Key Factors of Economic Growth

Abstract

The lack of economic growth theories does not match the importance of economic growth. In this chapter, we review some of the classical growth theory models. After reading this chapter, readers might understand that most economists do concentrate on the topic of marginal increasing returns to scale. Modern economic growth theories develop as they gradually bring technological progress, human capital, and incomplete competition into the analysis framework with the goal of increasing factor return and continuous economic growth. In fact, subject to microeconomic theories, modern economic growth theories are never able to make a breakthrough due to the limits of production function. With no quality change in production function as a premise, the discussion on economic growth is severely limited, because the most important driver of economic growth is technological progress. Regarding the final products, any kind of technological progress will cause changes in industrial output. These changes are at least two-dimensional, including quantity and quality. Theoretical analysis without quality analysis is incomplete in terms of economic growth, and one of the objectives of this book is to change this situation. After finishing this chapter, readers are supposed to be able to understand the following: first, the content of economic theory including both quality and quantity growth; second, the development trend and shortcomings of current economic growth theories; third, the reasons why technological progress, human capital, and capital quality rises are in a reciprocal causation relationship and at the same time the sources of economic growth; and last, the structure and main contents of this book.