Chapter 3: A critique of orthodox growth theory: structure and demand matter for economic growth
In the previous chapter we laid out the foundations of orthodox growth theory, that started with the Harrod model in 1939, which led subsequently to the 1956 Solow model of neoclassical growth theory, and then on to so-called ‘new’ (or endogenous) growth theory in the 1980s. This is the orthodoxy that is taught in university departments of economics all over the world. But the assumptions of the basic orthodox neoclassical model, and its predictions, bear little relation to reality. There are so many objections and criticisms that can be made of the model that it has always been a mystery to me how the basic Solow model ever came to dominate the teaching of growth economics. It probably needs a social science psychologist to explain. I shall mention briefly just a few of the major criticisms now, and then develop others more fully later.
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