Review of Elhanan Helpman's Book: "The Mystery of Economic Growth"
This book, "The Mystery of Economic Growth," which was recently published in Hebrew, provides an excellent non-technical description of the developments of growth economics over the last half century. The story of the ideas and research of the theory and empirics of economic growth is organized around four themes. First, the importance of the accumulation of physical and human capital for the explanation of income levels and growth rates across countries. Second, the importance of knowledge creation and total factor productivity for economic growth. The discussion evolves around the impact of research and development, learning-by-doing, external effects (externalities) and increasing returns. To understand the determinants of knowledge accumulation one needs to investigate also the incentives for knowledge creation and diffusion. Third, the importance of various globalization trends and developments and the international transmission of technological innovation and knowledge for expansion of new techniques of production. Fourth, the role played by economic institutions on economic growth, and the growth effects of economic policy that these institutions help implement. Based on a large body of empirical research, the principal conclusion that emerges from the book "The Mystery of Economic Growth" is that long-term economic growth stems largely from economic institutions that facilitate technological innovation and adoption of new technologies. The solution to the puzzle of economic growth, according to Elhanan Helpman, could be found only if we understand the role played by the relevant economic and political institutions. I begin by describing the book's chapters in detail.