Economics Economic Growth Models Essay Example | Topics and Well Written Essays - 1000 words

economics Economic harvest-feast Models - Essay ExampleAs the paper stresses one common theme of these models is that the economic system will have a steady make up rate that depends on labor force growth and technological growth. New Growth Theory came closely because of discontent within the circle of economists with the Neoclassical Growth Model. New Growth Theory was developed during the 1950s and 1960s. It returned to the forefront of economic thought during the 1980s because many felt that the white-haired theories were outdated and did not get going the modern world. The new theory, based on knowledge and creativity, was developed to fit modern economic growth. This new theory is also called Endogenous Growth Theory because changes are do within the model rather than exogenously (outside the model). According to this theory mind power (knowledge) and creativity are outstanding factors in production and, added to labor and capital, plus economic growth. This theory states that creativity added to labor increases growth, creativity improves twain capital and labor, and creativity extends resources and tends to abundance.This paper outlines that in New Growth Theory creativity rearranges resources and thus resources take unlimited. In the neoclassical growth model resources are limited. Subsidies in research and development are argued to increase growth due to an increase in knowledge and innovation. Big players in the development of this model were Theodore Schultz, an economist at the University of Chicago, and Gary Becker, Nobel Prize winner for economics in 1992. Schultz, also a Nobel Prize winner, developed theories about the use of man capital to increase agricultural production. Shultz theorized that investing in education would invariably increase agricultural output. Becker added on to Shultzs theory by explaining that expenditures on education, skills training, and medical care can be considered human capital and can, if invested in , increase productivity and output.