how to generate economic growth
economic growth is dependent on the following four contributory areas the first is an increase in the amount of physical capital goods in the economy adding capital to the economy tends to increase the productivity of labor newer better and more tools mean that workers can produce more output per time period for a simple example a fisherman with a net will catch more fish per hour than a fisherman with a rod however two things are critical to this process someone in the economy must first engage in some form of saving in order to free up the resources to create the new capital in addition the new capital must be of the right type in the right place and activated at the right time for workers to actually use it productively a second method of producing economic growth is through technological improvements an example of this is the invention of gasoline fuel prior to the discovery of its energy generating power the economic value of petroleum was relatively low this changed when the use of gasoline proved a more productive method of transporting goods improved technology allows workers to produce more output with the same stock of capital goods by combining them in novel ways that are more productive like capital growth the rate of technical growth is highly dependent on the rate of savings and investment as they are necessary to engage in research and development the four factors of production are land and natural resources labor capital equipment and entrepreneurship another way to generate economic growth is to grow the labor force all else being equal more workers generate more economic goods and services during the 19th century a portion of the robust u s economic growth was due to a high influx of cheap productive immigrant labor however as with capital driven growth there are some key conditions to this process 4increasing the labor force necessarily increases the amount of output that must be consumed in order to provide for the basic subsistence of the new workers so the new workers need to be at least productive enough to offset this and not be net consumers also just like additions to capital it is important for the right type of workers to flow to the right jobs in the right places in combination with the right types of complementary capital goods in order to realize their productive potential the last method is to increase human capital this means laborers become more accomplished at their crafts raising their productivity through skills training trial and error or simply more practice savings investment and specialization are the most consistent and easily controlled methods human capital in this context can also refer to social and institutional capital behavioral tendencies toward higher social trust and reciprocity along with political or economic innovations such as improved protections for property rights are types of human capital that can increase the productivity of the economy 