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The Theory of Economic Growth: A "Classical" Perspective, edited by Neri Salvadori. Cheltenham, UK: Edward Elgar, 2003. $120.00. Pp. xiii. 395.
Growth theory has regained popularity in the past two decades after a period of time during the 1970s and 80s when economists primarily focused on short-run macroeconomic phenomena. The recently developed growth theory is often called "New (or Endogenous) Growth Theory" (NGT) in comparison to the "Old (or Exogenous) Growth Theory" (OGT) popular in the 1950s and 60s. There are several reasons for the resurgence of interest in growth theory. Above all, we can point to increased recognition of the importance of technical change for economic growth and the lack of empirical evidence to support the old growth theory.
As the NGT has almost replaced the OGT, many authors have begun to evaluate the NGT from various perspectives. A collection of 18 essays, The Theory of Economic Growth: A "Classical" Perspective is the product of a research group that addressed the recent developments from a historical perspective, especially its relation to "Classical" growth theory.
Interested readers should have some knowledge of modern economic theory in the neoclassical tradition, before attempting to read this book. Robert Solow contributed to developing the first generation of the neoclassical growth theory, the OGT. According to his basic model (with no technological progress), output per capita is determined by capital per unit of labor. When capital/labor increases, output per capita increases but at a decreasing rate. Eventually, every economy reaches a steady state where output per capita does not change. Since this basic model does not accurately predict the empirical fact that capitalist economies experience sustained growth of output per capita, technical progress is added to explain this occurrence. But this technical progress is an...