What Is New Growth Theory?

The new growth theory is an economic concept, positing that humans' desires and unlimited wants foster ever-increasing productivity and economic growth. It argues that 澳洲幸运5官方开奖结果体彩网:real gross domestic product (GDP) per person will perpetually🐲🐲 increase because of people's pursuit of profits.

Understanding New Growth Theory

The new growth theory offered a fresh take on what engineers economic prosperity. It emphasizes the importance of entrepreneurship, knowledge, innovation, and technology, challenging the view of 澳洲幸运5官方开奖结果体彩网:exogenous growth in 澳洲幸运5官方开奖结果体彩网:neoclassical economics that economic progress is determined by external, uncontrollable forces.

Competition squeezes profit, so people have to constantly seek better ways to do things or invent new products in order to maximize profitability. This concept is one of the central tenets of the new growth theory.

The theory argues that innovation and new technologies do not occur simply by random chance. Rather, it depends on the number of people seeking out new innovations or technologies and how hard they are looking for them. People also have control over their 澳洲幸运5官方开奖结果体彩网:knowledge capital—what to study, how hard to study, etc. If the profit incentive is great enough, people will choose to grow 澳洲幸运5官方开奖结果体彩网:human capital and look harder for new innovations.

A significant aspect of the new growth theory is the idea that knowledge is treated as an asset for growth that is not subject to finite restrictions or diminishing returns like other assets such as capital or real estate. Knowledge is an intangible quality, rather than physical, and can be a resource grown within an organization or industry.

New Growth Theory Example

Under the new growth th🐓eory, nurturing innovation internally is one of the reasons for organizations to invest in human capital. By creating opportunities and making resources available within an organization, the expectation is that individuals will be encouraged to develop new concepts and technology for the consumer market.

For example, a large enterprise might allow part of its staff to work on independent, internal projects that may develop into new innovations or companies. In some ways, the enterprise lets them function like startups being incubated inside the organization.

The desire of the employees to launch a new innovation is spurred by the possibility of generat𝐆ing more profits for themselves and the enterprise. This can be especially true in the United States, as commerce is increasingly driven by servi🍎ce-type companies. Software and app development may take place within companies, following the new growth theory.

Achieving such knowꦚledge-driven growth requires a sustained investment in human capital. This can create an environment for skilled professionals to have an opportunity to not only fulfill th🐼eir primary jobs but also explore the creation of new services that can be of benefit and use to the broader public.

Special Considerations

New growth theorists believe that companies generally undervalue the usefulness of knowledge and, as a result, argue that it is mainly up to governments to invest in human capital. Governments are encouraged to facilitate access to better education, as well as provide support and incentives for private-sector 澳洲幸运5官方开奖结果体彩网:research and development (R&D).