CHAPTER11Long-Run Economic Growth:Sources and PoliciesChapterOutlineand雪佛兰LearningObjectivesCHEVROLET11.1 EconomicGrowthoverTimeandaroundtheWorld仙爱我的鱼爱11.2 WhatDeterminesHowFastEconomiesGrow?11.3EconomicGrowthintheUnitedStates11.4 Whylsn'tthe WholeWorldRich?11.5GrowthPolicies爱唯欧
1 Chapter Outline and Learning Objectives 11.1 Economic Growth over Time and around the World 11.2 What Determines How Fast Economies Grow? 11.3 Economic Growth in the United States 11.4 Why Isn’t the Whole World Rich? 11.5 Growth Policies CHAPTER 11 CHAPTER Long-Run Economic Growth: Sources and Policies
Obtaining EconomicGrowthIntheprevious chapter,welookedatwaystomeasureeconomicgrowth in the long and short terms.In this chapter, we will consider the effects of different governmentpolicies on long-term economic growth.. Economic growth, after all, is not inevitable; history has seen longperiods of stagnation where no sustained increases in output percapita occurred.Why have some countries been able to achieve rapidly increasingreal GDP per capita, while other countries have failed to keep pace?. Our goal in this chapter is to develop a model of economic growthtohelpanswerquestionssuchasthis@2015PearsonEducation,Inc
© 2015 Pearson Education, Inc. 2 Obtaining Economic Growth In the previous chapter, we looked at ways to measure economic growth in the long and short terms. In this chapter, we will consider the effects of different government policies on long-term economic growth. • Economic growth, after all, is not inevitable; history has seen long periods of stagnation where no sustained increases in output per capita occurred. Why have some countries been able to achieve rapidly increasing real GDP per capita, while other countries have failed to keep pace? • Our goal in this chapter is to develop a model of economic growth to help answer questions such as this
EconomicGrowthoverTimeandaroundtheWorld11.1LEARNINGOBJECTIVEDefineeconomic growth,calculateeconomic growthrates,and describeglobaltrendsineconomicgrowth.@2015PearsonEducafion,lnc
LEARNING OBJECTIVE © 2015 Pearson Education, Inc. 3 Economic Growth over Time and around the World 11.1 Define economic growth, calculate economic growth rates, and describe global trends in economic growth
FromPrehistorytotheMiddleAgesEconomist Brad DeLong estimates that in 1,000,000 B.C., ourancestors had a GDP per capita of approximately $145.He estimates that GDP per capita in 1300 A.D. was also about $145.. In other words, no sustained economic growth occurred before themiddle ages; a peasant on a farm in 1300 A.D. was about as welloffhis ancestors@2015PearsonEducation,Inc
© 2015 Pearson Education, Inc. 4 From Prehistory to the Middle Ages Economist Brad DeLong estimates that in 1,000,000 B.C., our ancestors had a GDP per capita of approximately $145. He estimates that GDP per capita in 1300 A.D. was also about $145. • In other words, no sustained economic growth occurred before the middle ages; a peasant on a farm in 1300 A.D. was about as well off his ancestors
The lndustrialRevolutionSignificant economic growth did not really begin until the IndustrialRevolution, the application of mechanical power to the production ofgoods and services which began in England around 1750.: Before this, production of most goods had relied on human oranimalpower.The use of mechanical power allowed England and other countries-like the United States, France, and Germanyto begin to experiencelong-runeconomicgrowth@2015PearsonEducation,Inc
© 2015 Pearson Education, Inc. 5 The Industrial Revolution Significant economic growth did not really begin until the Industrial Revolution, the application of mechanical power to the production of goods and services which began in England around 1750. • Before this, production of most goods had relied on human or animal power. The use of mechanical power allowed England and other countries— like the United States, France, and Germany—to begin to experience long-run economic growth
MakingWhy Did the Industrial Revolution Begin in England?theConnectionNobel Laureate Douglass North arguesthattheGloriousRevolutionof1688wasa key turning point in the economichistory of Britain.. After that date, the British Parliamentrather than the king, controlled thegovernment. The court system alsobecame independent of the king.The government was then ableto makecredible promises regarding upholdingproperty rights,protecting wealth, and theelimination of arbitrary tax increases.. This, claims North, madeentrepreneurs willing to make theinvestments necessaryfortheIndustrialRevolutiontotakehold@2015PearsonEducation,Inc
