ABSTRACT
The fundamental question of economic growth was expressed in the title of Adam Smith's foundational book An Inquiry Into the Nature and Causes of the Wealth of Nations. The motivating question was why some countries are so rich while others are so poor, a question that has striking implications for the progress of human development. The key factor in economic growth in the Solow model, technological change, is thus left unexplained. Endogenous growth models were built to remedy this shortcoming. The key to these models is their emphasis on the ideas that are manifested in technological progress, and the notion that ideas are fundamentally different than most economic goods. The nonrival nature of ideas turns out to be very important because it generates increasing returns to scale, which means that a doubling of the inputs leads to a more than doubling of the outputs.
