ABSTRACT
We saw in Chapter 1 that macro-economic investigations of the sources of economic growth in recent times have usually concluded that the increase of aggregate inputs is able to explain only a small part of the measured growth of output which has accrued, and that the bulk – in one investigation as much as seven-eighths – of that growth has to be explained by ‘residual’ factors. Since the mode of analysis adopted has been based on the concept of the ‘production function’, and since the production function is an expression summarizing the ranges of possible outputs which given collections of inputs can generate, given the state of technology available at the time, it seems natural to think of this ‘residual’ as a measurement of the increase of the ratio of output to input arising from the historical development of technology, con- stantly pushing out the production possibility frontier.
