Answer to Question #129465 in Economics of Enterprise for Vee

Question

What are the principles of new growth theory?

Answer 1

What are The Principles of New Growth Theory

      Growth theory is a theory that was advanced by Paul Romer. The theory postulates that humans yearnings and infinite wants increase productivity and economic growth. The theory posits that knowledge and innovation are not subject to diminishing returns.

Principles of New Grow Theory

1)     The theory places the importance of increasing capital and labour productivity.

The new growth theory holds that labour capital is not subject to diminishing returns but may have increasing returns (Tejvan Pettinger, 2017a)

2)     Emphasis knowledge as assert for growth that unlike other factors of production is not subject to diminishing returns.

3)     The theory advocates that entrepreneurship, technology, and knowledge are essential for growth. Refuting the notion that growth is as a result of external forces

4)     The theory states that as people pursue their desires for profit, GDP will eventually grow.

References

Tejvan Pettinger. (2017, September 17). Explaining Theories of Economic Growth | Economics Help. Retrieved from Economicshelp.org website: https://www.economicshelp.org/blog/57/growth/explaining-theories-of-economic-growth/

Krylovskiy, N. (n.d.). New_growth_theory. Retrieved August 13, 2020, from Economics Online website: https://www.economicsonline.co.uk/global_economics/new_growth_theory.html