Customer Reviews

The Mystery of Economic Growth

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Helpman here offers a survey of many important aspects of economic growth theory. He gives some general background and then deals with accumulation, productivity, innovation, interdependence between countries, inequality, and institutions. Be warned, however, that although he claims that his book "provides a nontechnical description of growth economics," the word "nontechnical" here simply means non-mathematical. Much of the book is peppered with economics jargon, and although the glossary at the back is helpful, a reader without some advanced undergraduate or basic graduate background in macroeconomics will struggle.

Some chapters are definitely more approachable than others, and you generally don't need to have read an earlier chapter to understand a later one. The chapters on inequality and on institutions, for example, could be understood by most readers, whereas the chapter on innovation is much more challenging.

Having some advanced training in economics, I found the book a helpful refresher course on the latest research in many areas of growth economics. A better book for someone interested in a truly nontechnical (but definitely not dumbed-down) exploration of how growth theory has been applied to economic development policy is Easterly's The Elusive Quest for Growth. A non-technical (and slim) volume focusing on the empirical aspects of growth research is Barro's Determinants of Economic Growth.

I was expecting - hoping - for something a little different. Helpman runs through the Solow growth model and does little else. I ended up putting it down. Nothing about competing theories, why economic growth models work some places and not in others, or anything beyond the mainstream model. If that's what you're looking for, that's great, but otherwise, take a look at The Elusive Quest for Growth by Bill Easterly, or The Mystery of Capital, by Hernando de Soto. Those offer a departure from the norm of development theory.

What factors influence and drive economic growth? Numerous titles have studied the sources of economic growth, but mysteries remain, especially for novice readers without a solid background in economics. Enter The Mystery Of Economic Growth, presenting a fine survey of what is known and unknown in economics, and how to improve an understanding of global economic influences. Here the story of growth economics is organized around themes of technological and institutional influencers, total productivity, and interdependent growth rates of different countries.

It is simply a summation of my international economics class from five years ago. Factors of production effect growth. We don't know what inequality does. It has been found that countries with good institutions have higher growth.

If you were expecting a book like Sen's or Sach's (or even de Soto) meant for the lay person to unerstand: you got the wrong book. If you can keep up with all of the references and know some of the unexplained uses of accepted models, then you probably don't need to read it. Meanwhile if you haven't taken at least six semesters of economics, this book might as well be in Sanskrit. It's kinda like the movie Catch-22 (if you haven't read the book, don't bother; and if you have read the book, you don't need the movie).

The references to the literature are at times machine gun paced. I cannot imagine who is the target audience for this. It too simple and unrevolutionary for the economist and too esoteric for the layman. Just a waste of paper resources!

Helpman, his name notwithstanding, doesn't help much in understanding "the mystery". Maybe the title is far too ambitious, maybe it's because of his often convoluted writing, maybe because the most important recent evolutions in growth theory seem not to have been thoroughly digested by the author, maybe because there's little about the politics of economic growth. In fact, the part on governance and institutions in particular is less than clear. The first chapters are better, though: clear and comprehensive. But that is not enough to make of this book a classic.

Well meant summary of the author's ideas on econ growth. However, I guess he tried deliberately to exclude any mathematical equations. But then he covers econometric models. How is that going to work? Some sentences sound like this: "The XYZ factor is the coefficient of the product of the sums of the logarithms of the ABC inputs." It forces the reader to try to decipher the language and to write down the equation himself. I put the book down after 4 chapters and will look for alternatives. I am a quantitatively trained derivatives trader who wanted to self-educate himself on economics, but not with hardcore econ textbooks. Obviously, this book was the wrong choice, and I will now look for a more technical version. It is a book for graduate economics students who know the equations already, and who want a (biased) summary of the current literature regarding these growth models.

This book has a promising start on accumulation, productivity, and innovation, making some essential points that have not been widely enough appreciated.

It loses momentum, however, in its chapter on "Interdependence" dealing with international trade. The author describes and then abandons a series of models that by now retain little interest. The cumulative effect risks confusion.

The chapter on "Inequality" similarly does little to build on the essential points about innovation and productivity. Unfortunately, it also falls prey to the common fallacy of assuming that the "nation" receives an income (the "national income") that needs distribution. This fallacy seems to result from confusion over two senses of the word "distribution." One is the mathematical sense of a distribution function, and in this sense one can ask how the individual incomes found in a nation are distributed across sizes. The other sense is the action of dividing up a whole. While much income is earned collectively in enterprises and is indeed distributed subsequently, this is not true of economists' abstraction called "national income."

The concluding chapter on "Institutions and Politics" is similar to the trade chapter: an account of economists' articles that connect poorly to the essential findings on growth. The author's limited goal of identifying next steps for research on institutions does not have obvious interest outside the profession.

There are real questions about how to support innovation for economic development that a book on growth should grapple with if it takes economists' learning about growth seriously. For example, is the best way to attract finance to R&D really to charge horrendous monopoly prices for use of the eventual innovations? This is a dramatic question in some industries (e.g., pharmaceuticals), and all the more in light of the granting of inappropriate patents (e.g., for obvious business processes already in long use).

Regressions where actual countries are taken as if they were samples from a universe of countries-in-general are of little help in addressing such issues.

The theme in Helpman's book is that institutions matter more than anything else when we try to answer the question of why a country is poor. His conclusion is not obvious to many, especially non-economists, and Helpman succeeds only to some extent, though in my view it is not his fault. The field of development economics has been one of many schools, each trying like the six blind men to describe an elephant. Helpman should get the credit for cutting through these schools. A thoughtful reader would understand that for economic growth, savings (sacrifice) and investment are not enough, that diffusion of technology does not explain very much, but that research on institutions is the key. The most important institutions are: property and contract rights, the rule of law, and constraints on the power of rulers. Of course, institutions are not established overnight, and their creation may itself be a mystery of their own.

This volume may be appropriate and understandable by those who have extensive backgrounds and training in economics, but is rather tough going for those who have taken only micro and macro economics courses.

This book summarizes a good deal of economic thinking, so it will probably of value to someone. But I found the style sufficiently dull that I couldn't bring myself to absorb much of what it says.
The author seems to hold views that are very mainstream for an economist, and is mostly reporting consensus opinions rather than new insights.