The Korean Journal of Economic Studies
Presidential Address : In Search for the Ultimate Forces that Propel Economic Growth
Jisoon Lee (Seoul National University)Year 2016Vol. 64No. 1
In this short essay I attempt to show that private ownership, economicfreedom, and competition are the ultimate power sources that propel persistenteconomic growth. Among the three, I argue, ownership is the most basic. Inorder to prove this assertion, I utilize a streamlined version of Lucas’ dynasticmodel and study how people would behave differently under two contrastingownership arrangements: common ownership vs. private ownership.Numerical exercises applied to the stationary solutions of the model indicatethat when we move from common ownership to private ownership, income perperson would increase by more than 76%. This substantial increase in incomeis caused by investment inducement effects of private ownership. When effortsinducement effects of private ownership is added, income would increase bymuch more than 76%.In order for an economy to persistently grow, it is essential to maintainunceasing investment in human capital, knowledge capital, and technologycapital. Investments in these kinds of capital would occur most vigorouslywhen private ownership is firmly established. When ownership is in doubt,people would be hesitant to undertake long term investment projects. It is,therefore, essential to secure private ownership if we want to keep theeconomy growing indefinitely.