Market as the key of growth.

One of several theories that try to explain the growth was developed by Adam Smith (1723 - 1790).

According to this economist (1723 - 1790), the key of growth is related to the market expansion.

The market accomplishes three functions: 

• It gives incentives to people to increase their productivity. 

• Any efficiency of production in any place of the market is immediately known for the rest (flawless information).

• The concentration of the demand allows to increase the specialization linked to the idea of trade.  People deals with that goods which have more productivity.

Smith considered that the growth of market had some limits.  For example, regarding technology he said that from XIX century on, it would not be more progress.  It means that the PPF could not be improve and the progress could be stopped.

The main critique to this theory is the non consideration of the technology.  Anothe critique is that the existence of a market does not warrant growth.

One of the contributions of Adam Smith was the "invisible hand". This "hand" means that the individual interest, that explains certain behavior of people, are guided, unwittingly, to contribute to the maximun wellness of population.

Bibliography:

Cameron R. (1992).  Historia Económica Mundial.  Alianza.  Capítulo 1.

North, D.C.,  y Tomas, R.P. (1989).  El nacimiento del mundo occidental.  Una nueva historia económica (900-1700).  Capítulos 1 y 2.