Developments in Major Fields of Economics
Edited by Gilbert Faccarello and Heinz D. Kurz
Ever since the inception of systematic economic analysis at the time of the classical economists from William Petty to David Ricardo the problem of economic growth – its sources, forms and effects – has been high on the agenda of economists. In the real world the problem and the fact of economic growth are, of course, of much longer standing. Even in the more or less stationary economies of antiquity the possibility, if not the fact, of economic expansion lingers at the back of certain considerations. Brick plates from Mesopotamia provide information about social productivity by means of a simple input–output calculation in terms of barley. The main question concerned the surplus product of barley that the ancient society was able to generate, that is, the excess of total output in a year with a normal harvest over the amount of input of barley as seed or as means of subsistence of labourers plus any other inputs needed in the society measured in terms of barley. From the surplus rate, that is, the ratio of surplus product to necessary input, it is obviously only a small step intellectually, but a huge step historically, to the concept of the rate of growth. Adam Smith viewed the growth process as strictly endogenous (see also Lowe 1954 : 108; Eltis 1984: 69; Rostow 1990: 34), placing special emphasis on the impact of capital accumulation on labour productivity. He began his inquiry into the Wealth of Nations (Smith 1776 , hereafter WN) by stating that income per capita “must in every nation be regulated by two different circumstances; first, by the skill, dexterity, and judgment with which its labour is generally applied; and, secondly, by the proportion between the number of those who are employed in useful labour, and that of those who are not so employed” (WN, I.3). According to Smith there is no upper limit to labour productivity. This is why Smith maintained that an investigation of the growth of income per capita is first and foremost an inquiry into “The causes of this improvement, in the productive powers of labour, and the order, according to which its produce is naturally distributed among the different ranks and conditions of men in the society” (WN I.5).
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