Economic growth 69415 225109438 2008-07-11T22:38:37Z Rajah 107598 /* Measuring growth */ typo {{Refimprove|date=March 2007}} [[Image:World GDP Capita 1-2003 A.D.png|right|thumb|200px|World [[GDP]]/capita changed very little for most of human history before the [[industrial revolution]]. (Note the empty areas mean no data, not very low levels. There are data for the years 1, 1000, 1500, 1600, 1700, 1820, 1900, and 2003.)]] '''Economic growth''' is the increase in value of the goods and services produced by an [[economics|economy]]. It is conventionally measured as the percent rate of increase in ''real [[gross domestic product]]'', or ''real GDP''. Growth is usually calculated in ''real'' terms, i.e. [[real vs. nominal in economics|inflation-adjusted]] terms, in order to net out the effect of [[inflation]] on the price of the goods and services produced. In [[economics]], "economic growth" or "economic growth theory" typically refers to growth of [[potential output]], i.e., production at "[[full employment]]," which is caused by growth in [[aggregate demand]] or observed output. As an area of study, ''economic growth'' is generally distinguished from ''[[development economics]]''. The former is primarily the study of how rich countries can advance their economies. The latter is the study of how poor countries can catch up with rich ones. As economic growth is measured as the annual percent change of gross domestic product (GDP), it has all the advantages and drawbacks of that measure. ==Short-term stabilization and long-term growth== Economists draw a distinction between short-term economic stabilization and long-term economic growth. The topic of economic growth is primarily concerned with the long run. The short-run variation of economic growth is termed the [[business cycle]], and almost all economies experience periodical [[recession]]s. The cycle can be a misnomer as the fluctuations are not always regular. Explaining these fluctuations is one of the main focuses of [[macroeconomics]]. There are different schools of thought as to the causes of recessions but some consensus- see [[Keynesianism]], [[Monetarism]], [[New classical economics]] and [[New Keynesian economics]]. Oil shocks, war and harvest failure are obvious causes of recession. Short-run variation in growth has generally dampened in higher income countries since the early 90s and this has been attributed, in part, to better macroeconomic management. The long-run path of economic growth is one of the central questions of [[economics]]; in spite of the problems of measurement, an increase in GDP of a country is generally taken as an increase in the standard of living of its inhabitants. Over long periods of time, even small rates of annual growth can have large effects through compounding (see [[exponential growth]]). A growth rate of 2.5% per annum will lead to a doubling of GDP within 28 years, whilst a growth rate of 8% per annum (experienced by some [[Four Asian Tigers]]) will lead to a doubling of GDP within 9 years. This exponential characteristic can exacerbate differences across nations. For example, the difference in the annual growth from country A to country B will multiply up over the years. A growth rate of 5% seems similar to 3%, but over two decades, the first economy would have grown by 165%, the second only by 80%. In the early 20th century, it became the policy of most nations to encourage growth of this kind. To do this required enacting policies, and being able to measure the results of those policies. This gave rise to the importance of [[econometrics]], or the field of creating measurements for underlying conditions. Terms such as "unemployment rate", "[[Gross Domestic Product]]" and "rate of inflation" are part of the measuring of the changes in an economy. In mainstream economics, the purpose of government policy is to encourage economic activity without encouraging the rise in the general level of prices (in other words, increase GDP without creating inflation). This combination is seen as, at the macro-scale (see [[macroeconomics]]) to be indicative of an increasing stock of capital. The argument runs that if more money is changing hands, but the prices of individual goods are relatively stable, then it is proof that there is more productive capacity, and therefore more capital, because it is capital that is allowing more to be made at a lower cost per unit. ''See [[Economies of scale]], [[Inflation]], [[Hyperinflation]], [[Price]], [[Supply and demand]]''. ==Measuring growth== [[Image:Gdp accumulated change.png|right|thumb|250px|[[GDP]] increase since 1990, in major countries.]] [[Image:Gdp real growth rate 2007 CIA Factbook.PNG|thumb|right|250px|World map showing [[List of countries by GDP (real) growth rate|GDP