Introduction to Modern Economic Growth
Daron Acemoglu | 2008-12-15 00:00:00 | Princeton University Press | 1008 | Economics
Introduction to Modern Economic Growth is a groundbreaking text from one of today's leading economists. Daron Acemoglu gives graduate students not only the tools to analyze growth and related macroeconomic problems, but also the broad perspective needed to apply those tools to the big-picture questions of growth and divergence. And he introduces the economic and mathematical foundations of modern growth theory and macroeconomics in a rigorous but easy to follow manner. After covering the necessary background on dynamic general equilibrium and dynamic optimization, the book presents the basic workhorse models of growth and takes students to the frontier areas of growth theory, including models of human capital, endogenous technological change, technology transfer, international trade, economic development, and political economy. The book integrates these theories with data and shows how theoretical approaches can lead to better perspectives on the fundamental causes of economic growth and the wealth of nations. Innovative and authoritative, this book is likely to shape how economic growth is taught and learned for years to come.Introduces all the foundations for understanding economic growth and dynamic macroeconomic analysis Focuses on the big-picture questions of economic growth Provides mathematical foundations Presents dynamic general equilibrium Covers models such as basic Solow, neoclassical growth, and overlapping generations, as well as models of endogenous technology and international linkages Addresses frontier research areas such as international linkages, international trade, political economy, and economic development and structural change An accompanying Student Solutions Manual containing the answers to selected exercises will be available Spring 2009 (978-0-691-14163-3/$24.95). See: http://press.princeton.edu/titles/8970.html. For Professors only: To access a complete solutions manual online, email us at: acemoglusolutions@press.princeton.edu
Reviews
"Economic growth" continues to be of interest largely because of the large part of humanity whose living standards are so very substantially worse than the middle-class norm of OECD countries. Economists are as interested as anyone else, whence university texts full of economists' economic growth research:
-- Acemoglu, "Introduction to Modern Economic Growth" (2009)
-- Aghion and Howitt, "The Economics of Growth" (2009)
-- Weil, "Economic Growth" (2nd ed., 2009)
As a Ph.D. economist who has resided and worked for the past thirty years in low-income areas of several continents, in countries of which the wealthiest was Egypt, "Economic Growth" is a daily interest. How does the enterprise sector relate to what attracts our attention to low-income countries in the first place: hunger, physical insecurity, abusive social relations? Does it pass these problems by, or does it alleviate them? Should interested outsiders care about "the economy" and if so what should they do? Or should they concentrate on relief, or on political reform?
This review of the three texts listed above looks at them from the point of view of their usefulness in relation to this particular interest.
Although Weil's undergraduate text stays away from the mathematics that dominate the other two, all three books are quite similar in that each is an encyclopedic exposition of models of aggregate growth, along with numerous factors that have been suggested to affect it. None is a monograph that states and defends a thesis. They all prepare a student to grapple with problems in the hope that the students will solve them.
Perhaps that is the fate of a textbook: anything more assertive would be commercially limiting.
Nonetheless, the result is a certain defensiveness. The task of the two graduate texts in particular seems to be to demonstrate that, if observation of low-income countries or of growth should give rise to an idea, then the economics profession can model it.
This is not to say that the authors haven't had ideas. But none of these texts is a handbook of things to be done: how to create economic growth or improve its quality. The implication, unfortunately, is that the authors don't have that toolkit to offer. (The graduate texts are, however, handbooks on how to model.)
The reader will learn quite a bit about the world from Weil's book, which is more descriptive than the other two. Aghion and Howitt's is immensely learned, but Acemoglu's book stands out in a couple ways. First, it is the only one to cross the line and become an applied mathematics textbook pure and simple. Secondly, however, its great length affords space for an "Epilogue," an explicit outlier that contains some non-mathematical statements. And it's here where I can pin-point what seems to me to be the underlying methodological error.
Acemoglu says about Chinese history, on page 867 (!): "When prospects for economic growth conflicted with political stability, the elite opted for maintaining stability, even if this came at the expense of potential economic growth. Thus China tightly controlled ... ."
Let me state the principle that Acemoglu has violated here: Things don't happen for causes. Things happen because people do them.
If things happened for causes, then we might indeed model cause and effect -- and probably conclude that that's all we could do.
