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One Thing I’ve Learned This Semester: Measuring Economic Growth

One of the most interesting things I have learned this semester in Marshall is the different models with which we can quantitatively measure the long term economic growth of a nation. The most prominent of these two methods are the Solow model and the Endogenous model. Both of these theories are based on the idea that economies grow due to growths in productivity, capital and labor. The former, though, shows that productivity growth is the dominant factor in long-term growth; without it, the economy will reach a “steady-state” in which living standards (consumption, output, and capital per worker) stay constant. The Solow model is very important because it allows us to analyze the evolution of nations’ economies over time, providing an important summary of both the global economy and national economies during any given year.

The endogenous method suggests that economic growth is due to a variety of other factors besides productivity, including the savings rate and depreciation, that can be manipulated by government policies. It also emphasizes the power of human capital and research and development in sustaining growth. While it is not as widely accepted, this newer model is fascinating because it implies that the government can possibly prompt economic growth through certain policies.

As someone who is interested in finance and business economics, this was an especially interesting piece of information among the breadth of knowledge I have obtained this semester in Marshall.


Posted on February 27, 2017 by Andy Gabler


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