay by Robert Nadeau
    Robert Nadeau (science historian)
    Robert Lee Nadeau is an American Professor of English at George Mason University. His recent research focuses on integration between economic and environmental thinking.-Bibliography:*Books...

     in Scientific American
    Scientific American
    Scientific American is a popular science magazine. It is notable for its long history of presenting science monthly to an educated but not necessarily scientific public, through its careful attention to the clarity of its text as well as the quality of its specially commissioned color graphics...

     on the basic assumptions behind current economic theory
  • World Growth Institute
    World Growth Institute
    The World Growth Institute projects itself an international NGO serving as a think tank for economic growth issues, and it says that "Staff and contributing fellows comprise former trade diplomats and other government officials to discuss economic growth issues. Key U.S. economists contributing to...

    . An organization dedicated to helping the developing world realize its full potential via economic growth.
  • Economics for Everyone- Evaluating Economic Growth
  • Understanding the world today Multiple reports on economic growth

Data