Acton Institute Powerblog

The Solow model and ideas

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Note: This is post #84 in a weekly video series on basic economics.

According to previous videos in this series, the Solow model seems to predict that we’ll always end up in a steady state with no economic growth. But, the Solow model still has one variable unaccounted for: ideas.

Ideas do one thing really well, says Alex Tabarrok of Marginal Revolution University, they give us more bang for our buck. This means we get more output for the same inputs of capital and labor. Ideas are a way of upping our productivity, increasing output per worker across different industries.

(If you find the pace of the videos too slow, I’d recommend watching them at 1.5 to 2 times the speed. You can adjust the speed at which the video plays by clicking on “Settings” (the gear symbol) and changing “Speed” from normal to 1.25, 1.5 or 2.)

Click here to see other videos in the Introduction to Economics series.

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Joe Carter Joe Carter is a Senior Editor at the Acton Institute. Joe also serves as an editor at the The Gospel Coalition, a communications specialist for the Ethics and Religious Liberty Commission of the Southern Baptist Convention, and as an adjunct professor of journalism at Patrick Henry College. He is the editor of the NIV Lifehacks Bible and co-author of How to Argue like Jesus: Learning Persuasion from History's Greatest Communicator (Crossway).

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