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4. THEORY OF ECONOMIC GROWTH
CLASSICAL THEORY
CLASSICAL ECONOMISTS PROVIDE THE VIEW THAT
ECONOMIC GROWTH IS INFLUENCED BY FOUR
FACTORS, NAMELY POPULATION SIZE, CAPITAL
ACCUMULATION, LAND AREA AND NATURAL
RESOURCES, AND THE LEVEL OF TECHNOLOGY USED.
ALTHOUGH IT IS KNOWN THAT THERE ARE MANY
FACTORS THAT INFLUENCE ECONOMIC GROWTH,
CLASSICAL ECONOMISTS FOCUSED THEIR ATTENTION
ON THE INFLUENCE OF POPULATION GROWTH ON
ECONOMIC GROWTH.
SCHUMPETER'S THEORY
SCHUMPETER FIRST EXPRESSED HIS OPINION
REGARDING THE THEORY OF ECONOMIC GROWTH IN
THE BOOK THEORY OF ECONOMIC DEVELOPMENT.
SCHUMPTER FIRST ASSUMED THAT THERE WAS A
PERFECTLY COMPETITIVE ECONOMY IN STEADY
EQUILIBRIUM. THERE IS A PERFECT COMPETITIVE
BALANCE IN THIS STEADY BALANCE, NAMELY THE
ABSENCE OF PROFITS, INTEREST RATES, SAVINGS,
INVESTMENT AND FORCED UNEMPLOYMENT
(JHINGAN, 1988).
