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.

The economic development in historical perspective

Through the following two points we are going to introduce the economic development in historical perspective.

• Economic History.
• Growth and development.

Economic History.  Purpose.

"Explain the structure, operation and the outcome of the economies" (Douglas North)

An economist is worried about the general characteristics of a society (structure), studies the institutional working (families and state), the technology operation, ideology of society and the preferences (institutional scope of oportunities and restrictions).

There is not only a concern about the economic performance but also about the factors needed for the economic growth and development (because of the existence of countries rich and poor).

The classical economy stablished a tripartite classification of the production factors: land, work and capital.  The total production of a economy is determined by the quantity of this factors used.

            

Growth and development.

The growth is possible thanks to the technology application because of capital investments.  These investments can be:

• Extensive: when the investments is made over more than one particular factor (land, work and capital).
• Intensive: when  the resources are used in a more effective way (that is to say, we have the same resources, but we are able to use better).

By other hand the development is the economic growth with a structural change.  This changes are substantial regarding to the structure and the organization of the economy.

Growth and development are not the same concepts.  As a rule, in countries where the industrialization is being born, to a certain extent, there is a big change in the Economy (development), while the growth is only starting to emerge (for example in UK during the first step of its industrialization).

The progress is linked to the development.  The growth of the economy is a reversible process, that is to say, the decadency could follow to this growth.  However when we speak about development and progress of economy, unfrequently it appears a regresive cycle wherein a country is able to lose out structures or organizations created in the past.

By other hand the progres (according to Cameron) is related to moral or subjective issues, unlike the growth and development which correspond to objective issues.

To understand the difference between growth and efficiency we will use the support of the production-possibility frontier example:

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.