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.
- 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)
- 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
- to generate utility—and
- that’s just beginning…