Advanced economies have experienced a tremendous increase in material well- being since the industrial revolution. Modern innovations such as personal computers, laser surgery, jet airplanes, and satellite communication have made us rich and transformed the way we live and work. But technological change has also brought with it a variety of social problems. It has been blamed at various times for increasing wage and income inequality, unemployment, obsolescence of physical and human capital, environmental deterioration, and prolonged recessions.
To understand the contradictory effects of technological change on the economy, one must delve into structural details of the innovation process to analyze how laws, institutions, customs, and regulations affect peoples' incentive and ability to create new knowledge and profit from it. To show how this can be done, Philippe Aghion and Peter Howitt make use of Schumpeter's concept of creative destruction, the competitive process whereby entrepreneurs constantly seek new ideas that will render their rivals' ideas obsolete.
Whereas other books on endogenous growth stress a particular aspect, such as trade or convergence, this book provides a comprehensive survey of the theoretical and empirical debates raised by modern growth theory. It develops a powerful engine of analysis that sheds light not only on economic growth per se, but on the many other phenomena that interact with growth, such as inequality, unemployment, capital accumulation, education, competition, natural resources, international trade, economic cycles, and public policy.
"The most basic proposition of growth theory is that in order to sustain a positive growth rate of output per capita in the long run, there must be continual advances in technological knowledge in the form of new goods, new markets, or new processes. This proposition can be demonstrated using the neoclassical growth model developed by Solow ( 1956) and Swan(1956), which shows that if there were no technological progress, then the effects of diminishing returns would eventually cause economic growth to cease."
Philippe Aghion (born August 17, 1956) is a French economist. He is Robert C. Waggoner Professor of Economics at Harvard University, having previously been Professor at University College London, an Official Fellow at Nuffield College, Oxford, and an Assistant Professor at Massachusetts Institute of Technology (MIT).
His main research work is on growth and contract theory. With Peter Howitt, he developed the so-called "Schumpeterian paradigm", and extended the paradigm in several directions; much of the resulting work is summarised in his joint book with Howitt entitled "Endogenous Growth Theory".
Aghion is a graduate of the Ecole Normale Superieure de Cachan (ENS Cachan, Mathematics Section), has a Diplome d’etudes approfondies (DEA) in Mathematical Economics from University of Paris 1 Pantheon-Sorbonne, and a Ph.D. from Harvard University (1987). He was elected a Fellow of the American Academy of Arts and Sciences in 2009 and he is a member of the Executive and Supervisory Committee (ESC) of CERGE-EI.
Peter Wilkinson Howitt (born May 31, 1946) is a Canadian economist. He is the Lyn Crost Professor of Social Sciences at Brown University. Howitt is a Fellow of the Econometric Society since 1994 and a Fellow of Royal Society of Canada since 1992. He served as President of the Canadian Economics Association in 1993-1994 and was the editor of the Journal of Money, Credit, and Banking in the period 1997-2000.