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Chapter 25: Production and Growth

Recent Posts
(Note: Page numbers referenced in posts prior to June 1, 2011 refer to 5th edition)

 

September 13

David Landes

The New York Times published an obituary of economic historian David Landes. Landes argued that accurate clocks were central to industrial development. He also emphasized that culture influences whether a country is rich or poor.

Textbook References:

Pages 532-536 “Economic Growth around the World”

August 25

Free Bikes and Girls' Education - Update

Educating women is an important element in economic development. The state of Bihar in India has increased female attendance in secondary school by offering free bikes.

Textbook References:

Page 545 “Promoting Human Capital ”

July 27

Is Technopessimism Bunk?

Economic historian Joel Mokyr argues that technological progress will continue to be a major economic and social force.

Textbook References:

Pages 538-539 “Technological Knowledge”

April 4

A Nice Example of Technological Progress

A short video about manufacturing potato chips illustrates the relationship between technological progress and rising productivity.

Textbook References:

Pages 536-540 “Productivity: Its Role and Determinants”

July 27

Where is economics going?

Prominent young economists discuss the future of their discipline. Growth and behavioral economics figure prominently.

Textbook References:

Pages 480-485 “Behavioral Economics”
Pages 540-552 “Economic Growth and Public Policy”

May 1

Correlation of the Day

A graph shows the correlation between math test scores and economic growth around the world.

Textbook References:

Pages 543-544 “Education”

April 7

Monitoring the So-called Recovery

A graph from the Bureau of Labor Statistics shows a sharp decline in the U.S. employment-to-population ratio since 2008.

Textbook References:

Pages 594-598 “How Is Unemployment Measured?”
Pages 745-748 “The Recession of 2008-2009”

March 22

The Economics of the Hunger Games

Matthew Yglesias explains how the fictional economy from The Hunger Games resembles real ones.

Textbook References:

Pages 550-551 “What Makes a Nation Rich?”

March 20

Free Bikes and Girls' Education

India's poorest state gives bicycles to girls who stay in school. Two economists discuss how to measure its effectiveness.

Textbook References:

Pages 7-9 “Principle 4: People Respond to Incentives”
Pages 22-29 “The Economist as Scientist”
Pages 543-544 “Education”

February 5

Transitioning from Communism

Andrei Shleifer discusses seven lessons from the experiences of countries transitioning from socialism to some form of capitalism.

Textbook References:

Chapter 25 “Production and Growth”

December 18

Is Modern Capitalism Sustainable?

Kenneth Rogoff agues that modern capitalism will continue to evolve and there are no viable alternative systems.

Textbook References:

Pages 10-11 “Principle 6: Markets Are Usually A Good Way To Organize Economic Activity”
Pages 532-536 “Economic Growth Around the World”

December 10

Coffee and the Age of Reason

Steven Johnson suggests that the switch to drinking coffee and tea instead of alcohol helped bring about the Age of Reason.

Textbook References:

Pages 536-540 “Productivity: Its Role and Determinants”

October 14

Even leftists believe in property rights

A photo taken at an "Occupy" protest displays a bit of irony.

Textbook References:

Pages 546-547 “Property Rights and Political Stability”

August 27

Auctioning Public Parking Spaces

A new iPhone app has created a market linking people looking for a parking space to people leaving a parking space.

Textbook References:

Pages 10-11 “Principle 6: Markets Are Usually A Good Way To Organize Economic Activity”
Page 538 “Technological Knowledge”

August 26

An Animated 4-Minute History of Econ

An artist blends economic history and the history of economic thought in a time-lapse video.

Textbook References:

Pages 532-536 “Economic Growth around the World”

July 14

Reinhart and Rogoff on the Debt Problem

Carmen Reinhart and Kenneth Rogoff argue that public debt above 90 percent of GDP is associated with slower growth.

Textbook References:

Page 552 “The Importance of Long-Run Growth”
Pages 570-572 “The History of U.S. Government Debt”

June 27

The Rate of Return on Human Capital

The financial return on a college education far exceeds that on stocks or real estate.

Textbook References:

Pages 398-400 “Human Capital”
Pages 543-544 “Education”

June 12

A Look at QE2

John Cochrane argues that the quantitative easing by the Fed will not have much effect on the economy.

