"If God had meant there to be more than two factors of production, He would have made it easier for us to draw three-dimensional diagrams." - Robert Solow c. 1950.
We always think in the two-dimensional space of labor and capital, yet if we want to truly grow an economy we have think about technical change and innovation. This is the third dimension. We have learned a lot about innovation and technical change since the early days of the Solow growth model and the Cobb-Douglas production model, yet innovation is still the great challenge for economist because it is the link to productivity.
We have seen different Asian models of growth and observed that it is often cheap labor or capital that is doing the heavy lifting. Once the cheap factor is exhausted, we must worry about innovation and the institutional systems that will driver technical change. Innovation is either driven by a black box that we cannot control or is fully understood, or it the observation that the status quo institutions will have to change.
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