But all the models and history are after the fact. If the fact were different, we'd be modeling that instead. And it always might have been different. China's history, in point of fact, finally did read: "Even though the measures required for economic growth conflicted with political stability, the elite found a way to take the measures and preserve political structures, resulting in massive benefits that ultimately were both economic and political." China's elite might very well have done this at any time; it's not for us to say that they couldn't have.
Acemoglu also overlooked this principle of action in the section on pp. 868-70 about Western Europe's growth after 1800. He says that two things were different in the pre-1800 period: no systematic investment in human capital, and the presence of "authoritarian" political regimes. But he then ignores investment in human capital in his story of the post-1800 period.
This is a fatal error. People make the political institutions what they are, make the families what they are, and make the firms what they are. "Things happen because people do them."
People who bring about change do not drop from outer space; they "distill their frenzy" from somewhere, and it's usually from an intellectual outlook they encountered in schools and universities.
If we hope low-income countries' enterprises will become more world class, their owners and managers must have this as their vision. If we hope that international standards of human rights will prevail, then social leaders must have that as their vision. And if we hope that Total Factor Productivity will rise in low-income countries, it is people who will make that happen.
It is actually a bit odd that all three texts should tell the basic story whose thread runs through savings, capital accumulation, TFP, and innovation without tackling what Acemoglu calls (p. 873) "the industrial organization of innovation." I give Acemoglu credit for this excellent term.
Surely the industrial organization of innovation would include universities investing in human capital, but perhaps this kind of investment will have to have happened more widely in low-income countries before it's modeled.
I conclude by reiterating that each of these three texts is truly encyclopedic and extremely impressive.
Reviews
This book, by one of the most respected contributors to macro, is a one stop shop for economic growth. It is a great book for understanding the fundamentals of macro theory as well as the progression of the theoretical and empirical work in every sub field of growth. It is a must for all graduate students, and I am sure it will be great addition to any researchers collection.
Reviews
I love this book, it contains all modern economic growth models, but it also has the basic ones that gave birth to this new branch of models. A former student of D.Acemoglu taught me a Macro course based on this book and it was amazing. I also recommend it for self study because explanations are very clear. Math requeriments are standard, but it also has some appendixes where he explains all math needed to understand advanced economics.
Reviews
Here is how good this book is. I recently moved and, upon organizing my economics books on my bookshelves, I had a truly hard time figuring out where to put Acemoglu's Introduction to Modern Economic Growth.
It could be beside my other growth theory textbooks, which will have to accept their place as just timid predecessors of this amazingly comprehensive and yet equally pedagogical volume. Or, given its excellent treatment of Dynamic Optimization Methods, I could place it by the couple of best graduate-level Macroeconomic and Macroeconomic Methods textbooks around. Even placing it along my Microeconomics textbooks did not seem far-fetched; Acemoglu truly conveys much of the intricacies of General Equilibrium Theory with a clarity I have not found elsewhere. And then, of course, the Mathematical Appendix has been such a useful constant reference since I have the book, that I could well put it together with my Mathematical Economics books.
As a young economist, I have no doubt that this book will be a great companion in the years to come and I recommend it to anyone who is passionate about economics.
Reviews
It's sad to see how this forum is used by "geniuses" such as Thornstein Veblen (who probably hasn't read the book) to write uninformative reviews that make no sense. I guess the profound influence that Acemoglu has had on economists across the world as well as the John Bates Clark medal granted to him by the American Economic Association in 2005 speak for themselves...
Now let's move to the book (which is what these reviews are supposed to be about):
I've had the opportunity to go through the book carefully and I think it is hard to find an economics textbook that is as comprehensive and self-contained as this one.
The first part convincingly motivates what the most important open questions in the study of economic growth are. It even touches on topics such as institutions, and geography which many growth textbooks often ignore.
The chapters in parts I-III are very useful for teaching an intermediate course in Economic Growth, with very detailed and rigorous explanations of the formal arguments. I loved the fact that he takes the time to go through some of the details of the proofs which is very helpful both for students and teachers.
Parts IV-VIII contain more advanced material on very relevant topics such as technology, trade, and political economy. I especially liked part VIII on the Political Economy of Growth which only a textbook written by Acemoglu, who has made some of the most recent substantial contributions to this field, could include.
Last but not least, I am sure students will be very thankful for the very detailed Mathematical Appendices that level the field (to some extent) for students with different mathematical backgrounds.
In sum, I totally recommend this textbook to both intermediate and graduate students interested in the study of economic growth. Only an economist who has made contributions to some of the topics covered in the book could write such a great textbook.
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