World GDP/capita changed very little for most of human history before the industrial revolution. The Industrial Revolution was a period in the late 18th and early 19th centuries when major changes in agriculture manufacturing and transportation had a profound effect on the (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 economy. Economics is the social science that studies the production distribution, and consumption of goods and services. 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. inflation-adjusted terms, in order to net out the effect of inflation on the price of the goods and services produced. The distinction between real versus nominal value occurs in many fields In economics inflation or price inflation is a rise in the general level of prices of goods and services over a period of time In economics, "economic growth" or "economic growth theory" typically refers to growth of potential output, i. Economics is the social science that studies the production distribution, and consumption of goods and services. In Economics, potential output (also referred to as "natural gross domestic product" refers to the highest level of real Gross Domestic Product e. , production at "full employment," which is caused by growth in aggregate demand or observed output. In Macroeconomics, full employment is when all people looking for employment can find a job In Economics, aggregate demand is the total demand for final goods and services in the economy ( Y) at a given time and Price level.

As an area of study, economic growth is generally distinguished from development economics. Development economics is a branch of Economics which deals with economic aspects of the development process in low-income countries. 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. Bold text

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 recessions. The term business cycle or economic cycle refers to the fluctuations of economic activity during its long term growth trend A recession is a contraction phase of the Business cycle. The U The cycle can be a misnomer as the fluctuations are not always regular. Explaining these fluctuations is one of the main focuses of macroeconomics. Macroeconomics is a branch of Economics that deals with the performance structure and behavior of a national or regional Economy as a whole 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. In Economics Keynesian economics (ˈkeɪnziən also Keynesianism and Keynesian Theory) is based on the ideas of twentieth-century British economist Monetarism is a school of economic thought concerning the determination of national income and monetary Economics. New classical macroeconomics emerged as a school in Macroeconomics during the 1970s New Keynesian economics is a school of contemporary Macroeconomics that strives to provide microeconomic foundations for 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. Economics is the social science that studies the production distribution, and consumption of goods and services. Over long periods of time, even small rates of annual growth can have large effects through compounding (see exponential growth). Exponential growth (including Exponential decay) occurs when the growth rate of a mathematical function is proportional to the function's current value 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. The term Four Asian Tigers or East Asian Tigers refers to the Economies of South Korea, Hong Kong, Singapore 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. Econometrics is concerned with the tasks of developing and applying Quantitative or Statistical methods to the study and elucidation of economic principles 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. Macroeconomics is a branch of Economics that deals with the performance structure and behavior of a national or regional Economy as a whole 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. In economics inflation or price inflation is a rise in the general level of prices of goods and services over a period of time Certain figures in this article use Scientific notation for readability Price in Economics and Business is the result of an exchange and from that trade we assign a numerical Monetary value to a good, Supply and demand is an Economic model describing effects on price and quantity in a Market.

Measuring growth

GDP increase since 1990, in major countries.

World map showing GDP real growth rates for 2007. The list of Countries of the world sorted by their Gross domestic product (real growth rate shows the increase in value of all final goods and services produced

The real 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. The standard of living refers to the quality and quantity of goods and services available to people and the way these goods and services are distributed within a population 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 pulluted 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. The Gini coefficient is a measure of statistical dispersion most prominently used as a measure of inequality of income distribution or inequality of wealth 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. Green Gross Domestic Product (Green GDP is an index of Economic growth with the environmental consequences of that growth factored in )

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, such as the Index of Sustainable Economic Welfare or the 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. The Index of Sustainable Economic Welfare is an economic indicator intended to replace the Gross domestic product. 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 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):

"When civilization [population] increases, the available labor again increases. This is a sub-article of Islamic economic jurisprudence and Muslim world. Ibn Khaldūn or Ibn Khaldoun (full name أبو زيد عبد الرحمن بن محمد بن خلدون,, ( May 27, 1332 AD/732 AH &ndash March 19 The Muqaddimah, or the Muqaddimah of Ibn Khaldun ( Arabic: ar مقدّمة ابن خلدون Amazigh: Tazwarit n Ibn Xldun The term Western world, the West or the Occident ( Latin: occidens -sunset -west as distinct from the Orient) can have multiple meanings 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. "^[1]

In the early modern period, some people in Western European 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. The early modern period is a term initially used by historians to refer mainly to the period roughly from 1500 to 1800 in Western Europe ( Early modern Europe) Western Europe at its most general meaning means 'all the countries in the West of Europe ' 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 evolution of our self-organized life-support and cultural systems is remarkably creative and flexible, but highly unpredictable in many ways. Exponential growth (including Exponential decay) occurs when the growth rate of a mathematical function is proportional to the function's current value 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 "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. Mercantilism is the idea that a colony should export more goods than it imports and that a colony should sell at higher prices and buy at lower prices This "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. Bullionism is an Economic Theory that defines Wealth by the amount of Precious metals owned

