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New Growth Theory
real GDP per person grows because of the choices people make in the pursuit of profit and that growth can persist indefinitely
The ability to innovate means
new technologies are developed and capital accumulated as in the neoclassical model. The production function shifts upward. Real GDP per person increases
The pursuit of profit means
more technological advances occur and the production function continues to shift upward. Nothing stops the upward shifts of the production function because the lure of profit is always present
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