First part of the article
highlights that most of the latest growth theories were declared as successful
if they met with models’ features, rather than world’s. Neoclassical economic
growth model is one of the examples of such theory. This model makes a hypothesis
that all countries have the same technologies and what makes a difference
between economic levels are educational level and saving rate of the
country. However, statistical evidences of education and income per worker from
Britain and US contradict the assumptions of the theory. Therefore, it would be
incorrect to state that Britain and US had the same technological development
and technology did play a role in a growth of economy and income.
Second part concludes that
another approach was concerned about the significance of economic history, but
denied to acknowledge the necessity of formal theory. About 30 years ago
economists were disapproved the use of mathematical statements, equations and
expressions. Economists were arguing
against the credibility of results of expressions such as productions function consisting
of capital and labor, increase in human capital through education and
experience, etc. This part sums up that the potential of real physical world can
be achieved through reliable growth theory.
economic growth is account for the relationship between technology and conventional
inputs in neoclassical theory. The decision to divide the theory into two parts
was right, but they did not succeed in segmentation of technology. They did not
link technology to real life physical machines, but made a connection with an
increase in potential production of the country. However, later they added
terms “ideas” and “things”. The fact that ideas can be worked out by one and
understood by another made a little correction with initial mistakes in
explaining what type of good was technology.
Later scientists were analyzing why US and Britain
had different economic developments. Initial reasons were stated as lack of
natural resources, but developed agriculture in US. In the beginning, US were buying
British technology, but situation has changed from the 19th century.
Second reason was in number of residents, combination of resources and size and
types of various markets. In addition, the role of investment, specialization
and machineries were concluded as vital.