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 "factories". A factory (previously manufactory) or manufacturing plant is an industrial Building where workers manufacture goods 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" and the "British East India company" were examples of such state-granted trade monopolies. The Dutch East India Company ( Vereenigde Oost-Indische Compagnie or VOC in old-spelling Dutch, literally "United East Indian The Honourable East India Company ( HEIC) referred to most commonly as the East India Company, also historically and colloquially as John Company, or In Economics, a monopoly (from Greek monos, alone or single + polein, to sell exists when a specific individual or enterprise has sufficient

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 "Absolutism"). An autocracy is a Form of government in which the Political power is held by a single self-appointed ruler This process helped produce the modern nation-state in Western Europe. For the online game see Jennifer Government NationStates. The nation-state is a certain form of State that derives its legitimacy

Internationally, Mercantilism led to a contradiction: growth was gained through trade, but to trade with other nations on equal terms was disadvantageous. This – along with the rise of nation-states – 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 physiocrats were a group of Economists who believed that the wealth of nations was derived solely from the value of land Agriculture or land development The Scottish Enlightenment was the period in 18th century Scotland characterised by an outpouring of intellectual and scientific accomplishments David Hume (26 April 1711 25 August 1776 Scottish Philosopher, Economist, and Historian is an important figure in Western philosophy Adam Smith ( baptised 16 June 1723 – 17 July 1790) was a Scottish moral philosopher and a pioneer of Political economy. Political economy originally was the term for studying production buying and selling and their relations with law custom and government 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. David Ricardo (18 April 1772 &ndash 11 September 1823 was an English political economist, often credited with systematizing economics and was one of the most influential This theory of "comparative advantage" would be the central basis for arguments in favor of free trade as an essential component of growth. In international trade the principle of comparative advantage refers to the fact that although one country may have an absolute disadvantage with another value can be created for both Free trade is a system in which the trade of goods and services between or within countries flows unhindered by government-imposed restrictions

Income per capita was essentially flat until the industrial revolution. The Industrial Revolution was a period in the late 18th and early 19th centuries when major changes in agriculture manufacturing and transportation had a profound effect on the 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. Thomas Robert Malthus FRS (13 February 1766 – 23 December 1834 was an English political economist and demographer who expressed views " 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.

The neo-classical growth model

Main article: Exogenous growth model

The notion of growth as increased stocks of capital goods (means of production) was codified as the Solow-Swan Growth Model, which involved a series of equations which showed the relationship between labor-time, capital goods, output, and investment. The Exogenous growth model, also known as the Neo-classical growth model or Solow growth model is a term used to sum up the contributions of various authors to a The Exogenous growth model, also known as the Neo-classical growth model or Solow growth model is a term used to sum up the contributions of various authors to a In this modern view, the role of technological change became crucial, even more important than the accumulation of capital. Technological change (TC is a term that is used to describe the overall process of Invention, Innovation and Diffusion of Technology or Most generally the accumulation of capital refers simply to the gathering or amassment of objects of value the increase in wealth or the creation of wealth This model, developed by Robert Solow^[2] and Trevor Swan^[3] in the 1950s, was the first attempt to model long-run growth analytically. Robert Merton Solow (born August 23 1924 is an American Economist particularly known for his work on the theory of Economic growth. Trevor W Swan, 1918-1989 was an Australian economist He is best known for his work on the neoclassical model of Economic growth, published simultaneously with that of This model assumes that countries use their resources efficiently and that there are diminishing returns to capital and labor increases. Economic efficiency is used to refer to a number of related concepts In Economics, diminishing returns is also called diminishing marginal returns or the law of diminishing returns. 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". The steady state is a condition of the Economy in which output per worker ( Productivity of labour and capital per worker ( Capital

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. ^[4]

Development economics

Main article: 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. Development economics is a branch of Economics which deals with economic aspects of the development process in low-income countries. This led to the field of development economics, including the work of Nobel laureates Amartya Sen and Joseph Stiglitz. Development economics is a branch of Economics which deals with economic aspects of the development process in low-income countries. This is a list of Nobel Prize Laureates awarded for their outstanding contributions to Humanitarian causes for Peace, work in Literature Amartya Kumar Sen CH (Hon (অমর্ত্য কুমার সেন Ômorto Kumar Shen) (born 3 November 1933) is an Indian Joseph Eugene Stiglitz (born February 9, 1943) is an American Economist and a professor at Columbia University.

