Book contents
- Frontmatter
- Contents
- Introduction
- PART I POSITIVE GROWTH THEORY
- PART II OPTIMAL GROWTH THEORY
- PART III A UNIFIED APPROACH
- 11 Preliminaries: interest rates and capital valuation
- 12 From arbitrage to equilibrium
- 13 Optimal savings: a general approach
- 14 Problems in growth: common traits between planned economies and poor countries
- 15 From Ibn Khaldun to Adam Smith, and a proof of Smith's conjecture
- In conclusion: on the convergence of ideas and values through civilizations
- Further reading, data on growth and references
- Index
15 - From Ibn Khaldun to Adam Smith, and a proof of Smith's conjecture
Published online by Cambridge University Press: 01 February 2010
- Frontmatter
- Contents
- Introduction
- PART I POSITIVE GROWTH THEORY
- PART II OPTIMAL GROWTH THEORY
- PART III A UNIFIED APPROACH
- 11 Preliminaries: interest rates and capital valuation
- 12 From arbitrage to equilibrium
- 13 Optimal savings: a general approach
- 14 Problems in growth: common traits between planned economies and poor countries
- 15 From Ibn Khaldun to Adam Smith, and a proof of Smith's conjecture
- In conclusion: on the convergence of ideas and values through civilizations
- Further reading, data on growth and references
- Index
Summary
Our first aim in this concluding chapter is to bring together the fundamental conditions of economic growth. As we mentioned at the outset of Part I, we believe they were laid out in a definitive, masterly way by Ibn Khaldun in his Muqaddimah (Introduction to History, 1377).
Western civilization had to wait four centuries for those conditions to be formulated independently. One of them would be expressed in a most daring and powerful conjecture: we owe it to Adam Smith. It is intimately linked to the very engine of growth we have described in this text: investment, or the accumulation of capital. Smith wrote that whenever individuals try to find the most advantageous use of their capital, they are led to prefer that employment which is most advantageous to society. By doing so, the individual “intends his own gain, and he is in this as in many other cases, led by an invisible hand to promote an end which was no part of his intention”.
Here is what Kenneth Arrow and Frank Hahn had to say about Smith's conjecture: “The notion that a social system moved by independent actions in pursuit of different values is consistent with a final coherent state of balance, and one in which the outcomes may be quite different from those intended by the agents, is surely the most important intellectual contribution that economic thought has made to the general understanding of social processes”.
The conjecture is daring: it is not in the least supported by intuition.
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- Economic GrowthA Unified Approach, pp. 332 - 348Publisher: Cambridge University PressPrint publication year: 2009
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