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Last Modified: 1999-07-02
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Reading Notes for November 10, Twentieth Century Economic Growth

Economics 210a, Fall 1999

J. Bradford DeLong (1988), "Productivity Growth, Convergence, and Welfare: Comment," American Economic Review 78: 5 (December), pp. 1138-1154.

Lant Pritchett (1997), "Divergence, Bigtime," Journal of Economic Perspectives 11:3 (Summer), pp. 3-17.

The main purpose on the reading list of these two papers is to drum it into the class's heads that there has not been "convergence" in living standards and productivity levels over the past century and a half. Instead, there has been massive divergence.

It is the case that the set of "first world" economies today is larger than it was a century and a half ago. The first world has grown: back then it was small the United States--Britain--Belgium and Holland--France--Western Germany industrializing core; today it includes all of western Europe, North America, and Australasia--plus Japan. Countries not in the first world are with very, very few exceptions much richer in their material standards of living than they were back in 1850.

The key question remains: why?

There are lots of proposed answers. David Landes likes to divide them into two groups: the first being "because we (the rich) are so good and they (the poor) are so bad"; the second being "because we (the rich) are so bad and they (the poor) are so good". I don't think either set is adequate.

N. Gregory Mankiw (1995), "The Growth of Nations," Brookings Papers on Economic Activity 1995:1 (Spring), pp. 275-310.

Greg Mankiw's answer to "why divergence?" is a version of the "...because they're so bad" answer. Countries that are relatively poor are relatively poor because they have (a) high population growth rates, (b) low rates of physical investment, and (c) low levels of educational attainment. Yet I find this answer very unsatisfying: these are as much effects as causes of relative poverty.

Moses Abramovitz (1986), "Catching Up, Forging Ahead, and Falling Behind," Journal of Economic History 46, pp. 385-406.

Mo Abramovitz tries to provide a nuanced answer to the question "why divergence?" He discusses science and culture, social capability and economic growth, investment and savings. This paper always strikes me as extraordinarily wise every time I read it. Yet in the end there is little in his argument that would have led on to predict ex ante the rapid industrialization of a Korea or the stagnation of an Argentina...

Paul Romer (1994), "The Origins of Endogenous Growth," Journal of Economic Perspectives 8:1 (Winter), pp. 3-22.

Paul Romer from Stanford making an (implicit) argument that still further divergence is to be anticipated in the future. Economic growth has too many positive-feedback loops and too much in the way of increasing returns for any optimism about the future of poor countries (or regions, or the descendants of poor people).

J. Bradford DeLong and Lawrence H. Summers (1991), "Equipment Investment and Economic Growth," Quarterly Journal of Economics 106:2 (May), pp. 445-502.

This paper takes a very oversimplified view of the world: (a) there are good policies and bad policies; (b) bad policies make it hard to invest in the capital goods that embody industrial technologies--by raising the price of capital goods or lowering the supply of saving--(c) countries that don't invest in industrial capital goods find that their workforces cannot learn how to efficiently use them, and so remain unproductive; and (d) unproductive countries are poor.

The astonishing thing to me--now--is how incredibly far this very simple one-dimensional story gets you in understanding the twentieth century.

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Professor of Economics J. Bradford DeLong, 601 Evans Hall, #3880
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