Perspectives on Growth Theory

This essay relates recent developments in growth theory to problems and ideas that first engaged R. F. Harrod, E. Domar, and their neoclassical successors. The body of ‘new growth theory’ began by finding special ways to assume that there are constant returns to capital. It is shown that this is a v...

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Bibliographic Details
Published in:	The Journal of economic perspectives Vol. 8; no. 1; pp. 45 - 54
Main Author:	Solow, Robert M.
Format:	Journal Article
Language:	English
Published:	Nashville American Economic Association 01-01-1994
Subjects:	Business growth Business innovation Computer simulation Economic development Economic growth Economic growth models Economic growth rate Economic growth theories Economic models Economic theory Investments Labor force Labor productivity Long run economic growth Return on capital Symposia: New Growth Theory Technological innovation Unemployment
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Summary:	This essay relates recent developments in growth theory to problems and ideas that first engaged R. F. Harrod, E. Domar, and their neoclassical successors. The body of ‘new growth theory’ began by finding special ways to assume that there are constant returns to capital. It is shown that this is a very nonrobust assumption, thus not a good basis for growth theory. More promising is the attempt to create a genuinely endogenous theory of the process of innovation. This notion has always been present in the literature or just beneath the surface. Current ideas, for all their ingenuity, may be too mechanical.
ISSN:	0895-3309 1944-7965
DOI:	10.1257/jep.8.1.45