Allocation and growth in economics: are they complementary ideas?

Two important ideas in economics that seem in some ways incompatible are those of the efficient allocation of resources and that of growth. Neoclassical microeconomics in its basic form is thought to encourage governments to pursue free market policies so that resource allocation is efficient and maximises the welfare of society in the form of utility. It is concerned with a static model of allocation. By contrast, theories of growth are concerned with change over time, that is a dynamic process. Continue reading

Advertisements

Building bridges between left and right on policy

One of the basic tenets of Keynesian economics is the importance of aggregate demand or spending in the economy for the purposes of supporting growth and employment. This spending takes the form of consumption and investment in the private, public and foreign sectors for an economy open to international flows of trade and investment. Continue reading