New growth theory

Main article: Endogenous growth theory

Growth theory advanced again with the theories of economist Paul Romer in the late 1980s and early 1990s. In economics endogenous growth theory or new growth theory was developed in the 1980s as a response to criticism of the Neo-classical growth model. Paul Michael Romer (born 1955 is an Economist and professor at Stanford University. Other important new growth theorists include Robert E. Lucas and Robert J. Barro. Robert Emerson Lucas Jr (born September 15, 1937, Yakima Washington) is an American Economist at the University of Chicago Robert Joseph Barro (born September 28, 1944) is an American classical liberal Macroeconomist and the Paul M

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. In economics endogenous growth theory or new growth theory was developed in the 1980s as a response to criticism of the Neo-classical growth model. ^[5][6] This model also incorporated a new concept of human capital, the skills and knowledge that make workers productive. Human capital refers to the stock of skills and knowledge embodied in the ability to perform labor so as to produce Economic value. Unlike physical capital, human capital has increasing rates of return. In general physical capital refers to any non-human asset made by humans and then used in production 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). ^[4]

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" 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. The Big Push Model is a concept in Development economics or Welfare economics that emphasizes the fact that a firm 's decision whether to industrialize or ^[7]

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. In Statistics, a spurious relationship (or sometimes spurious correlation) is a Mathematical relationship in which two occurrences have no causal connection 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:^[8]

1. 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. Quality of life is the degree of well-being felt by an individual or group of people
2. 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. "^[8]
3. 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. ^[9] 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. Thomas Robert Malthus FRS (13 February 1766 – 23 December 1834 was an English political economist and demographer who expressed views ^[10]
4. Distribution of income: The gap between the richest in the world and the poorest is growing. ^[11]

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.

There are concerns with the environmental and ecological effects of economic growth, especially relating to growth in mining, forestry, agricultural and industrial activities. Ecology (from Greek grc οἶκος oikos, "house(hold" and grc -λογία -logia) is the scientific study of Many researchers feel these sustained environmental effects can have an effect on the whole ecosystem. An ecosystem is a natural unit consisting of all plants animals and micro-organisms( Biotic factors in an area functioning together with all of the non-living physical ( 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. Archaeology, archeology, or archæology (from Greek grc ἀρχαιολογία archaiologia – grc ἀρχαῖος archaīos 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). Climate encompasses the temperatures humidity rainfall atmospheric particle count and numerous other meteorogical factors in a given region over long periods of Natural capital is the extension of the economic notion of capital (manufactured means of production to environmental goods and services 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. Uneconomic growth (or economic degrowth in Human development theory, Welfare economics (the economics of social welfare and some forms of Ecological economics A Green party' or ecologist party is a formally organized Political party based on the principles of Green politics.

• Arguments supporting economic growth

Supporters argue that global income inequality is in fact diminishing,^[12] and that the rapid reduction in global poverty is in large part due to economic growth, according to World Bank. Kuznets curve is the graphical representation of Simon Kuznets 's theory ('Kuznets hypothesis' that Economic inequality increases over time while a country is The World Bank Group (WBG is a family of five International organizations responsible for providing Finance and advice to countries for the purposes of economic ^[13] The decline in poverty has been the slowest where growth performance has been the worst (ie. in Africa). ^[14] Happiness increases with a higher GDP/capita, at least up to a level of $15,000 per person. ^[15] Many earlier predictions of resource depletion, such as Thomas Malthus (1798) predictions about this inevitable causing continuing famines in Europe, [4] The Population Bomb (1968), [5] [6] [7] Limits to Growth (1972), [8] [9] [10] and the Simon-Ehrlich wager (1980) [11] 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. Thomas Robert Malthus FRS (13 February 1766 – 23 December 1834 was an English political economist and demographer who expressed views The Population Bomb (1968 is a book written by Paul R Ehrlich. Limits to Growth is a 1972 book modeling the consequences of a rapidly growing World population and finite resource supplies commissioned by the Julian L Simon and Paul Ehrlich entered in a famous wager in 1980 betting on a mutually agreed upon measure of resource Scarcity over the decade leading [12] The book The Improving State of the World argues that the state of humanity is rapidly improving. The Improving State of the World Why We're Living Longer Healthier More Comfortable Lives On a Cleaner Planet is a 2007 book by Indur M

The Austrian School argue that the concept of "growth" or the creation and acquisition of more goods and services is dependent upon the relative desires of the individual. The Austrian School, also known as the “ Vienna School ” or the “ Psychological School ” is a heterodox school of economics that advocates A service is the non-material equivalent of a good. A service provision is an economic activity that does not result in Ownership, and this is what differentiates Someone may prefer having more leisure time to acquiring more goods and services. Leisure or free time, is a period of Time spent out of work and essential domestic Activity. Also, they claim that the notion of growth implies the need for a "central planner" within an economy. An economy is the realized social system of production exchange distribution and consumption of goods and services of a country or other area To Austrian economists, such an ideal is antithetical to the concept of a free market economy, without the presence of governmental intervention. A market economy is a realized Social system based on the Division of labour in which the prices of Goods and Services are determined in a For the government of parliamentary systems see Executive (government. As such, Austrian economists believe that the individual should determine how much "growth" s/he desires. As commonly used, individual refers to a Person or to any specific object in a collection ^[16]

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. The exponential function is a function in Mathematics. The application of this function to a value x is written as exp( x) A quantity that grows according to an exponential function exhibits a doubling in size at a regular time interval (called the doubling time). The doubling time is the period of time required for a quantity to double in size or value 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.

