Economics 101b Lecture: September 14: Our Unequal World
Lecture: September 14: Our Unequal World
*We live in a world in which output per worker levels vary by a factor of nearly 100--evenat purchasing power parities.
We live in a world in which America today is roughly eight times as rich as China today...*
Using the Solow growth model to decompose differences in productivity today:
- E(0): differences in where countries started (guns, germs, steel, and colonialism-imperialism)
- g: differences in ability to adapt (or invent) better technologies and organizations
- These two are most of the ballgame
- n: countries that have not yet gone through the demographic transition are at a deep disadvantage
- Vicious circle: if you're poor, you probably have high population growth--making you poorer
- Aside: what to do when your model can be used by the architects of China's "mandatory abortion" policy?
- Amartya Sen: take the objective to be not GDP per capita but human freedom
- s: savings and investment
- Budget deficits, et cetera
- Vicious circles: if you're poor capital goods are very expensive--especially imported capital goods
This model provides a framework for understanding and evaluating differences in growth...
The case for neoliberalism and free trade as a way of maximizing economic and cultural contact--and we don't know how else to aid technology-and-organizational transfer.
