13: Economic growth

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Economic growth is one of the most historic, challenging and important topics in macroeconomics. Standards of living within a country are measured by real GDP per capita. Growth in real GDP is growth in potential output, Y_P, and growth in real GDP per capita is a measure of change in the standard of living. Over time, growth in Y_P that exceeds population growth raises per capita real GDP and standards of living. But growth that falls persistently short validates Thomas Malthus' prediction in his First Essay on Population (1798) that population growth would exceed output growth causing starvation and the end of population growth. But what determines growth in real GDP and real GDP per capita? A theory of economic growth is needed to answer that question.

Observations on the recent history of economic growth raise four questions.

What is long-term growth?
What are the causes or sources of growth?
What are the effects of economic growth, both positive and negative?
Can economic policies affect growth?

Although the focus here is mainly on industrial countries, the growth or lack of it in poor countries is also an extremely important issue for the economics of development. To see many other interesting dimensions of growth compared across a much larger sample of countries over longer time periods, visit Gapminder World on the web site www.gapminder.org.