New endogenous growth theory

The new endogenous growth theory, also known as the "new growth theory," is a school of thought in economics that emerged in the 1980s and 1990s. It is a response to the traditional neoclassical growth model, which assumes that technological progress is exogenous and that economic growth is driven by increases in the labor force and capital stock.

The new endogenous growth theory, on the other hand, posits that technological progress is endogenous, meaning that it is driven by factors within the economy itself, rather than being exogenously determined. This theory emphasizes the role of institutions, policies, and social and cultural factors in shaping economic growth.

Some of the key features of the new endogenous growth theory include:

1. Endogenous technological progress: Technological progress is driven by factors such as research and development, human capital, and innovation, rather than being exogenously determined.
2. Increasing returns to scale: Firms and industries can experience increasing returns to scale, meaning that their productivity and output increase as they grow.
3. Spillovers and externalities: New technologies and innovations can create positive externalities, such as increased productivity and economic growth, that benefit other firms and industries.
4. Institutions and policies: The new endogenous growth theory emphasizes the importance of institutions, such as property rights, the rule of law, and financial systems, in shaping economic growth.
5. Human capital: The accumulation of human capital, such as education and training, is seen as a key driver of economic growth.
6. Social and cultural factors: Social and cultural factors, such as social norms, values, and institutions, can also influence economic growth.

Some of the key proponents of the new endogenous growth theory include:

1. Paul Romer: Romer is a Nobel laureate and one of the leading proponents of the new endogenous growth theory. He has written extensively on the role of institutions and policies in shaping economic growth.
2. Robert Lucas: Lucas is another Nobel laureate who has made significant contributions to the new endogenous growth theory. He has emphasized the importance of human capital and technological progress in driving economic growth.
3. Edward Prescott: Prescott is a Nobel laureate who has worked on the new endogenous growth theory, focusing on the role of institutions and policies in shaping economic growth.

Some of the key criticisms of the new endogenous growth theory include:

1. Lack of empirical evidence: Some critics argue that there is limited empirical evidence to support the new endogenous growth theory, and that the theory is based on unrealistic assumptions.
2. Overemphasis on institutions: Some critics argue that the new endogenous growth theory places too much emphasis on institutions and policies, and neglects other important factors that influence economic growth.
3. Too much focus on technological progress: Some critics argue that the new endogenous growth theory focuses too much on technological progress, and neglects other important drivers of economic growth, such as changes in the labor force and capital stock.

Overall, the new endogenous growth theory has had a significant impact on our understanding of economic growth and development, and has led to a greater emphasis on the importance of institutions, policies, and social and cultural factors in shaping economic outcomes.