When we hear about economic growth, we usually think about money growing in our bank accounts or our portfolios. But measuring growth for the whole economy is much harder than just counting your wealth. Economic growth is the increase in the amount of economic goods and services produced by a country or region over time. It’s often measured as GDP or other measures of real incomes, like life expectancy. These measures are adjusted for price differences between countries and for inflation, making them a true measure of the real value of the products we produce.
The most obvious way to produce economic growth is by adding more physical capital, such as machinery and tools. Having more of these tools allows workers to perform the same job in less time or with more output. For example, a fisherman with a better net will catch more fish per hour than one with a simple fishing rod.
A simpler method is to grow the human, or knowledge, capital of the economy by educating and training people. This has the added advantage of reducing unemployment, which reduces the amount of goods and services that must be consumed to keep people fed and clothed.
There are many other ways to produce economic growth, including increased efficiency in production processes. The energy used to run factories and other productive activities can be reduced, for example by using renewables. The use of more efficient energy sources also has the added benefit of reducing pollution.
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