Growth Theory

In the preface to the first edition of Growth Theory (copyright 1970), the author writes: "I have tried to give some feeling for the scope of aggregate theory of growth, a notion of technical details, and some idea of the directions in which future research is likely to go. About four years ago, the OUP NY economics editor suggested to Professor Solow that he bring this book up to date, because of the large amount of recent literature, often referred to as the "new growth theory," or more technically as "endogenous growth theory". This second edition of Growth Theory, which grew out of that conversation, begins with the author's Nobel Prize Lecture "Growth Theory and After" (1987) followed by the original six chapters of the first edition. The first edition appeared in 1970; the author maintains that basic growth theory is still best summarized in these chapters, using what is often classified as "exogenous growth theory." In the 70s, which happened to coincide witha worldwide productivity slowdown, very little new work occurred in growth theory. It wasn't until the 1980s that a surge of new writing appeared, with the work of Roemer, Lucas, and others, what the author refers to as "an astonishing burst of theoretical and empirical research that still continues." The author developed "a second half" of the book for this edition, six entirely new chpaters in which he discusses new growth theory (endogenous growth theory) and its relationship to exogenous theory. As a "bridge" between the two sets of chapters, he has written an essay entitled "Intermezzo" in which he discusses the relatively inactive period for growth theory in the 70s, before introducing the "new" endogenous theory of growth and contrasting it with earlier work. Solow is quick to agree that older growth theory can aptly be described as "exogenous," because the growth rate itself was left unexplained, or rather was considered a "given" (basically a result of the actual rate of labor-augmenting technology). But treating the growth rate as exogenous does not make it a permanent constant or inexplicable. Certainly things can be said about a variety of (exogenous) factors affecting the growth rate; nevertheless the "old" theory did not provide, or try to give, a systematic theory of the growth...