Chapter

Orthodox Growth Theories

Maurice FitzGerald Scott

in A New View of Economic Growth

Published in print June 1991 | ISBN: 9780198287421
Published online November 2003 | e-ISBN: 9780191596872 | DOI: http://dx.doi.org/10.1093/0198287429.003.0003

Series: Clarendon Paperbacks

 Orthodox Growth Theories

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Orthodox growth theories generally assume a neoclassical production function, with growth of output explained by increases in the capital stock or employment, or by shifts in the function attributed to exogenous technical progress that is independent of investment. But increases in the capital stock are measured by gross investment minus either scrapping or depreciation, and in competitive conditions neither of these will reduce output, although causing big reductions in the stock. Consequently, the role of investment in explaining growth has been very much understated, leading to the famous residual, attributed to exogenous technical progress. Orthodox vintage theories give essentially the same result, and all are mistaken as there is no residual. In reality, technical progress cannot be separated from investment, nor is it independant of it.

Keywords: capital stock; depreciation; exogenous technical progress; orthodox theories; production function; residual; vintage theories

Chapter.  16033 words.  Illustrated.

Subjects: Economic Development and Growth

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