8.5 Conclusion

Long-run economic growth is the single most important determinant of the economic well-being of a nation’s citizens. Everything else that macroeconomists study—unemployment, inflation, trade deficits, and so on—pales in comparison.


Fortunately, economists know quite a lot about the forces that govern economic growth. The Solow growth model and the more recent endogenous growth models show how saving, population growth, and technological progress interact in determining the level of and growth in a nation’s standard of living. Although these theories offer no magic recipe to ensure an economy achieves rapid growth, they do offer much insight, and they provide the intellectual framework for much of the debate over public policy aimed at promoting long-run economic growth.