What are different theories of economic growth?
various theory of economic growth of the center on the question of what circumstances lead to permanent economic development in the economy. These tend to look at the interactions of the state and a free enterprise. They also look at other factors that affect economic performance. Each theory tends to grow from an attempt to understand the economics of one person and then create a model that maximizes growth. Mercantilistic, classical and neoclassical theory theories, spontaneous order and monetarism are among the different theories of economic growth. Two early and contradictory schools were physiocratic and mercantilist theory of economic growth. The first, French theory of the 18th century, believed that economic growth came only from the ownership of land and agriculture. On the other hand, he believed that trade was the only producer of economic growth.
Adam Smith, in HJe 1776 work investigating the nature and cause of the wealth of nations , developed classical theory of economic growth as a criticism of both physiocrats andMerkantilists. According to Smith, economic growth depends on the specialization and division of work and the accumulation of wealth. To work, he believed that the government must be small and non -intervention, which would lead to a large sector of free enterprise. Robert Solow helped develop classical theory by insisting that savings create growth and consumption should be postponed to build savings.
Solow, along with Paul Romer and Paul Omerod, helped develop neoclassical or new theory of economic growth. These theories of economic growth further developed Smith theory. Theory states that the growth of work will cause adequate economic growth. This is also said about Rises in the quality of work through education and training, growth in business and investment growth.
Joseph Schumpeter took this step further with his economic growth theories that took into account the impacts of technology and innovation. According to Schumpeter leadsDevelopment of new technologies to grow. Innovation and new products and services also lead to the creation of new markets and the destruction of old - theory known as creative destruction. Edward J. Neil took this step further with his theory of transformation growth, showing how new products create new business models.
Not all theories of economic growth are born at a time of economic growth and stability. Some, such as John Maynard Keynes, are born at a time of economic depression. Keynes believed that during the recession wealth creators or wealth holders would keep their money and not invest on the free market. As a result, keynes' theory of economic growth states that the government must invest in the labor market to increase consumption and cause economic growth.
The main sources of criticism against Keynes came from Friedrich Hayek and Milton Friedman. Hayek believed that many elements of economic growth could not be foreseen. Its theory of economic growth, one of which is called the spontaneous order,realizes that there is a "invisible hand" in the game in the economy. This hand is produced, but is more random than a human creature.
Friedman, on the other hand, believed that the offer of money created growth. His theories, called Monetarism, said that governments should control the amount of money in the offer, but this money should be spent by individuals and individual societies, not by the government. Politics worked by finding a balance between supply and demand, reducing inflation to zero and maintaining a minimum level of unemployment.