Growth in One (Short) Lesson

This paper argues that the economic theorizing about growth leads to one simple conclusion: the key notion is innovation, and the history of growth can be aptly synthesized as the history of successful innovation. Innovation includes technological progress and entrepreneurship, which in turn depend on tolerance, interaction, and – more generally – a favourable institutional environment. Besides the importance a community assigns to credibility and reputation and from a public policy perspective we emphasize the role of both contract enforcement and protection of property rights as necessary, even though not sufficient, conditions for growth.