Modern Principles: Macroeconomics, Economic Growth
course an embarrassment. In much of the developing world, diarrhea
is a killer, especially of children. Every year 1.8 million
children die from diarrhea. Ending the premature deaths of these
children does not require any scientific breakthroughs, nor does it
require new drugs or fancy medical devices. Preventing these deaths requires
only one thing: economic growth.
That’s the opening paragraph of The Wealth of Nations and Economic Growth, Chapter 6 in Modern Principles: Macroeconomics. Does the opening make you a little bit squeamish? We hope so–we wanted an opening that would jar students out of complacency and remind them how vital economic growth is to human life. Â
Due to its importance, we have more material on growth and development than any other principles text.  In Chapter 6 we lay out the key facts and the basic framework for understanding economic growth. I think we do an especially good job explaining that the proximate causes of growth, increases in capital, labor, and technology must themselves be explained. Why do people save? Why do people invest?  Why do people research and develop new ideas?  It’s these questions which connect macroeconomics to microeconomics and point to the fundamental importance of incentives and institutions. These questions also foreshadow future chapters on savings, investment, financial intermediation and the economics of ideas.Â
For a limited time, you can read Chapter 6 at the link above (and do enjoy the pretty color pictures before you print!).  Tyler and I will be writing more about Modern Principles: Macroeconomics this week; you can also find more information at www.SeeTheInvisibleHand.com.