GGenerations of economics students have learned about Robert M. Solow's model of economic growth. In two groundbreaking papers in 1956 and 1957, Solow demonstrated the importance of technological progress to the long-term growth of an economy; his research also suggested that capitalism could be more stable than expected.
The excitement over these findings, which seem self-evident today, is evident from the state of knowledge at the time: At the time, the growth models of the economists Roy Harrod and Evsey Domar were popular, who placed economic growth “on a knife's edge”: their theory suggested that only under According to assumptions that are by no means self-evident, an economy tends to achieve reasonably stable growth. Deviations from this path can easily lead an economy into extreme instability.
A moderate Keynesian
Solow showed that these results theoretically do not hold if the model assumes technical progress and a certain interchangeability of labor and capital in the production process. Empirically, he showed that the economic development of the United States could be explained much better with his model than with the model of Harrod and Domar. For this research, Solow received the Nobel Memorial Prize in Economic Sciences in 1987.
The theory of economic growth does not end with Solow's approach, of course, but the importance of the economist, born in New York in 1924, remained significant in the decades following his pioneering work. Alongside his colleague and friend Paul M. Samuelson, Solow helped transform the formerly insignificant economics department of the Massachusetts Institute of Technology (MIT) into a premier address that could compete with the departments of Harvard, Chicago, Yale, and Stanford.
In terms of economic policy, Solow, like Samuelson, remained a moderate Keynesian: throughout his life he honored a macroeconomic analysis (“macroeconomics”) in which the state had the task of counteracting significant disruptions in overall economic demand with active policies. A paper written in 1973 with his student Alan Blinder on the stimulating effects of expansionary financial policy was widely discussed at the time. He was never a fan of tightly binding fiscal rules. Solow's political home was the Democratic Party; he supported Joe Biden’s “Inflation Reduction Act”.
Not afraid of any arguments
Solow did not shy away from arguments with antipodes like Milton Friedman, but he was never considered primarily driven by ideology. American Keynesians of his generation in particular always pointed out the importance of good supply conditions with a level of clarity that is by no means self-evident for European Keynesians. In an interview from 2002 on the occasion of a meeting of Nobel Prize winners on Lake Constance, Solow already mentioned an upcoming shortage of workers as a result of demographic change.
He spoke of the need for work to be worthwhile and therefore warned against excessively generous social benefits. He also discussed the possibility of compensating for a lack of domestic workers through immigration in the future, but at the same time he spoke of the danger of culturally motivated resistance by domestic populations against large numbers of immigrants. From today's perspective, this reads almost prophetic.
His robust health allowed Solow to continue to participate in economic debates even in old age. Robert M. Solow died this Thursday at the age of 99.
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