Long-run economic growth

Long-run economic growth is the slow, compounding rise in output per person that, over decades, separates rich economies from poor ones — and small differences in the growth rate produce enormous gaps over a lifetime. The Solow model explains where it comes from and, surprisingly, where it doesn't. More capital per worker raises output, but capital has diminishing returns, so simply saving and investing more reaches a richer steady state and then stalls: you cannot save your way to endless growth. The one thing that lifts living standards permanently is total factor productivity — how much output you get from given inputs, driven by technology, know-how, and better institutions. The model also predicts convergence: poorer economies, starting with less capital, can grow faster and catch up to richer ones with similar fundamentals. It reframes the central question of prosperity as how to raise productivity, not just accumulate capital.