Theories

In this sense, economic development is practically equivalent to industrialisation. But to say that economic development is only indus­trialisation would not be correct because besides involving the use of power and technology in production, it also involves labour mobility, ex­tensive educational system, and so on.

Tax Policy:

• Some propose cutting taxes on such activities as working and saving in order to increase the productive capacity of the economy.
• Others argue that if the tax is lowered on income placed in saving accounts, the return from saving will increase and thus the amount of saving will rise.

What About Industrial Policy?

• Industrial policy is a deliberate government policy of aiding those industries that are most likely to succeed in the world marketplace.
• Government needs to work with business firms in the private sector to help them compete in the world marketplace.
• Critics maintain industrial policy does not always turn out the way its proponents would have for 3 reasons: government may favor industries with more political influence; officials who design policy don’t know what will be industries of the future; officials are likely to hamper growth if they aid cetain industries.

New Growth Theory:

• Technology is a central part of the economic system.
• The amount and quality of technology that is developed depends on the amount of resources we devote to it.
• If one person is trying to advance technology, his or her chances of success are much smaller than if hundreds or thousands of persons are trying.
• The theory also places emphasis on the process of discovering and formulating ideas.

Discovery, Ideas, and Institutions :

1. If the process of discovering ideas is important to economic growth, then it behooves us to figure out ways to promote the discovery process.
2. Employee flexibility is becoming a larger part of the US economy.