From the 1950s-1990s there was a contradiction between the theory of economic growth and the facts of economic growth
A theory of economic growth said that growth was primarily due to Total Factor Productivity (TFP) as put forward by Solow.
But the facts of rapidly growing economies, above all in Asia, showed rapidly growing economies were dominated by factor accumulation of capital and labour – as shown by Young and other studies.
The prediction was therefore made by Krugrman that the Asian economies would drastically slow down compared to the US. But the the facts showed they didn't.
Science demands that where facts and theory don’t coincide the theory has to change not the facts.
More accurate methods of measurement now show there no contradiction between the facts and economic theory.
But the analysis and policy that economic development can primarily be driven by TFP has to be abandoned. Or to put it simply Solow quantification was wrong and it is necessary for economic policy and theory to understand this and its implications.
This presentation analyses the developments in the more accurate analysis in the causes of economic growth.