- Person
- Robert Solow
- Lived
- 1924–2023
- Field
- Economics
- From
- American
The story
Robert Solow was a young professor at the Massachusetts Institute of Technology when he took on one of the outstanding puzzles of economics: what actually makes national economies grow over the long run. In the years after the Second World War many economists believed the path to growth lay in ever more investment in factories, machinery and infrastructure, and some pointed to the Soviet Union's relentless reinvestment as a model. The leading theory of the day, the Harrod–Domar model, treated capital as the main engine of growth and suggested that growing economies were inherently unstable.
Solow's paper "A Contribution to the Theory of Economic Growth", published in the Quarterly Journal of Economics in February 1956, set out a compact mathematical model of a growing economy, built around a single differential equation. He added labour as a factor of production and allowed the mix of capital and labour to change. Because each extra machine adds less output than the one before, an economy that simply saves a fixed share of its income and invests it eventually settles into a steady state, in which output per person stops rising. Saving more raises the level of income but not its long-run growth rate.
The conclusion was striking. Increases in population and capital investment, on their own, cannot sustain rising living standards. In the long run, only technical progress can. The Australian economist Trevor Swan reached similar results independently the same year in The Economic Record, and the framework is now called the Solow–Swan model. It also implied that poorer countries, with less capital per worker, should tend to grow faster and catch up with richer ones.
The model let economists separate the drivers of growth into increases in inputs, labour and capital, and technical progress. In 1957 Solow used it to measure the contribution of technology in US data, and in 1960 he extended it to allow new machines to embody newer technology. The Nobel committee, awarding him the 1987 prize, said the model had had an enormous impact and provides a framework within which modern macroeconomic theory can be structured.
It became the starting point for later work, from the Ramsey–Cass–Koopmans model of the 1960s to the endogenous growth theories developed by Paul Romer, Robert Lucas and others in the 1980s, which tried to explain where technical progress itself comes from. It is still the first growth model that economics students learn.
Why it matters
Solow's model shifted attention toward technology, skills and ideas as the true source of rising living standards, shaping how governments think about growth.
About Robert Solow
MIT economist whose growth model showed that technological progress, not just capital and labour, drives rising living standards; Nobel laureate in 1987 and teacher of Nobel winners.
More about Robert Solow
- Solow showed technology drove 80% of US growthIn 1957 Robert Solow used US data to show that roughly four-fifths of growth in output per worker came from technical progress, not just more capital.
- Robert Solow intercepted German radio traffic in WWIIAt 18 Robert Solow left Harvard to join the US Army, serving in North Africa, Sicily and Italy intercepting German radio messages from trucks near the front.
- Robert Solow helped found MDRC to test anti-poverty programsIn 1974 Robert Solow helped found the Manpower Demonstration Research Corporation, a pioneer in rigorously testing programs that help disadvantaged workers.
Sources
- Institute Professor Emeritus Robert Solow, pathbreaking economist, dies at age 99 MIT News
- Robert Solow Wikipedia
- The Prize in Economic Sciences 1987: Press release NobelPrize.org
Another act of tikkun olam. This is part of tikkun olam, the Jewish idea of repairing the world, and every one of us can add to it.