There are various macroeconomic models which attempt to explain the factors of growth, for example the Solow growth model. In this model technological advancement is only one of three factors. The others are the savings rate and the population growth rate.
According to this model, you may not be able to innovate your way to growth if one or both of the other factors are contrary to growth. This may sound academic but there are concrete examples in the last twenty years of countries that have not grown because of a stagnant or shrinking working age population, e.g. Japan and Italy.
This has no bearing on the passive vs active debate, as I'm fairly confident that passive investing will always be the better strategy for a retail investor regardless of the growth potential of an economy.
It's just in a country with unfavorable macroeconomic conditions, passive investing may be the way to minimize losses rather than maximize gains.
The assumption of continued growth will probably hold true for the American economy through the end of the century at least, so for everyone here investing in US equities it is academic. But we can try to decompose an economy into factors and use those to check whether we expect growth to occur at all.
There are various macroeconomic models which attempt to explain the factors of growth, for example the Solow growth model. In this model technological advancement is only one of three factors. The others are the savings rate and the population growth rate.
According to this model, you may not be able to innovate your way to growth if one or both of the other factors are contrary to growth. This may sound academic but there are concrete examples in the last twenty years of countries that have not grown because of a stagnant or shrinking working age population, e.g. Japan and Italy.
This has no bearing on the passive vs active debate, as I'm fairly confident that passive investing will always be the better strategy for a retail investor regardless of the growth potential of an economy.
It's just in a country with unfavorable macroeconomic conditions, passive investing may be the way to minimize losses rather than maximize gains.
The assumption of continued growth will probably hold true for the American economy through the end of the century at least, so for everyone here investing in US equities it is academic. But we can try to decompose an economy into factors and use those to check whether we expect growth to occur at all.