02
A History of Economic Growth Theory
From Malthus to CDR — a chronological survey of what each model got right and where it fell short
Learning Objectives
- Situate the CDR model within the history of economic thought
- Critically evaluate why classical and neoclassical models fail to fully explain cross-country growth
- Understand how Schumpeter anticipated entrepreneurship's central role two centuries before CDR formalized it
15th c. / 18th c.
Mercantilism & Physiocracy
Wealth as trade surplus or land productivity. No mechanism for sustained growth creation.
1776
Adam Smith — Classical Theory
Division of labor creates surplus capital. Recognized gain from specialization and cooperation. Not a complete growth model but foundational for CDR's source-of-wealth concept.
1798
Malthus — Population Theory
Proposed population growth would exhaust resources. Reverse is empirically true: population growth is positively correlated with economic growth. CDR supersedes Malthus.
1817–1821
Ricardo — Comparative Advantage
Gain from trade. Treated labor as homogeneous — ignoring skilled/unskilled distinction and human capital ideas. CDR preserves Ricardo's homogeneous brawn definition while adding brain.
1911
Schumpeter — Creative Destruction
Capital accumulation not the main driver; entrepreneurial creativity is. Required private property, competitive markets, and efficient finance — all embedded in CDR's C, D, R variables.
1930s–1950s
Keynes / Harrod-Domar
Incomplete markets; fiscal policy as driver. Government spending included in CDR regression shows zero coefficient — not a growth determinant under CDR law.
1956–1957
Solow — Neoclassical Growth
Economies converge to balanced growth path. Capital stock only — cannot capture entrepreneurship. There is no such thing as an aggregate production function (Cohen & Harcourt, 2003). CDR complements rather than replaces micro production function.
1980s–1990s
Romer / Endogenous Growth
Endogenous technological progress. Misapplied Pontryagin's principle. CDR provides the missing institutional framework that enables technological progress.
2016–present
Ridley et al. — CDR Model
First global time-invariant model. Parsimonious (3 variables). Scientific law governing capital-to-GDP conversion. R² = 83%. Explains the source of wealth, its conversion, and its limits.