Why, Indeed, in America? Theory, History, and the Origins of Modern Economic Growth

15 Pages Posted: 10 Jun 2000 Last revised: 17 Nov 2022

See all articles by Paul M. Romer

Paul M. Romer

National Bureau of Economic Research (NBER)

Date Written: January 1996

Abstract

When they are used together, economic history and new growth theory give a more complete picture of technological change than either can give on its own. An empirical strategy for studying growth that does not use historical evidence is likely to degenerate into sterile model testing exercises. Historical analysis that uses the wrong kind of theory or no theory may not emphasize the lessons about technology that generalize. The complementarity between these fields is illustrated by an analysis of early industrialization. The key theoretical observation is that larger markets and larger stocks of resources create substantially bigger incentives for discovering new ways to use the resources. This simple insight helps explain why the techniques of mass production emerged in the United States during the first half of the 19th century. It also helps explain how a narrow advantage in the techniques of mass production for a small set of goods grew into broad position of industrial supremacy by the middle of the 20th century.

Suggested Citation

Romer, Paul M., Why, Indeed, in America? Theory, History, and the Origins of Modern Economic Growth (January 1996). NBER Working Paper No. w5443, Available at SSRN: https://ssrn.com/abstract=225500

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National Bureau of Economic Research (NBER)

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