Growth Theory: A Primer

Some Basic Facts

Since majority of us live in an environment of persistent growth, it is difficult to imagine a world of stagnancy. However this was the reality which our forefathers lived over centuries. Ever since human being evolved out of apes, there were some periodic spurts of technological advances: use of fire, discovery of wheel, animal domestication, agriculture, development of cognitive language and phonetic alphabets, use of mathematics and geometry and so on and so forth. These changes helped to advance per capita output² to a certain higher level. However such changes could not be sustained. The economy became richer and leaved happily thereafter³. The idea was an attainment of a steady state where growth in per capita growth is arrested. Moreover these changes were sporadic and not shared by majority of the people either in the same country of elsewhere. Neither could it be sustained for a long enough period. The idea of continuous improvement in the life of a majority of the people is an entirely recent phenomenon. This idea can be grasped from the following table that gives the growth rate of per capita world GDP (in 1985 dollars).