Friday, April 11, 2008
The reason to teach it, I think, is simple: Growth is just too damn important to be pushed aside in an intermediate textbook. As Romer says here, possibilities don't add up, they multiply. Why they multiply is what students should learn. I often use Easterly's Elusive Quest for Growth with this because Easterly's organization is very close to what John says is the problem with Solow -- it doesn't tell us much. But it does help us shoot down some bad ideas in development, like project aid and population control. It makes you focus on the A in AF(K,L) and get away from the K and the L. The property rights, entrepreneurial culture, the transactions costs, the quality of government -- those are all in the A. That's where the action is, and you can use Solow to get you there.
Bill and I teach that section of the course in roughly the same way. I've pretty much given up the golden rule portion of Solow (like anyone ever made policy that way!) and Harrod and Domar are gone completely, but it's an easy entrance to the good stuff, until someone makes a better one.