real growth rates]] for 2007.]] The real [[List of countries by GDP per capita|GDP ''per capita'']] of an economy is often used as an indicator of the average [[standard of living]] of individuals in that country, and economic growth is therefore often seen as indicating an increase in the average standard of living. This could have the overall effect of an increased GDP per capita but with a lower standard of living for many or even the majority population. There are several problems in using growth in GDP ''per capita'' to measure general well-being. * GDP per capita growth varies depending on the basket of goods used to deflate the nominal value or on the base year of measure. * GDP per capita does not provide any information relevant to the distribution of income in a country. * GDP per capita does not take into account negative externalities from environmental damage consequent to economic growth. Thus, the amount of growth may be overstated once we take environmental damage into account. * GDP also includes negative expenditures, such as repairing polluted water supplies or building prisons. * GDP per capita does not take into account positive externalities that may result from services such as education and health. * GDP per capita excludes the value of all the activities that take place outside of the market place (such as cost-free leisure activities like hiking). * GDP per capita does not include activities of the informal sector of the economy in precise form. Only as approximate estimates. * GDP per capita does not account for purchases on goods that were not produced in a given fiscal year, such as used cars or houses. * GDP per capita does not provide any information about the appreciation or depreciation of goods already produced, which may reflect a change in standard of living. (dilapidation in residential buildings, for example) Economists are well aware of these deficiencies in GDP, thus, it should always be viewed merely as an indicator and not an absolute scale. Economists have developed mathematical tools to measure inequality, such as the [[Gini Coefficient]]. There are also alternate ways of measurement that consider the negative externalities that may result from pollution and resource depletion (see [[Green Gross Domestic Product]].) The flaws of GDP may be important when studying public policy, however, for the purposes of economic growth in the "short" long run it tends to be a very good indicator (in the very long run it is greatly distorted by the large changes in relative prices and sectors in the economy). There is no other indicator in economics which is as universal or as widely accepted as the GDP. Other [[Measures of national income and output|measures of national income]], such as the [[Index of Sustainable Economic Welfare]] or the [http://www.rprogress.org/projects/gpi/ Genuine Progress Indicator], have been developed in an attempt to give a more complete picture of the level of well-being, but there is no consensus as to which, if any, is a better measure than GDP. GDP still remains by far the most often-used measure, especially since, all else equal, a rise in real GDP is correlated with an increase in the availability of jobs, which are necessary to most individuals' survival. ==The history of economic growth theory== ===Origins of the concept and theories of economic growth=== In 1377, the [[Islamic economics in the world|Arabian economic]] thinker [[Ibn Khaldun]] provided one of the earliests descriptions of economic growth in his famous ''[[Muqaddimah]]'' (known as ''Prolegomena'' in the [[Western world]]): {{quote|"When civilization [population] increases, the available labor again increases. In turn, luxury again increases in correspondence with the increasing profit, and the customs and needs of luxury increase. Crafts are created to obtain luxury products. The value realized from them increases, and, as a result, profits are again multiplied in the town. Production there is thriving even more than before. And so it goes with the second and third increase. All the additional labor serves luxury and wealth, in contrast to the original labor that served the necessity of life."<ref>[[Ibn Khaldun]], ''[[Muqaddimah]]'', 2:272-73, quoted in Dieter Weiss (1995), "Ibn Khaldun on Economic Transformation", ''International Journal of Middle East Studies'' '''27''' (1), p. 29-37 [30].