Solow: Reflections on Growth Theory

Solow, R., 2005. Reflections on growth theory. In Handbook of Economic Growth. Aghion, P, Durlauf.

Solow’s introduction to the Handbook emphasized a couple of direction that growth models have failed to head. One of those is making the models multi-sectoral. “…Leif Johansen had an early book, orientated toward planning. Luigi Pasinetti has written extensively on the sorts of structural changes to be expected along a trajectory, arising from such inevitable factors as differing income elasticities of demand for different goods. In a very different vein, there was a whole literature stemming from the von Neumann model, which now seems to have gone out of favor. Xavier Sala-i-Martin’s chapter in the Handbook reviews some worthwhile developments and promises others” (4).

There was work on two sector models, but this didn’t last as long as it possibly should have. “I have the feeling that too much in those models turned out to depend on differences in factor intensity between the sectors. We have very little in the way of facts or intuition about that issue, and there was no reason to expect or postulate any systematic pattern that could lead to exciting results” (4).

Endogenizing technology and human capital: “I can now turn from the things that growth theory has not accomplished to the things that it has done, in particular the way it has expanded outside the confines of a narrow model. The main effort has quite properly gone into the endogenization of changes in technology…and changes in the stock of human capital” (6).