Equilibrium Growth and Cumulative Causation

Abstract

The observation by Evsey Domar captures the demise in the status of growth theory within mainstream economics during the first half of the twentieth century. Questions relating to the possibilities for economic progress had been at the forefront of Marshall’s economic enquiries, just as it had in the writings of his revered classical predecessors. However, interest in such matters had clearly waned during the Marshallian era, with attention increasingly focused on the static equilibrium analysis of relative prices and resource allocation. The ‘Keynesian revolution’ saw consideration directed more towards the short-period analysis of aggregate output and prices, subsequently embedded in a variety of alternative short-and long-period equilibrium frameworks, as outlined in Chapter 4.

Growth has occupied an odd place: always seen around but seldom invited in. It has either been taken for granted or treated as an afterthought.

(Domar 1957: 16)