</ref>}} In the [[early modern period]], some people in [[Western Europe]]an nations developed the idea that economies could "grow", that is, produce a greater economic surplus which could be expended on something other than mere subsistence. This surplus could then be used for consumption, warfare, or civic and religious projects. The previous view was that only increasing either population or tax rates could generate more surplus money for the Crown or country. Now it is generally recognized that economic growth also corresponds to a process of continual rapid replacement and reorganization of human activities facilitated by investment motivated to maximize returns. This [[exponential growth|exponential]] evolution of our self-organized life-support and cultural systems is remarkably creative and flexible, but highly unpredictable in many ways. Since science still has no good way of modeling complex self-organizing systems, various efforts to model the long term evolution of economies have produced few useful results. During much of the [[Mercantilism|"Mercantilist"]] period, growth was seen as involving an increase in the total amount of specie, that is circulating medium such as silver and gold, under the control of the state. This [[Bullionism|"Bullionist"]] theory led to policies to force trade through a particular state, the acquisition of colonies to supply cheaper raw materials which could then be manufactured and sold. Later, such trade policies were justified instead simply in terms of promoting domestic trade and industry. The post-Bullionist insight that it was the increasing capability of manufacturing which led to policies in the 1700s to encourage manufacturing in itself, and the formula of importing raw materials and exporting finished goods. Under this system high tariffs were erected to allow manufacturers to establish "[[factory|factories]]". Local markets would then pay the fixed costs of capital growth, and then allow them to export abroad, undercutting the prices of manufactured goods elsewhere. Once competition from abroad was removed, prices could then be increased to recoup the costs of establishing the business. Under this theory of growth, the road to increased national wealth was to grant monopolies, which would give an incentive for an individual to exploit a market or resource, confident that he would make all of the profits when all other extra-national competitors were driven out of business. The "[[Dutch East India Company|Dutch East India company]]" and the "[[British East India Company|British East India company]]" were examples of such state-granted trade [[monopoly|monopolies]]. In this period the view was that growth was gained through "advantageous" trade in which specie would flow in to the country, but to trade with other nations on equal terms was disadvantageous. It should be stressed that Mercantilism was not simply a matter of restricting trade. ''Within'' a country, it often meant breaking down trade barriers, building new roads, and abolishing local toll booths, all of which expanded markets. This corresponded to the centralization of power in the hands of the Crown (or "[[Political absolutism|Absolutism]]"). This process helped produce the modern [[nation-state]] in Western Europe. Internationally, Mercantilism led to a contradiction: growth was gained through trade, but to trade with other nations on equal terms was disadvantageous. This &ndash; along with the rise of nation-states &ndash; encouraged several major wars. ===Classical growth theory=== The modern conception of economic growth began with the critique of Mercantilism, especially by the [[physiocrats]] and with the [[Scottish Enlightenment]] thinkers such as [[David Hume]] and [[Adam Smith]], and the foundation of the discipline of modern [[political economy]]. The theory of the physiocrats was that productive capacity, itself, allowed for growth, and the improving and increasing capital to allow that capacity was "the wealth of nations". Whereas they stressed the importance of agriculture and saw urban industry as "sterile", Smith extended the notion that manufacturing was central to the entire economy. [[David Ricardo]] would then argue that trade was a benefit to a country, because if one could buy a good more cheaply from abroad, it meant that there was more profitable work to be done here. This theory of "[[comparative advantage]]" would be the central basis for arguments in favor of [[free trade]] as an essential component of growth. Income per capita was essentially flat until the [[industrial revolution]]. This period of time is called the Malthusian period, since it was governed by the principles explained by [[Thomas Malthus]] in his "Essay on the Principle of Population." In essence, Malthus said that any growth in the economy would translate into a growth in population. Thus, although aggregate income could increase, income per capita was bound to stay roughly constant. The mainstream theory of economic growth states that with the industrial revolution and advancements in medicine, life expectation increased, infant mortality decreased, and the payoff to receiving an education was higher. Thus, parents began to place more value on the quality of their children and not on the quantity. This led to a drop in the fertility rates of most industrialized nations. This is known as the breakdown of the Malthusian regime. With income increasing faster than population growth, industrialised economies substantially increased their incomes per capita in the next centuries. ===Creative destruction and economic growth=== {{main|Creative destruction}} Many economists view [[entrepreneurship]] as having a major influence on a society's rate of technological progress and thus economic growth.