Canadian scientist, David Suzuki stated in the 1990s that ecologies can only sustain typically about 1. David Takayoshi Suzuki CC OBC (born March 24 1936) is a Canadian Science broadcaster and The 1990s collectively refers to the years between and including 1990 and 1999 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. Agriculture refers to the production of goods through the growing of plants and fungi and the raising of domesticated Animals The study of agriculture Forestry is the Art and Science of managing forests tree Plantations and related Natural resources. Natural capital is the extension of the economic notion of capital (manufactured means of production to environmental goods and services Soil, often typeset as SOiL, is a four piece rock band from Chicago Illinois United States founded by Shaun Glass Tom Schofield Tim King and Adam Zadel A forest is an area with a high density of Trees There are many definitions of a forest based on various criteria Some think this argument can be applied even to more developed economies.

Mainstream economists would argue that economies are driven by new technology and ongoing improvements in efficiency — 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 satellites, asteroid mining, or a Dyson sphere. Space colonization (also called space settlement, space humanization, Space habitation, etc A solar power satellite, or SPS or Powersat, as originally proposed would be a Satellite built in High Earth orbit that uses Microwave Raw resources and minerals could be mined from an Asteroid in space using a variety of methods A Dyson sphere (or shell as it appeared in the original paper is a hypothetical Megastructure originally described by Freeman Dyson. The book Mining the Sky: Untold Riches from the Asteroids, Comets, and Planets is one example of such arguments. Mining the Sky Untold Riches from the Asteroids Comets and Planets is a book by John S 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. The economics of global warming refers to the projected size and distribution of the economic costs and benefits of Global warming, and to the economic Greenhouse gases are gaseous constituents of the atmosphere bothnatural and anthropogenic that absorb and emit radiation at specific wavelengths within the spectrum of thermal infrared Climate change is any long-term significant change in the “average weather” that a given region experiences

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. ^[17]

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. The Stern Review on the Economics of Climate Change is a 700-page report released on October 30, 2006 by economist Lord Stern of Brentford for the

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". Nigel Lawson Baron Lawson of Blaby, PC (born 11 March 1932 is a British Conservative Politician who was Chancellor of the Exchequer between ^[18]

See also

Prominent growth economists

References

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. Growth Fetish is a book about Economics and Politics by the Australian liberal political theorist Clive Hamilton.
• Jones, Charles I. 2002. Introduction to Economic Growth. 2nd ed. W. W. Norton & Company: New York, N. Y.
• Kirzner, Israel. 1973. Competition and Entrepreneurship
• Lucas, Robert E., Jr., "The Industrial Revolution: Past and Future," Federal Reserve Bank of Minneapolis, Annual Report (2003) online edition
• Mises, Ludwig E. Robert Emerson Lucas Jr (born September 15, 1937, Yakima Washington) is an American Economist at the University of Chicago 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. Economic Growth. 2nd ed. Addison Wesley.

External links

Articles and lectures

• Economic Growth by Paul Romer, The Concise Encyclopedia of Economics.
• "Economic growth." Encyclopædia Britannica. 2007. Encyclopædia Britannica Online. 17 November 2007.
• Beyond Classical and Keynesian Macroeconomic Policy. Paul Romer's plain-English explanation of Endogenous Growth Theory. Paul Michael Romer (born 1955 is an Economist and professor at Stanford University.
• Size of Government and Economic Growth, Joint Economic Committee
• Does Economic Growth increase Living Standards?
• Who's afraid of economic growth? Essay by Daniel Ben-Ami on the contemporary anxiety about economic growth.
• CEPR Economics Seminar Series Two seminars on the importance of growth with economists Dean Baker and Mark Weisbrot
• On global economic history by Jan Luiten van Zanden. Explores the idea of the inevitability of the Industrial Revolution.
• The Economist Has No Clothes – essay by Robert Nadeau in Scientific American on the basic assumptions behind current economic theory

Data

• Historical data - since 1954 - comparing the US GDP growth rate versus the US Fed Funds Rate
• Angus Maddison's Historical Dataseries -Series for almost all countries on GDP, Population and GDP per capita from the year 0 up to 2003