Question

• increasing capital formation (savings/investment)
• improving human capital (skills/knowledge/productivity of labor)
• raising entrepreneurial ability
• enhancing natural resources
• upgrading technology and infrastructure
• the existence of a competitive and open market
• sensible planning
• effective legal and judicial system
• effective government oversight

• Use short bullet points and provide only the essence of each theory in 50 words or less.
• Which of the above factors does the theory focus on? What does the theory suggest drives growth?

GROWTH THEORY		DRIVERS OF GROWTH/WEALTH CREATION
ADAM SMITH (1776) CLASSICAL THEORY
CARL MARX (1867) SOCIALISM
KEYNES (1930s) KEYNESIAN THEORY
ROSTOW (1960) 5 STAGES MODEL
HARROD-DOMAR (DATE) CAPITAL/SAVINGS/INVESTMENT
LEWIS (1954) TWO-SECTOR MODEL
SOLOW (1956) NEOCLASSICAL GROWTH MODEL
VARIOUS THEORISTS (1990s) NEW GROWTH THEORY
VARIOUS THEORISTS (1990s) THEORIES OF COORDINATION FAILURE

Answer 1

We know that the Adam Smith considered as the father of economics. His famous book was The wealth of Nation written in 1776. He discussed two kinds of social institutions. That is feudalism and religion. In his point of view, the religion creates the modernity in the society. The religious movements in his days create liberally values of a free society. They are always favored of moral codes, interpretations of religious values, and political activism. He connecting revival and process what we called as urbanization.

He also discussed another institution called human institutions. The human institutions include roads, bridges, canals, harbors, schools, companies, etc. and he argued that the human institutions will create the wealth of nation. He argued that the human institutions will prevent the natural course of things.

2.

Classical economic thought

3.

According to Adam Smith, the markets are self-regulating one. He assumes that there are enough firms are competing in the market. These all firms are self-regulating. Here the competition between the firms is the regulator of economic activity. This he called an invisible hand.

4.

John Maynard Keynes is the founder of macroeconomics. He started his work based on the criticism of classical works. In his version of output and employment determination, based on the criticism of Say’s law of market where supply creates it's on demand. Keynes argued that demand creates its own supply. He gives more importance to the role of government and rejected the invisible hand given by Smith. In his famous contribution Theory of Employment Interest and Money published in 1936. In his view, the short run equilibrium occurs when aggregate supply equals aggregate demand.

5.

Keynesian school of thought

6.

Aggregate demand

7.

In Keynesian views, the self-regulating market is wrong one. Because the self-regulating market is operated on perfect competition market and it creates full employment n the society. But Keynes argued that there is underemployment in the economy

8.

The Marxian contribution to the economics was labour theory of value, the economics of exploitation, concept of surplus value and the rate of profit

9.

Marxian economics