<ref name="Britannica Growth">"economic growth." Encyclopædia Britannica. 2008. Encyclopædia Britannica 2006 Ultimate Reference Suite DVD 14 June 2008.</ref> [[Joseph Schumpeter]] was a key figure in understanding the influence of [[entrepreneur]]s on technological progress.<ref name="Britannica Growth" /> In Schumpeter's ''[[Capitalism, Socialism and Democracy]]'', published in 1942, an entrepreneur is a person who is willing and able to convert a new idea or [[invention]] into a successful [[innovation]]. Entrepreneurship forces "[[creative destruction]]" across markets and industries, simultaneously creating new products and [[business model]]s. In this way, creative destruction is largely responsible for the dynamism of industries and long-run economic growth. Former [[Federal Reserve System|Federal Reserve]] chairman [[Alan Greenspan]] has described the influence of creative destruction on economic growth as follows: "Capitalism expands wealth primarily through creative destruction—the process by which the cash flow from obsolescent, low-return capital is invested in high-return, cutting-edge technologies." [http://www.federalreserve.gov/Boarddocs/Speeches/2002/20020503/default.htm] ===The neo-classical growth model=== {{main|Exogenous growth model}} The notion of growth as increased stocks of capital goods (means of production) was codified as the [[Exogenous growth model|Solow-Swan Growth Model]], which involved a series of equations which showed the relationship between labor-time, capital goods, output, and investment. In this modern view, the role of [[technological change]] became crucial, even more important than the [[capital accumulation|accumulation of capital]]. This model, developed by [[Robert Solow]]<ref>Robert M. Solow (1956), "A Contribution to the Theory of Economic Growth," ''Quarterly Journal of Economics'', 70(1), p[http://links.jstor.org/sici?sici=0033-5533%28195602%2970%3A1%3C65%3AACTTTO%3E2.0.CO%3B2-M&size=LARGE&origin=JSTOR-enlargePage p. 65]-94.</ref> and [[Trevor Swan]]<ref>Trevor W. Swan (1956). "Economic Growth and Capital Accumulation', ''Economic Record'', 32, pp. 334–61.</ref> in the 1950s, was the first attempt to model long-run growth analytically. This model assumes that countries use their resources [[Efficiency (economics)|efficiently]] and that there are [[diminishing returns]] to capital and labor increases. From these two premises, the neo-classical model makes three important predictions. First, increasing capital relative to labor creates economic growth, since people can be more productive given more capital. Second, poor countries with less capital per person will grow faster because each investment in capital will produce a higher return than rich countries with ample capital. Third, because of diminishing returns to capital, economies will eventually reach a point at which no new increase in capital will create economic growth. This point is called a "[[Steady state (macroeconomics)|steady state]]". The model also notes that countries can overcome this steady state and continue growing by inventing new technology. In the long run, output per capita depends on the rate of saving, but the rate of output growth should be equal for any saving rate. In this model, the process by which countries continue growing despite the diminishing returns is "exogenous" and represents the creation of new technology that allows production with fewer resources. Technology improves, the steady state level of capital increases, and the country invests and grows. The data does not support some of this model's predictions, in particular, that all countries grow at the same rate in the long run, or that poorer countries should grow faster until they reach their steady state. Also, the data suggests the world has slowly increased its rate of growth.<ref name="mystery">Elhanah Helpman, [http://www.amazon.com/dp/067401572X/ The Mystery of Economic Growth], Harvard University Press, 2004.