Introduction to Modern Economic Growth past 2000 years, thus it is unlikely that simple economies of scale to population are responsible for the economic takeoff in Western Europe while Asia stagnated We will return to an explanation for why economic growth might have taken off in Western Europe in Chapter 27 We conclude from this discussion that models based on economies of scale of one sort or another not provide us with fundamental causes of cross-country income differences At best, they are theories of world growth (the world taken as a whole) Moreover, once we recognize that the modern economic growth process was uneven, meaning that it took place in some parts of the world and not others, the appeal of such theories diminishes further If economies of scale were responsible for modern economic growth, it should also be able to explain when and where this process of economic growth started Existing models based on economies of scale not In this sense, they are unlikely to provide the fundamental causes of modern economic growth Does this mean that these types of economies of scale and increasing returns to population are unimportant? Certainly not They may well be part of the proximate causes of the growth process (for example, the part lying in the black box of technology) But this discussion suggests that these models need to be augmented by fundamental causes in order to explain why, when and where the takeoff occurred This further motivates our investigation of the fundamental causes 4.3 The Four Fundamental Causes 4.3.1 Luck and Multiple Equilibria In Chapter 22, we will see a number of models in which multiple equilibria or multiple steady states can arise because of coordination failures in the product market or because of imperfections in credit markets These models suggest that an economy, with given parameter values, can exhibit very different types of behavior, some with higher levels of income or perhaps sustained growth, while others correspond to poverty and stagnation To 163