System Dynamics and the role of History in economic growth theory

Recent literature in economic growth suggests that it is taking place a theoretical research convergence among historical studies and neo-growth theory. We argue in this paper that system dynamics, due to be a flexible methodology, may be an instrument for helping to bridge those two strands of thoughts. The paper begins for presenting a stylized historical background for endogenous growth theory which is perhaps one the more appealing modern interpretation of growth process available. A simple endogenous growth model based on this historical background, which explains modern growth without recurring to the hypothesis that a historical singularity has been actually necessary for triggering the process, is then provided and re-written in system dynamics language. An enlarged version of the basic growth model is next presented and it is shown how to assess the strength of the different feedback loops involved in the process of economic growth. The conclusive section of the paper finally suggests that system dynamics can be an important complementary tool for understanding and perhaps enhancing economic growth in less developed countries.