</ref> ===Development economics=== {{main|development economics}} The latter half of the 20th century, with its global economy of a few very wealthy nations and many very poor nations, led to the study of how the transition from subsistence and resource-based economies to production and consumption based-economies occurred. This led to the field of [[development economics]], including the work of [[Nobel laureates]] [[Amartya Sen]] and [[Joseph Stiglitz]]. ===New growth theory=== {{main|Endogenous growth theory}} Growth theory advanced again with the theories of economist [[Paul Romer]] in the late 1980s and early 1990s. Other important new growth theorists include [[Robert Lucas, Jr.|Robert E. Lucas]] and [[Robert Barro|Robert J. Barro]]. Unsatisfied with Solow's explanation, economists worked to "endogenize" technology in the 1980s. They developed the [[endogenous growth theory]] that includes a mathematical explanation of technological advancement.<ref>Romer, 1986</ref><ref>Lucas, 1988</ref> This model also incorporated a new concept of [[human capital]], the skills and knowledge that make workers productive. Unlike [[physical capital]], human capital has increasing rates of return. Therefore, overall there are constant returns to capital, and economies never reach a steady state. Growth does not slow as capital accumulates, but the rate of growth depends on the types of capital a country invests in. Research done in this area has focused on what increases human capital (e.g. education) or technological change (e.g. innovation).<ref name="mystery">Elhanah Helpman, [http://www.amazon.com/dp/067401572X/ The Mystery of Economic Growth], Havard University Press, 2004.</ref> === Other theories === Theories of economic growth, the mechanisms that let it take place and its main determinants abound. One popular theory in the 70's for example was that of the "[[Big Push Model|Big Push]]" which suggested that countries needed to jump from one stage of development to another through a virtuous cycle in which large investments in infrastructure and education coupled to private investment would move the economy to a more productive stage, breaking free from economic paradigms appropriate to a lower productivity stage. <ref>[[Paul Rosenstein-Rodan]]</ref> Analysis of recent economies' success shows a close correlation between growth and climate. It is possible that there is absolutely no actual mechanism between the two, and the relation may be [[spurious relationship|spurious]]. In early human history, economic as well as cultural development was concentrated in warmer parts of the world, like Egypt. According to Acemoglu, Johnson and Robinson, the positive correlation between high income and cold climate is a by-product of history. Former colonies have inherited corrupt governments and geo-political boundaries (set by the colonizers) that are not properly placed regarding the geographical locations of different ethnic groups; this creates internal disputes and conflicts. Also, these authors contend that the egalitarian societies that emerged in colonies without solid native populations, and which could be exploited by individual farmers led to better property rights and incentives for long-term investment than those where native population was large, and together with the tropical climate, colonizers were led to plunder and run, and to create exploitative institutions, a situation which did not foster growth or private property rights. Colonies in temperate climate zones as Australia and USA did not inherit exploitative governments since Europeans were able to inhabit these territories and set up governments that mirrored those in Europe. It is important to note that Sachs, among others, do not believe this to be the case. == Criticism == * '''Arguments against economic growth''' Four major critical arguments are generally raised against economic growth:<ref name="PoM">Case, K.E., and Fair, R.C. 2006. ''Principles of Macroeconomics.'' Prentice Hall. ISBN-10: 0132226456, ISBN-13: 978-0132226455.</ref> #Growth has negative effects on the [[quality of life]]: Many things that affect the quality of life, such as the environment, are not traded or measured in the market, and they can lose value when growth occurs. #Growth encourages the creation of artificial needs: Industry cause consumers to develop new tastes, and preferences for growth to occur. Consequently, "wants are created, and consumers have become the servants, instead of the masters, of the economy."<ref name="PoM">Case, K.E., and Fair, R.C. 2006. ''Principles of Macroeconomics.'' Prentice Hall. ISBN-10: 0132226456, ISBN-13: 978-0132226455.</ref> #Resources: The 2007 United Nations GEO-4 report warns that we are living far beyond our means. The human population is now so large that the amount of resources needed to sustain it exceeds what is available. Humanity’s environmental demand is 21.9 hectares per person while the Earth’s biological capacity is, on average, only 15.7 ha/person.