Economic growth is when an economy produces more goods and services over time. It can be a result of more resources (land, labor, capital), better efficiencies in using those resources, or technological advances. Regardless, faster economic growth often means higher living standards.
The most commonly used measure of economic growth is gross domestic product (GDP). It’s an important statistic to know, but it doesn’t tell you everything about a country’s prosperity. For one thing, GDP only counts the market value of the things that get made within a country’s borders. That would mean that a country that makes more airplanes would see its GDP rise, but it wouldn’t necessarily be growing in the overall sense of people enjoying a more comfortable life.
To fully understand a country’s prosperity, we need to look at other factors. For example, human capital—the knowledge and skills of the people in a workforce—can contribute to economic growth. Better education and training are important for this, but so are behavioral tendencies toward more reciprocity and trust in relationships and political or economic innovations like improved protections for property rights.
It’s also important to note that GDP isn’t a measure of welfare, and while policies may impose costs on businesses that slow measured GDP, the benefits of better health, safer workplaces, and cleaner environments are still worth the cost. And then there’s population growth—without immigration, the world’s potential labor force will grow much more slowly than in the past, which could have implications for economic growth.