The Sources of Growth - Economists identify five important sources of growth - Growth-compatible institutions - Markets and private ownership of property foster economic growth - When individuals get much of the gains of growth themselves, they work Harder - Corporations are growth-compatible institutions because of limited liability, Which gives stockholders an incentive to invest their savings in large Enterprises - Informal property rights limit borrowing by the poor and hence limit growth - Capital accumulation – investment in productive capacity - Although capital is a key element in growth, capital accumulation does not Necessarily lead to growth - Capital may become obsolete - Capital is much more than physical machines and includes - Human capital are skills that workers gain from experience, education, And on the job training - Social capital is the habitual way of doing things that guides people in How they approach production - Available resources - The growth in the U.S. in the 20th century was due in part to its large supply of Natural resources - What is a resource depending on the production processes of an economy and Technology - New technology can overcome a lack of resources - Greater participation in the market may increase the labor force participation rate - Technological development - Technology is the way we make goods and supply services - Changes in technology and changes in the goods and services we buy fuel Growth - Advances in technology shift the production possibility curve outward by Making workers more productive - Important developments in biotechnology, computers, and communications Have helped fuel U.S. growth. - Entrepreneurship - Entrepreneurship is the ability to get things done using creativity, vision, Willingness to accept risk, and a talent for translating vision into reality. - Entrepreneurs have been central to growth in the U.S - Examples of American entrepreneurs include - Thomas Edison – generation and use of electricity - Henry Ford – automobile production - Bill Gates – Computers and software