Different models of economic growth stress alternative causes of economic growth. The principal theories of economic growth include:
Mercantilism – Wealth of a nation determined by the accumulation of gold and running trade surplus
Classical theory – Adam Smith placed emphasis on the role of increasing returns to scale (economies of scale/specialisation)
Neo-classical-theory – Growth based on supply-side factors such as labour productivity, size of the workforce, factor inputs.
Endogenous growth theories – Rate of economic growth strongly influenced by human capital and rate of technological innovation.
Keynesian demand-side – Keynes argued that aggregate demand could play a role in influencing economic growth in the short and medium-term. Though most growth theories ignore the role of aggregate demand, some economists argue recessions can cause hysteresis effects and lower long-term economic growth.
Limits to growth – From an environmental perspective, some argue in the very long-term economic growth will be constrained by resource degradation and global warming. This means that economic growth may come to an end – reminiscent of Malthus theories.
Mercantilism
Popular at the start of the industrial revolution, Mercantilism isn’t really a theory of economic growth but argued that a country could be made better off by seeking to accumulate gold and increasing exports.
Classical model
Developed by Adam Smith in Wealth of Nations (1776), Smith argued there are several factors which enable increased economic growth