© 2015 Pearson Education, Inc. 6 Making the Connection Why Did the Industrial Revolution Begin in England? Nobel Laureate Douglass North argues that the Glorious Revolution of 1688 was a key turning point in the economic history of Britain. • After that date, the British Parliament, rather than the king, controlled the government. The court system also became independent of the king. The government was then able to make credible promises regarding upholding property rights, protecting wealth, and the elimination of arbitrary tax increases. • This, claims North, made entrepreneurs willing to make the investments necessary for the Industrial Revolution to take hold
AverageAnnual GrowthRates Are ImportantThe graph showsRates of long-rungrowth in realBrad DeLong'sGDPpercapitaestimated average2.5%2.3%annual growth ratesfor the world2.0economy.1.51.3%The IndustrialRevolution, and its1.0subsequent spreadthroughout the0.50.2%world, resulted in0%0sustained increases1million1300-18001800-19001900-2000B.C.-1300inreal GDPpercapita.Figure 11.1Average annual growthrates for the worldeconomy@2015PearsonEducation,Inc
© 2015 Pearson Education, Inc. 7 Average Annual Growth Rates Are Important The graph shows Brad DeLong’s estimated average annual growth rates for the world economy. The Industrial Revolution, and its subsequent spread throughout the world, resulted in sustained increases in real GDP per capita. Average annual growth rates for the world economy Figure 11.1
Why DoGrowth RatesMatter?The differenceRates of long-rungrowth inrealbetween1.3%andGDPpercapita2.3% may not seem2.5%2.3%like much; but over a2.0long period, it makes aremarkabledifference.1.5Over 50 years. a 1.3%1.3%growth rate leads to1.0about a 91% increaseinreal GDPper capita.0.5But a 2.3% growth rate leads0.2%0%to about a 212% increase.01million1300-18001800-19001900-2000In the long run, smallB.C.-1300differencesineconomicFigure 11.1Average annual growthgrowthrates result inbigrates for the worldeconomydifferences in living standards.82015PearsonEducation,Inc
© 2015 Pearson Education, Inc. 8 Why Do Growth Rates Matter? The difference between 1.3% and 2.3% may not seem like much; but over a long period, it makes a remarkable difference. Over 50 years, a 1.3% growth rate leads to about a 91% increase in real GDP per capita. But a 2.3% growth rate leads to about a 212% increase. In the long run, small differences in economic growth rates result in big differences in living standards. Average annual growth rates for the world economy Figure 11.1
Differencesin Incomesacross CountriesEconomists often referto the high-income countries (or industrialcountries)ofWesternEurope,Australia,Canada,Japan,NewZealand, and the United States, in comparison to the poorerdeveloping countries of the rest of the world.The 1980s and 1990s have seensome countries progress outof thedeveloping category, like Singapore, South Korea, and Taiwan; theseareoftenreferredtoas newlyindustrializingcountries.Real GDP per capita is markedly different across the world, evenafter correcting for cost of living differences.In 2012 it ranged fromahighof $103,900 inQatarto a lowof $400 inthe DemocraticRepublicof the Congo.2015PearsonEducation,Inc
© 2015 Pearson Education, Inc. 9 Differences in Incomes across Countries Economists often refer to the high-income countries (or industrial countries) of Western Europe, Australia, Canada, Japan, New Zealand, and the United States, in comparison to the poorer developing countries of the rest of the world. The 1980s and 1990s have seen some countries progress out of the developing category, like Singapore, South Korea, and Taiwan; these are often referred to as newly industrializing countries. Real GDP per capita is markedly different across the world, even after correcting for cost of living differences. In 2012 it ranged from a high of $103,900 in Qatar to a low of $400 in the Democratic Republic of the Congo
GDPperCapitain2012Greaterthan $20,000Between$10.000and20.000Between$2.500and$10,000Lessthan$2,500Thefigure shows GDP percapita (inUS$)inFigure11.22012 for each of the world's nations, adjustedGDPper capita,2012fordifferencesinthecostof living10@2015PearsonEducation,lnc
© 2015 Pearson Education, Inc. 10 GDP per Capita in 2012 The figure shows GDP per capita (in US $) in 2012 for each of the world’s nations, adjusted for differences in the cost of living. GDP per capita, 2012 Figure 11.2