<ref>UNEP’s Global Environment Outlook: environment for development (GEO-4 2007) report. [http://www.unep.org/geo/geo4/media/] </ref> This report supports the basic arguments and obsevations made by [[Thomas Malthus]] in the early 1800s, that is, economic growth depletes non-renewable resources rapidly.<ref>Meadows, D.L., Meadows, D.L., and Randers, J. (1973) ''The Limits to Growth'' Washington, DC: Potomac Associates.</ref> #Distribution of income: The gap between the richest in the world and the poorest is growing.<ref>Pritchett, Lant. "Divergence, Big Time." ''Journal of Economic Perspectives'' Summer 1997 [http://www.jstor.org/view/08953309/di980592/98p0034h/0]</ref> Other intellectuals report that the narrow view of economic growth, combined with globalisation, is creating a scenario where we could see a systemic collapse of our planet's natural resources.{{Fact|date=October 2007}} There are concerns with the environmental and [[ecology|ecological]] effects of economic growth, especially relating to growth in mining, forestry, agricultural and industrial activities. Many researchers feel these sustained environmental effects can have an effect on the whole [[ecosystem]]. They claim the accumulated effects on the ecosystem put a theoretical limit on growth of these activities. Some draw on [[archaeology]] to cite examples of cultures they claim have disappeared because they grew beyond the ability of their ecosystems to support them. The claim is that the limits to growth will eventually make growth in resource consumption impossible. The rate or type of economic growth may have important consequences for the environment (the [[climate]] and [[natural capital]] of ecologies). Concerns about possible negative effects of growth on the environment and society led some to advocate lower levels of growth, from which comes the idea of [[uneconomic growth]], and [[Green parties]] which argue that economies are part of a global society and a global ecology and cannot outstrip their natural growth without damaging them. * '''Arguments supporting economic growth''' Supporters argue that global income inequality is in fact [[Kuznets curve|diminishing]],<ref>[http://www.heritage.org/research/features/index/chapters/htm/index2007_chap1.cfm Global Inequality Fades as the Global Economy Grows] [[Xavier Sala-i-Martin]]. 2007 [[Index of Economic Freedom]].</ref> and that the rapid reduction in global poverty is in large part due to economic growth, according to [[World Bank Group|World Bank]].<ref>[http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/EXTPGI/0,,contentMDK:20263370~menuPK:342777~pagePK:148956~piPK:216618~theSitePK:342771,00.html Poverty, Growth, and Inequality] World Bank</ref> The decline in poverty has been the slowest where growth performance has been the worst (ie. in Africa).<ref>Fischer, Stanley. "Globalization and Its Challenges." ''American Economic Review'' May 2003, p.13.</ref> Happiness increases with a higher GDP/capita, at least up to a level of $15,000 per person.<ref>[http://www.cato.org/pub_display.php?pub_id=8179 In Pursuit of Happiness Research. Is It Reliable? What Does It Imply for Policy?] The Cato institute. April 11, 2007</ref> Many earlier predictions of resource depletion, such as [[Thomas Malthus]] (1798) predictions about this inevitable causing continuing famines in Europe, [http://www.nature.com/nature/journal/v418/n6898/full/nature01013.html;jsessionid=54A677A0A96BB1BB1CAF9EB2002F311C] [[The Population Bomb]] (1968), [http://www.oswego.edu/~edunne/200ch17.html] [http://www.reason.com/news/show/34758.html] [http://www.aei.org/publications/pubID.21588/pub_detail.asp] [[Limits to Growth]] (1972), [http://www.oswego.edu/~edunne/200ch17.html] [http://www.reason.com/news/show/34758.html] [http://www.aei.org/publications/pubID.21588/pub_detail.asp] and the [[Simon-Ehrlich wager]] (1980) [http://www.wired.com/wired/archive/5.02/ffsimon_pr.html] have, according to critics, been proved false, one reason being that advancements in technology and science have continually allowed previously unavailable resources to be utilized economically. [http://www.wired.com/wired/archive/5.02/ffsimon_pr.html] The book [[The Improving State of the World]] argues that the state of humanity is rapidly improving. The [[Austrian School]] argue that the concept of "growth" or the creation and acquisition of more [[Good (economics and accounting)|good]]s and [[Service (economics)|services]] is dependent upon the [[relative]] desires of the individual. Someone may prefer having more [[leisure]] time to acquiring more goods and services. Also, they claim that the notion of growth implies the need for a "central planner" within an [[economy]]. To Austrian economists, such an ideal is antithetical to the concept of a [[Market economy|free market economy]], without the presence of [[government]]al intervention. As such, Austrian economists believe that the [[individual]] should determine how much "growth" s/he desires.