Causes of economic growth: little review of four models.

What we currently have, mainly depends of the economic growth of the past. The difference amongst the life levels is showed through the national income or the Gross National Product per capita.  The level of this magnitude is caused by the past of a country.

What are the causes of the growth?

Mokyr determines a key ingredient (but no essential): the technologic creativity.

As we have seen if the society is under the PFF the life level is lowest than the one we can wait (by that this situation is named inefficiency).

This autor determines that the growth depends of four factors regarding four authors:

• Investment: where the work productivity is directly related to the quality of the tools and the equipments as well as the quantity.  When the capital rythm of increase is bigger than the work force, there is economical growht; this growth is also known as "Robert Solow's growth".

• Expansion of the trading because of the interchange of goods, services and production factors. This is known as "Adam Smith's growth".  The trade determines the work division through the specialization.  The capacity to make specific labours means an increase of productivity.

• Scale economies: if there is a population increase it could be possible to increase the income per habitant where the regions are little.  The increase population allows to this region the speciality and the production increase (North and Thomas).  Besides that some public goods are only available when the population is big.  However the population increase does not mean economic growth, because that increase could lead to greater pressure on food

• Increase of knowledge: technical progress and institutions development.  The previous concepts are regarding the "Schumpeter's growth" where the capital expansion allows a continuos increase of innovation financed by the credits of the banks.

All of this growth models are perfectly compatibles among them.

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

Jones E.L. (1990). El milagro europeo. Alianza. Madrid. Introducción y cap. 12.

Mokyr. J. (1987).  La revolución industrial y la Nueva Historia Económica", "Revista de Historia Económica".  Vol. 2. pp 203-41; vol 3, pp 441-82.

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

Theories of economic change: environment.

Regarding to theories of economic change the problems of the environment can be focused on: differences among the regions and how the environment changes affects to the development of a country.



Different authors have written about the environment and the economical change.  Let us see three opinions.

Karl August Wittfogel (1896 - 1988): he analyzed the ancient and modern era. His conclusions are related to the development of different cultures around rivers and deltas needed to make it work the irrigation systems.  These kind of systems brought about a centralization where the autor based his ideas about the oriental despotism. The one who has the control of the irrigation systems has the control of the economy.

The environment factors determine the kind of economic organization. This organization affects to the results of an economy.

The main critique to this theory is that the factors are independent each others, that is to say, for the develop of the despotism, it does not suggest the existence of irrigation systems and vice versa. Besides, at the old chinese empire, the peasants organized their own irrigation systems, without any control of the goverment.

     

Eric Jones (1936): he analyzes and explains the origin of the industrial revolution in Europe.  The differences in the XIV century between Europe and Asia were not very big, however, different environmental factors make this differences started to be relevant:

Europe has the luck of to own fertile and separated areas by natural barriers, that it did not allow contact among them. This fact means to develop a decentralized power (unlike that Asia where the population was concentrated around the deltas).  The european natural disasters kept untouched the physical capital.  It had the consequence to develop an increase of productivity and per capita income.  

The demographic european model is different from the asiatic (It easiest to recover than the asiatic).

The climate is much more varied in Europe than in Asia.  The consequence for Europe is more oportunnities regarding natural resources.

Finally, the physical european situation allow to this continent, to be isolated from invasions (mongols and turks). 

Jones considers countries as enterprises. These countries competed among them with the end to achieve the richness of each others.

Besides the countries started to developed a kind of organization where the goverments supplied defense and justice in exchange for a tax.  This situation allows to develop scale economics (the largest the population, the lower the cost associated to this population).  However there is a point where the increase of this population is negative.  This point is negative proportional to technology (how much more is invested in technology later this point appear.

There is another theories that try to explain the economic change regarding the environment by the climates change. However this theories are not adequate because of the lack of predictive.

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.