Economics Dictionary of ArgumentsHome
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| New Growth Theory: The New Growth Theory in economics argues that economic growth is driven by endogenous factors such as technology, human capital, and innovation. It challenges traditional theories by emphasizing the role of knowledge, learning, and innovation in sustaining long-term growth, focusing on how policies can foster these drivers._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Economic Theories on New Growth Theory - Dictionary of Arguments
Kurz I 260 New Growth Theory/Economic theories/Kurz: (…) [there are] reasons for the recent resumption of (some special form of) long-period analysis in 'new' growth theory. Until a few decades ago, the number of commodities and, as a consequence, the time horizon in intertemporal general equilibrium theory was assumed to be finite and, therefore, arbitrary. Problem: The principal objection to the restriction to a finite number of goods is that it requires a finite horizon and there is no natural way to choose the final period. Moreover, since there will be terminal stocks in the final period there is no natural way to value them without contemplating future periods in which they will be used (McKenzie 1987: 507)(1) The introduction of an infinite horizon turned out to be critical (see also Burgstaller 1994: 43-8)(2). It pushed the analysis inevitably towards the long period, albeit only in the very special sense of steady state. Endogenous growth/Robert Lucas: This was clearly spelled out, for instance, by Robert Lucas in a contribution to the theories of endogenous growth. He observed that [Flor any initial capital K(O) > 0, the optimal capital-consumption path (K(t), c(t)) will converge to the balanced path asymptotically. That is, the balanced path will be a good approximation to any actual path 'most' of the time [and that] this is exactly the reason why the balanced path is interesting to us. (Lucas 1988: 11)(3) Lucas thus advocated a (re-)switching from an intertemporal analysis to a steady-state one. Since the balanced path of the intertemporal model is the only path analysed by Lucas, in the perspective under consideration the intertemporal model may be regarded simply as a step toward obtaining a rigorous steady-state setting. Neoclassical economics: Moreover, Lucas abandoned one of the characteristic features of all neoclassical theories, that is, income distribution is determined by demand and supply of factors of production. If we concentrate on the balanced path, capital in the initial period cannot be taken as given along with other 'initial endowments'. Since distribution cannot be determined by demand and supply of capital and labour, in Lucas's model it is determined in the following way. Labour is considered the vehicle of 'human capital', that is, a producible factor. Hence all factors are taken to be producible and the rate of profits is determined as in Chapter II of Production of Commodities by Means of Commodities (Sraffa 1960)(4). At the beginning of that chapter (S 4—5), wages Kurz I 261 are regarded as entering the system 'on the same footing as the fuel for the engines or the feed for the cattle'. In this case the rate of profits and prices are determined by the socio-technical conditions of production alone - the 'methods of production and productive consumption' (Sraffa 1960:3)(4). The introduction of several alternative processes of production does not change the result. >P. Sraffa, >Production theory, cf. >Growth/Neoclassical Economics, >Exogenous Growth/Neoclassical Economics, >Endogenous growth. 1. McKenzie, L. W. (1987) 'General Equilibrium', The New Palgrave A Dictionary of Economics, edited by J. Eatwell, P. Newman and M. Milgate, London: Macmillan, vol. 11: 498-512. 2. Burgstaller, A. (1994) Property and Prices. Toward a Unified Theory of Value, Cambridge: Cambridge University Press. 3. Lucas, R. E. (1988) 'On the Mechanisms of Economic Development', Journal of Monetary Economics, 22: 3-42. 4. Sraffa, P. (1960) Production of Commodities hy Means of Commodities, Cambridge: Cambridge University Press. Kurz, Heinz D. and Salvadori, Neri. „Endogenous growth in a stylised 'classical' model“. In: Kurz, Heinz; Salvadori, Neri 2015. Revisiting Classical Economics: Studies in Long-Period Analysis (Routledge Studies in the History of Economics). London, UK: Routledge._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Economic Theories Kurz I Heinz D. Kurz Neri Salvadori Revisiting Classical Economics: Studies in Long-Period Analysis (Routledge Studies in the History of Economics). Routledge. London 2015 |
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> Counter arguments in relation to New Growth Theory
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