This is a linkpost for a paper I wrote recently, “Endogenous Growth and Excess Variety”, along with a summary.
Two schools in growth theory
Roughly speaking:
In Romer’s (1990) growth model, output per person is interpreted as an economy’s level of “technology”, and the economic growth rate—the growth rate of “real GDP” per person—is proportional to the amount of R&D being done. As Jones (1995) pointed out, populations have grown greatly over the last century, and the proportion of people doing research (and the proportion of GDP spent on research) has grown even more quickly, yet the economic growth rate has not risen. Growth theorists have mainly taken two approaches to reconciling [research] population growth with constant economic growth.
“Semi-endogenous” growth models (introduced by Jones (1995)) posit that, as the technological frontier advances, further advances get more difficult. Growth in the number of researchers, and ultimately (if research is not automated) population growth, is therefore necessary to sustain economic growth.
“Second-wave endogenous” (I’ll write “SWE”) growth models posit instead that technology grows exponentially with a constant or with a growing population. The idea is that process efficiency—the quantity of a given good producible with given labor and/or capital inputs—grows exponentially with constant research effort, as in a first-wave endogenous model; but when population grows, we develop more goods, leaving research effort per good fixed. (We do this, in the model, because each innovator needs a monopoly on his or her invention in order to compensate for the costs of developing it.) Improvements in process efficiency are called “vertical innovations” and increases in good variety are called “horizontal innovations”. Variety is desirable, so the one-off increase in variety produced by an increase to the population size increases real GDP, but it does not increase the growth rate. Likewise exponential population growth raise
Things like "do you work 40 vs. 60 hours a week" are not obvious choices here - longer hours probably increase risk of burnout, but you also get a lot more work done for as long as it lasts. In fields like corporate law or medical residency, people do long hours for years (though especially in medicine, there are definite quality vs quantity tradeoffs).