fact that the measured growth in the standard of living, also known as the ratio of output to labour input, could not be explained entirely by the growth in the capital/labour ratio was a significant finding, and pointed to innovation rather than capital accumulation as a potential path to growth. The 'Solow growth model' is not intended to explain or derive the empirical residual, but rather to demonstrate how it will affect the economy in the long run when imposed on an aggregate model of the macroeconomy exogenously. This model was really a tool for demonstrating the impact of "technology" growth as against "industrial" growth rather than an attempt to understand where either type of growth was coming from. The Solow residual is primarily an observation to explain, rather than predict the outcome of a theoretical analysis. It is a question rather than an answer, and the following equations should not obscure that fact. As a residual term in the Solow model Solow assumed a very basic model of annual aggregate output over a year (t). He said that the output quantity would be governed by the amount of capital (the infrastructure), the amount of labour (the number of people in the workforce), and the productivity of that labour. He thought that the productivity of labour was the factor driving long-run GDP increases. An example economic model of this form is given below: where: Y(t) represents the total production in an economy (the GDP) in some year, t. K(t) is capital in the productive economy – which might be measured through the combined value of all companies in a capitalist economy. L(t) is labour; this is simply the number of people in work, and since growth models are long run models they tend to ignore cyclical unemployment effects, assuming instead that the labour force is a constant fraction of an expanding population. A(t) represents multifactor productivity (often generalized as "technology"). The change in this figure from A(1960) to A(1980) is the key to estimating the growth in labour 'efficiency' and the Solow residual between 1960 and 1980, for instance. To measure or predict the change in output within this model, the equation above is differentiated in time (t), giving a formula in partial derivatives of the relationships: labour-to-output, capital-to-output, and productivity-to-output, as shown: Observe: Similarly: Therefore: The growth factor in the economy is a proportion of the output last year,