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Economic Change and “Technological” Change…

Summary:
What Is to Be Explained?: Three Things Origin of Modern Economic Growth (MEG) Pace of Modern Economic Growth (MEG) Duration of Modern Economic Growth (MEG) Origins of Modern Economic Growth We have market economies throughout Eurasia, at least—i.e., places where becoming a merchant drawing on sophisticated artisanal producers is a road to wealth We have governments smart enough—or constrained enough—not to kill the goose that lays the golden eggs, at least not quickly We have what looks like worldwide growth at a faster pace after 1500—one that calls forth a demographic response Post-1800 in the North Atlantic we have growth that outruns any possible demographic response, and triggers the demographic transition. Why? And how? Pace of Modern Economic Growth How fast has it been, really? No fooling now! Do quantitative indices of output per capita calculated over extended periods of time have any meaning? How many “singularities” or near-“singularities”? Standard Estimates of the Pace of Economic Growth Standard measures tell us that real wages in the North Atlantic grew at: an average rate of: 1.5%/year in the 19th century 2.5%/year in the 20th century.

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What Is to Be Explained?: Three Things

  1. Origin of Modern Economic Growth (MEG)
  2. Pace of Modern Economic Growth (MEG)
  3. Duration of Modern Economic Growth (MEG)

Origins of Modern Economic Growth

  • We have market economies throughout Eurasia, at least—i.e., places where becoming a merchant drawing on sophisticated artisanal producers is a road to wealth
  • We have governments smart enough—or constrained enough—not to kill the goose that lays the golden eggs, at least not quickly
  • We have what looks like worldwide growth at a faster pace after 1500—one that calls forth a demographic response
  • Post-1800 in the North Atlantic we have growth that outruns any possible demographic response, and triggers the demographic transition.
  • Why? And how?

Pace of Modern Economic Growth

  • How fast has it been, really? No fooling now!
  • Do quantitative indices of output per capita calculated over extended periods of time have any meaning?
  • How many “singularities” or near-“singularities”?

Standard Estimates of the Pace of Economic Growth

  • Standard measures tell us that real wages in the North Atlantic grew at: an average rate of:
    • 1.5%/year in the 19th century
    • 2.5%/year in the 20th century.
  • With the rest of the world more-or-less keeping pace
    • Less, actually: 1% in the 19th, 2% in the 20th
  • But looking at the price of light suggests that growth has been much faster: William Nordhaus: Do Real-Output and Real-Wage Measures Capture Reality? <http://tinyurl.com/dl20161210f>
    • Suppose we buy Nordhaus…
    • What do we get?

Looking Deeper at New Goods and New Types of Goods

  • New goods and new types of goods allow us to achieve “capabilities" much much cheaply
  • And give us new “capabilities"
  • Illumination as a sector in which what the “capability” is is unambiguous
  • Nordhaus looks at the price of light: concludes that growth has been much faster

“True” Estimates of Economic Growth

  • Measured: Bottom third today like our pre-industrial ancestors: $1000/year incomes “subsistence”
    • Middle third: 15x subsistence
    • Top third: 75x subsistence
  • “True”: Bottom third today: “subsistence”, but…
    • Top third: 75 x 32 = 2000x subsistence
    • Middle third?

“Efficiency of Labor”

  • We feed these numbers to a growth model
    • α (capital) = 0.4
    • β (resources) = 0.3
  • Get out “efficiency of labor”
    • From 0.04-1 in HGE (0.01%/yr)
    • 1-50 in MAA (0.045%/yr)
    • 50-110 in CRE (0.27%/yr)
    • 110-300 in IRE (1.4%/yr) *300 to 620,000 in MEGE (5.2%/yr)
  • e-ings:
    • Since 8000 BC: exp(13.3)
    • Since 1800: exp(8.6)
    • Since 1870: exp(7.6)
  • And what if we Nordhausize these numbers? E2016 = 20,000,000

Future Duration of Modern Economic Growth

  • Gordon vs. Varian
  • Gordon: it’s all about:
    • matter manipulation,
    • power generation and application, and
    • flush toilets—and
    • that’s all over…
  • Varian: we combine:
    • physical stuff,
    • energy applied to matter-manipulation,
    • information, and
    • communication
    • to generate utility—and
    • that’s just beginning…

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key: <https://www.icloud.com/keynote/05ZwGM9jmDlBNhemQcxgTvDcQ#2017-02-15_Economic_Growth_and_.Technological._Change_.IEH>

Bradford DeLong
J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

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