6 R.E. Lucas, Jr, On the mechanics of economic development story I have to tell, which will involve leaving many important questions open even at the purely theoretical level and will touch upon questions of empiric My plan is as follows. I will begin with an application of a now-standard neoclassical model to the study of twentieth century U.S. growth, closely following the work of Robert Solow, Edward Denison and many others. I will then ask, somewhat unfairly, whether this model as it stands is an adequate model of economic development, concluding that it is not. Next, I will consider two adaptations of this standard model to include the effects of human capital accumulation. The first retains the one-sector character of the original model and focuses on the interaction of physical and human capital accumulation. The second examines a two-good system that admits specialized human capital of diferent kinds and offers interesting possibilities for the interaction of trade and development. Finally, I will turn to a discussion of what has been arrived at and of what is yet to be done In general, I will be focusing on various aspects of what economists, using the term very broadly, call the'technology,'. I will be abstracting altogether from the economics of demography, taking population growth as a given throughout. This is a serious omission, for which i can only offer the excuse that a serious discussion of demographic issues would be at least as dificult as the issues i will be discussing and i have neither the time nor the knowledge to do both I hope the interactions between these topics are not such that they cannot usefully be considered separately, at least in a preliminary way. I will also be abstracting from all monetary matters, treating all exchange as though it involved goods-for-goods. In general, I believe that the importance of financial matters is very badly over-stressed in popular and even much professional discussion and so am not inclined to be apologetic for going to the other extreme. Yet insofar as the development of financial institutions is a limiting factor in development more generally conceived I will be falsifying the picture, and I have no clear idea as to how badly. But one cannot theorize about everything at once. I had better get on with what i do have to say 2. Neoclassical growth theory: Review The example, or model, of a successful theory that I will try to build on is the theory of economic growth that Robert Solow and Edward Denison developed and applied to twentieth century U.S. experience. This theory will serve as a basis for further discussion in three ways: as an example of the form that I believe useful aggregative theories must take, as an opportunity to BEcker and Barro(1985)is the first attempt known to me to analyze fertility and capital accumulation decisions simultaneously within a general equilibrium framework. Tamura (1986) contains further results this line