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In postsLatest ia, two-thirds have then new and detailed. On Memorial Day weekend in , a conference in Buffalo brought together the great minds in economics the idea was to evaluate the conflicting theories of growth. Romer, Krugman, Barro, Becker were in attendance along many other rising star and high profiled economist of the time. Romer argued that outcomes to the national growth rates were significantly affected by public policy, trade activity, and intellectual property.
He stressed that cumulative capital and specialization were key, and that not only population growth can increase capital of knowledge, it was human capital that is specifically trained in harvesting new ideas. One branch of endogenous growth theory was developed on the foundations of the Schumpeterian theory, named after the 20th-century Austrian economist Joseph Schumpeter.
In doing so, they make old technologies or products obsolete. This can be seen as an annulment of previous technologies, which makes them obsolete, and "destroys the rents generated by previous innovations". Unified growth theory was developed by Oded Galor and his co-authors to address the inability of endogenous growth theory to explain key empirical regularities in the growth processes of individual economies and the world economy as a whole.
The theory suggests that during most of human existence, technological progress was offset by population growth, and living standards were near subsistence across time and space. However, the reinforcing interaction between the rate of technological progress and the size and composition of the population has gradually increased the pace of technological progress, enhancing the importance of education in the ability of individuals to adapt to the changing technological environment. The rise in the allocation of resources towards education triggered a fertility decline enabling economies to allocate a larger share of the fruits of technological progress to a steady increase in income per capita, rather than towards the growth of population, paving the way for the emergence of sustained economic growth.
Public Debt, Sustainability and Economic Growth
The theory further suggests that variations in biogeographical characteristics, as well as cultural and institutional characteristics, have generated a differential pace of transition from stagnation to growth across countries and consequently divergence in their income per capita over the past two centuries. The prevailing views about the role of inequality in the growth process has radically shifted in the past century.
The classical perspective, as expressed by Adam Smith, and others, suggests that inequality fosters the growth process.
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The Neoclassical perspective that is based on representative agent approach denies the role of inequality in the growth process. It suggests that the while the growth process may affect inequality, income distribution has no impact on the growth process. The modern perspective which has emerged in the late s suggests, in contrast, that income distribution has a significant impact on the growth process. The modern perspective, originated by Galor and Zeira ,   highlights the important role of heterogeneity in the determination of aggregate economic activity, and economic growth.
Unsustainable Public Debt in a European Fiscal Union?
In particular, Galor and Zeira argue that since credit markets are imperfect, inequality has an enduring impact on human capital formation, the level of income per capita, and the growth process. Later theoretical developments have reinforced the view that inequality has an adverse effect on the growth process.
Specifically, Alesina and Rodrik and Persson and Tabellini advance a political economy mechanism and argue that inequality has a negative impact on economic development since it creates a pressure for distortionary redistributive policies that have an adverse effect on investment and economic growth. In accordance with the credit market imperfection approach, a study by Roberto Perotti showed that inequality is associated with lower level of human capital formation education, experience, apprenticeship and higher level of fertility, while lower level of human capital is associated with lower growth and lower levels of economic growth.
In contrast, his examination of the political economy channel found no support for the political economy mechanism. In particular, inequality in the distribution of land ownership provides the landed elite with an incentive to limit the mobility of rural workers by depriving them from education and by blocking the development of the industrial sector.
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