Econ 210c, Spring 2002, Reading Notes for February 27
Paul M. Romer (1996), "Why, Indeed in America?" AER (May): 202-206.
Next time: add Mankiw, Romer, and Weil...
R. Easterlin (1981), "Why Isnt the Whole World Developed?" Journal of Economic History (March), pp. 1-20.
Gregory Clark (1987), "Why Isnt the Whole World Developed? Lessons from the Cotton Mills" JEH 47 (March 1987). and Reply.
Moses Abramovitz (1986), "Catching Up, Forging Ahead, Falling Behind," JEH .
William Nordhaus (1997), "Do Real Output and Real Wage Measures Capture Reality? The History of Lighting Suggests Not".
Paul Romer has three main things to say. The first is that claims that "neoclassical" models explain economic growth survive when confronted with cross-sectional evidence, but not when confronted with historical evidence. The second is that the obvious factor to explain rapid American late nineteenth-century growth is the sheer enormous scale--the extent of the market--of the rapidly-expanding United States. It is, in Romer's view, the coexistence of huge amounts of resources and large-scale markets that is the key to America's industrial edge. The third is that the United States had a technology-friendly government and non-profit sector--the US Geological Survey, the research university, and so on. From Romer's point of view, accounting for the U.S. edge means accounting for the failure of other economies to develop or exhibit similar scale effects and similar technology-friendly institutions.
Easterlin's view is very different. Easterlin takes leading-edge technology and its development as given, and asks why it is that leading-edge technology has diffused so slowly. He comes up with a simple answer: schools. "The acquisition and application of [modern technological] knowledge by different countries has been governed largely by whether their populations have acquired traits and motivations associated with formal schooling." And "the establishment and expansion of formal schooling has depended in large part on political conditions and ideological influences." Easterlin is very optimistic: he looks forward to a world in which the spread of "modernity" makes everyone eager to adopt western schooling patterns. It is now 20 years since he wrote his article. What do we now think of his optimism? And, at a deeper level, what do we think of his argument for the very close correlation between schooling and economic development?
Gregory Clark grabs Easterlin's title and writes a completely different--and unconnected--paper about how the key to development is labor efficiency: poor countries are not poor because capital and technology are scarce, poor countries are poor because low labor efficiency makes capital accumulation and technology transfer unprofitable. A more complete contradiction to Easterlin's article can hardly be thought of. The contrast between the two is a major motor in this class.
Moses Abramovitz tries to give a more balanced, more narrative view of "catching up, forging ahead, and falling behind." Because his view is balanced, it is less exciting. But it is still the best single thing to read to gain a background understanding of comparative growth patterns.
The last article, Nordhaus's on light and real income growth, is a "big think" piece. Nordhaus argues powerfully that we are much richer than we would ever have imagined.