<ref>''[[Man, Economy and State]]'' [http://www.mises.org/rothbard/mes/chap12e.asp], Austrian economist [[Murray Rothbard]]</ref> Most growth in economic activity necessitates some growth in consumption of resources - for instance, it is impossible to produce goods without resource and energy inputs, and it is impossible to have the economy running without the further input of energy to transport people and goods. Steady growth is, by its nature, an [[exponential function]]. A quantity that grows according to an exponential function exhibits a doubling in size at a regular time interval (called the [[doubling time]]). If the rate of consumption of a non-renewable resource is growing steadily (for instance, 5% per year), then that rate will double regularly. At 5% growth per year, in approximately 14 years the consumption rate will have doubled. After another 14 years the rate will have quadrupled. After a century of 5% annual growth, the resource will be consumed at a rate 130 times the original rate. Those more optimistic about the environmental impacts of growth believe that, although localized environmental effects may occur, large scale ecological effects are minor. The optimists claim that if these global-scale ecological effects exist, human ingenuity will find ways of adapting to them.{{Fact|date=May 2008}} Canadian scientist, [[David Suzuki]] stated in the 1990s that ecologies can only sustain typically about 1.5-3% new growth per year, and thus any requirement for greater returns from [[agriculture]] or [[forestry]] will necessarily cannibalize the [[natural capital]] of [[soil]] or [[forest]].{{Fact|date=November 2007}} Some think this argument can be applied even to more developed economies.{{Fact|date=November 2007}} Mainstream economists would argue that economies are driven by new technology and ongoing improvements in efficiency &mdash; for instance, we have faster computers today than a year ago, but not necessarily computers requiring more natural resources to build. Also, physical limits may be very large if considering all the minerals in the planet Earth or all possible resources from [[space colonization]], such as [[solar power satellite]]s, [[asteroid mining]], or a [[Dyson sphere]]. The book ''[[Mining the Sky: Untold Riches from the Asteroids, Comets, and Planets]]'' is one example of such arguments. However, depletion and declining production from old resources can sometimes occur before new resources are ready to replace them. This is, in part, the logical basis of the [[Peak Oil]] phenomenon. ==Implications of climate change== :''see [[Economics of global warming]]'' The predicted rate of economic growth has important implications for climate change policy with regards to a reduction in economic growth due to a reduction in [[greenhouse gas]] emissions, versus the economic threat of [[climate change]] in the next 100 years. Some insurance industry analysts claim that the rate of increase in property destruction due to the effects of climate change are projected to exceed the world's total economic output by 2065.<ref>{{cite news|url=http://environment.independent.co.uk/article151290.ece|title='Climate change will bankrupt the world'|date=[[24 November]] [[2000]]|publisher=The Independent|first=Michael|last=McCarthy|accessdate=2007-11-29}}</ref> The [[Stern Review]], published by the United Kingdom Government in 2006, concluded that an investment of 1% of GDP per annum would be sufficient to avoid the worst effects of climate change, and that failure to do so could risk global GDP being 20% lower than it otherwise might be. On the other hand, if economic growth is sustained over the long term, future generations may be so wealthy that they will have nothing to fear. [[Lord Lawson]] claimed that people in a hundred years time would be "seven times as well off as we are today", therefore it is not reasonable to impose sacrifices on the "much poorer present generation".