New Growth Theory posits that economic growth results from increasing returns associated with new knowledge and innovation. As knowledge increases through technological improvements and innovations that increase productivity, such as the assembly line, it creates opportunities for unlimited economic growth. This is exemplified by a burger producer that doubled production by purchasing a new machine and hiring more skilled employees, demonstrating how new factors of production can continuously increase output.

1. New Growth Theory
By: 2409 & Chocolate Chip

2. What is New Growth Theory?
• The theory that our unlimited wants will lead us to ever
greater productivity and perpetual economic growth.
• Economic growth results from the increasing returns
associated with new knowledge.
• Growth of the economy increases as knowledge increases
because it creates opportunities for boundless growth.

3. Innovations
 Increases in technological systems is generally considered
to be great innovation.
 Improvements in the ways in which we do things is often
just as useful.
 Eg: The innovation of the assembly line by Henri Ford
to maximize the efficiency in the production process.
 Toyota has adapted the assembly line and now takes 18
hours to make one car whereas before, it took a day to
only make the rim of the car.

4. Increase in labor productivity

5. New Growth Theory Perpetual Motion

6. Example: Burger producer company.
 Initially, the company owns one machine and 12 employees
 Produces 300 burgers per day.
 Then, company made a purchase of another new machine,
then employed 12 well-educated and innovative employees.
 Unlimited wants of customer will lead to greater
productivity.
 Considering the new factors of production. (In this case:
Advanced Technology and skilled laborers), there will be
more production.
 Thus, producing 600 burgers per day.

7. Example: Public transportation
 China-Thailand Railway Project will require workers,
therefore, there will be an increase in demand of laborers.
 New jobs will be given to people for the creation of the
train.
 Every station will have workers.
 From that, the GDP might increase, because there will be
more income in the country.
 These projects generate positive externalities, and justify
government involvement.
 An improved infrastructure increases the likelihood of
tourist revenue as well as reducing production costs.

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