One of the most important challenges facing policymakers is the question of how to increase economic growth. Developing countries stuck with low living standards strive to overcome centuries of poverty. Developed countries facing an extended economic slump search for an answer to the question of how to return to “normal” growth.
One of the enduring myths, exposed in vivid detail by William Easterly in his book, The Elusive Quest for Economic Growth, is that the path to more rapid growth lies in bringing more investment to bear on the problem (Easterly 2001, p. 4). This is an appealing solution, based as it is in what amounts to a half-truth about the power of investment to propel an economy forward. It is also a misleading ...
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