Economic growth is an essential ingredient to a good life, but it can be difficult to understand and measure. Moreover, different economies value different goods and services differently. A heater is worth more to an Alaskan than to a Floridian, for example. Thus, economic growth must be measured in terms of the value of goods and services, not their quantity.
The most common way to measure economic growth is by calculating a nation’s gross domestic product (or GDP), which combines all the spending by consumers, businesses, and government in a given period. However, GDP excludes many investments that have long-term benefits, such as research and development (R&D).
In order to maximize economic growth, economists seek to increase both the potential output of an economy and its labor productivity. The former requires expanding the size of the workforce through population growth and reducing unemployment, while the latter involves improving the efficiency with which workers produce a given amount of output through technology and other innovations.
A growing economy can also benefit from a rise in the prices of raw materials, which is why economic growth is often closely linked to natural resource extraction and energy consumption. In the short run, an economy can achieve rapid rates of growth by catching up from a recession by eliminating excess unemployment and more fully utilizing the productive capacity that was idled during the downturn.
The papers in this issue explore a wide range of topics, including applications that take new approaches to old questions in the field (such as those on technology diffusion or structural change); work on open issues in the theory of economic growth; and empirical studies of various facets of economic growth.