This paper was published in Economics and Business Review 2017; Vol. 3 (17), No. 3: 60-87. For the full paper see: http://www.ebr.edu.pl/pub/2017_3_52.pdf

Michael Joffe

Imperial College London

Abstract

A theory for a phenomenon needs to explain its main empirical features. In the case of modern economic growth, these include the times and places where it has occurred, its magnitude, the distinction between cutting-edge and catch-up growth, and the uniformity of the growth process despite major cultural and institutional heterogeneity. I summarise the historical record to characterise the explanandum, then review the main theoretical perspectives. I find that most leading theories fail to explain the main observed features of modern economic growth. In particular, the magnitude of growth and other key characteristics suggest the need for a systems analysis. An implication is that the economy is driven by interacting economic forces, rather than being merely reactive to external non-economic influences such as preferences and technology.