<ref>{{cite web|url=http://www.publications.parliament.uk/pa/jt200607/jtselect/jtclimate/170/7051604.htm|title=Examination of Witnesses (Questions 32-39)|date=[[16 May]] [[2007]]|accessdate=2007-11-29}}</ref> ==See also== {{col-begin}} {{col-2}} * [[Boom and bust]] * [[Capital accumulation]] * [[Capital formation]] * [[Development economics]] * [[Eco-sufficiency]] * [[Ecological Economics]] * [[Economic determinism]] * [[Economic development]] * [[Gross fixed capital formation]] * [[Gross Output]] * [[Growth accounting]] * [[Human development theory]] * [[Incremental Capital-Output Ratio]] {{col-2}} * [[Index of Leading Indicators]] * [[Investment]] * [[Investment specific technological progress|Investment-specific technological progress]] * ''[[Limits to Growth]]'' (a book produced for the [[Club of Rome]] in 1972, a classic in the limits of growth debate) * [[List of countries by GDP (real) growth rate]] * [[Measures of national income]] * [[Net output]] * [[Peak oil]] * [[Stagflation]] * [[Sustainability]] * [[Uneconomic growth]] {{col-end}} ===Prominent growth economists=== {{col-begin}} {{col-2}} * [[Joseph Schumpeter]] * [[Roy Harrod]] * [[Evsey Domar]] * [[Nicholas Kaldor]] {{col-2}} * [[Robert Solow]] * [[Paul Romer]] * [[Robert Lucas, Jr.]] * [[Robert J. Barro]] * [[Daron Acemoglu]] {{col-end}} == References== {{reflist}} ==Further reading== * Barro, Robert J. 1997. ''Determinants of Economic Growth: A Cross-Country Empirical Study.'' MIT Press: Cambridge, MA. * Erber, Georg, and Harald Hagemann, ''Growth, Structural Change, and Employment'', in: Frontiers of Economics, Ed. Klaus F. Zimmermann, Springer-Verlag, Berlin – Heidelberg – New York, 2002, 269-310. * Foley, Duncan K. 1999. ''Growth and Distribution.'' Harvard University Press: Cambridge, MA. * Garrison, Roger. 1998 Time and Money * Hamilton, Clive 2002. ''[[Growth Fetish]].'' * Jones, Charles I. 2002. ''[http://www.amazon.com/dp/0393977455/ Introduction to Economic Growth.]'' 2nd ed. W. W. Norton & Company: New York, N.Y. * Kirzner, Israel. 1973. Competition and Entrepreneurship * [[Robert Lucas, Jr.|Lucas, Robert E., Jr.]], "The Industrial Revolution: Past and Future," Federal Reserve Bank of Minneapolis, ''Annual Report'' (2003) [http://www.minneapolisfed.org/pubs/region/04-05/essay.cfm online edition] * Mises, Ludwig E. 1949 Human Action 1998 reprint by the Mises Institute * Schumpeter, Jospeph A. 1912. ''The Theory of Economic Development'' 1982 reprint, Transaction Publishers * Schumpeter, Jospeph A. 1942. ''Capitalism, Socialism, and Democracy'' Harper Perennial * Weil, David N. 2008. ''[http://www.amazon.com/dp/0321416627/ Economic Growth.]'' 2nd ed. Addison Wesley. ==External links== ===Articles and lectures=== *[http://www.econlib.org/library/Enc/EconomicGrowth.html Economic Growth] by Paul Romer, The Concise Encyclopedia of Economics. *[http://www.britannica.com/eb/article-9106198/economic-growth "Economic growth."] Encyclopædia Britannica. 2007. Encyclopædia Britannica Online. 17 November 2007. * [http://www.gsb.stanford.edu/research/faculty/news_releases/Romer.Paul/London_Speech.html Beyond Classical and Keynesian Macroeconomic Policy]. [[Paul Romer]]'s plain-English explanation of Endogenous Growth Theory. * [http://www.house.gov/jec/growth/function/function.pdf Size of Government and Economic Growth], Joint Economic Committee * [http://www.economicshelp.org/essays/economics-growth-happiness.html Does Economic Growth increase Living Standards?] * [http://www.spiked-online.com/Articles/0000000CB04D.htm Who's afraid of economic growth?] Essay by Daniel Ben-Ami on the contemporary anxiety about economic growth. * [http://www.cepr.net/index.php/economics-seminar-series/ CEPR Economics Seminar Series] Two seminars on the importance of growth with economists Dean Baker and Mark Weisbrot *[http://www.iisg.nl/research/jvz-research.pdf On global economic history] by Jan Luiten van Zanden. Explores the idea of the inevitability of the Industrial Revolution. * [http://www.sciam.com/article.cfm?id=the-economist-has-no-clothes The Economist Has No Clothes] &ndash; essay by [[Robert Nadeau (science historian)|Robert Nadeau]] in [[Scientific American]] on the basic assumptions behind current [[economic theory]] ===Data=== *[http://www.intelligentguess.com/blog/2007/03/01/usa-comparism-of-gdp-growth-versus-fed-rate-since-1954/ Historical data - since 1954 - comparing the US GDP growth rate versus the US Fed Funds Rate ] * [http://www.ggdc.net/maddison/ Angus Maddison's Historical Dataseries] -Series for almost all countries on GDP, Population and GDP per capita from the year 0 up to 2003 [[Category:Economic growth|*]] [[Category:Welfare economics]] [[Category:Macroeconomics]] [[Category:Economic indicators]] [[ar:تنمية اقتصادية]] [[bg:Икономически растеж]] [[ca:Creixement econòmic]] [[cs:Hospodářský růst]] [[de:Wirtschaftswachstum]] [[et:Majanduskasv]] [[es:Crecimiento económico]] [[eo:Ekonomia kresko]] [[fa:رشد اقتصادی]] [[fr:Croissance économique]] [[hr:Ekonomski rast]] [[id:Pembangunan ekonomi]] [[it:Crescita economica]] [[he:צמיחה כלכלית]] [[kaa:Ekonomikalıq o'siw]] [[nl:Economische groei]] [[ja:経済成長]] [[pl:Wzrost gospodarczy]] [[ru:Экономический рост]] [[sh:Ekonomski rast]] [[fi:Talouskasvu]] [[sv:Ekonomisk tillväxt]] [[th:ความเจริญเติบโตทางเศรษฐกิจ]] [[vi:Tăng trưởng kinh tế]] [[zh:经济增长]]