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Solovian and New Growth Theory from the Perspective of Allyn Young on Macroeconomic Increasing Returns

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  • Roger J. Sandilands

Abstract

This paper evaluates Solow's neoclassical growth model and related empirical estimates of the sources of growth. Invoking Allyn Young, it is argued that the fundamental sources of growth cannot be measured by the value of factor inputs (including research inputs) without reference to the overall growth of product demand in the economy that both induces and limits increased specialization. What is attributed to the factors—the value of their marginal products—is not a measure of their contribution. Integration does not give the social picture. Young's theory of macroeconomic increasing returns reveals the limitations of models that assume an aggregate production function exhibiting constant returns to scale while “augmented” by exogenous technical progress. His endogenously self-sustaining growth paradigm is also shown to differ in important respects (including in its policy implications) from modern endogenous growth theory.

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Bibliographic Info

Article provided by Duke University Press in its journal History of Political Economy.

Volume (Year): 41 (2009)
Issue (Month): 5 (Supplement)
Pages: 285-303

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Handle: RePEc:hop:hopeec:v:41:y:2009:i:5:p:285-303

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Related research

Keywords: Robert Solow; Allyn Young; macroeconomics;

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  1. Yang, Xiaokai & Borland, Jeff, 1991. "A Microeconomic Mechanism for Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 460-82, June.
  2. Laidler, David, 1993. "Hawtrey, Harvard, and the Origins of the Chicago Tradition," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1068-1103, December.
  3. Ramesh Chandra, 2006. "Currie's 'leading sector' strategy of growth: an appraisal," Journal of Development Studies, Taylor & Francis Journals, vol. 42(3), pages 490-508.
  4. Buchanan, James M., 2008. "Let Us Understand Adam Smith," Journal of the History of Economic Thought, Cambridge University Press, vol. 30(01), pages 21-28, March.
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