Textbook References:

Pages 540-552 “Economic Growth and Public Policy”
Pages 758-767 “How Monetary Policy Influences Aggregate Demand”

June 11

How to Grow the Economy

Bruce Bartlett reminds us that saving and investment, education, infrastructure, and technological advancement ultimately drive growth.

Textbook References:

Pages 238-240 “The Fiscal Challenge Ahead”
Pages 540-552 “Economic Growth and Public Policy”
Pages 568-572 “Policy 3: Government Budget Deficits and Surpluses”

May 31

How to Fix the Long-Term Fiscal Problem

Six think tanks offer their solutions to the long-term fiscal crisis faced by the U.S.

Textbook References:

Pages 246-248 “The Fiscal Challenge Ahead”
Pages 560-572 “Economic Growth and Public Policy”
Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 842-843 “Dealing with Deficits”

May 13

Evaluating the ARRA

Tom Conley and Bill Dupor argue that the recent fiscal stimulus (the American Recovery and Reinvestment Act) actually destroyed more jobs than it saved.

Textbook References:

Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 560-572 “Economic Growth and Public Policy”
Page 750 “The 2008 Fiscal Stimulus”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-797 “Using Policy To Stabilize The Economy”

April 27

Height Over Time

People are much taller than they used to be. A new book attributes it to technological advances that improved nutrition, sanitation, and medicine.

Textbook References:

Pages 550-554 “Economic Growth Around The World”
Pages 565-566 “Health and Nutrition”
Page 632 “Worker Health”

April 25

The World's Poor and Hungry

Abhijit Banerjee and Esther Duflo discuss why the issue of world hunger is much more complicated than most people think.

Textbook References:

Pages 550-554 “Economic Growth Around The World”
Pages 565-566 “Health and Nutrition”
Page 632 “Worker Health”

March 29

A Striking Scatterplot

There is a strong negative correlation between the unemployment rate and the ratio of fixed investment to GDP.

Textbook References:

Pages 397-399 “What Causes the Labor-Demand Curve to Shift?”
Pages 555-560 “How Productivity Is Determined”
Pages 581-583 “Some Important Identities”

January 1

Letter to the President

Mankiw offers advice to President Obama on how to work with Republicans.

Textbook References:

Page 6 “Principle 3: Rational People Think at the Margin”
Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 442-445 “The Political Economy of Income Redistribution”
Pages 563-565 “Education”
Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 842-843 “Dealing with Deficits”

December 24

Economists on Ebenezer Scrooge

Three economists discuss the virtues of Scrooge, and a fourth claims there is a humbug industry.

Textbook References:

Pages 4-5 “Principle 1: People Face Trade-offs”
Pages 8-10 “Principle 6: Markets Are Usually A Good Way To Organize Economic Activity”
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Page 560 “Saving and Investment”
Pages 584-585 “Supply and Demand for Loanable Funds”

December 20

The Value of Good Teachers

Eric Hanushek calculates that good teachers have an astonishingly high value to society.

Textbook References:

Pages 414-416 “Human Capital”

Page 556 “Human Capital per Worker”

Pages 563-565 “Education”


December 16

The Economics of Seinfeld

Clips from the TV show "Seinfeld" are used to illustrate a variety of economic concepts.

Textbook References:

Pages 4-5 “Principle 1: People Face Trade-offs”
Pages 5-6 “Principle 2: The Cost of Something is What You Give Up to Get It”
Page 6 “Principle 3: Rational People Think at the Margin”
Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Chapter 3 “Interdependence and the Gains from Trade”
Pages 67-72 “Demand”
Pages 73-76 “Supply”
Pages 144-153 “Controls on Prices”
Chapter 10 “Externalities”
Pages 226-227 “The Different Kinds of Goods”
Pages 227-232 “Public Goods”
Pages 230-232 “The Difficult Job of Cost-Benefit Analysis”
Pages 232-237 “Common Resources”
Pages 274-275 “Fixed and Variable Costs”
Page 281 “Economies and Diseconomies of Scale”
Pages 312-315 “Why Monopolies Arise”
Chapter 16 “Monopolistic Competition”
Pages 370-378 “The Economics of Cooperation”
Pages 399-400 “The Supply of Labor”
Page 414 “Compensating Differentials”
Page 442 “Utility”
Page 465 “Utility: An Alternative Way to Describe Preferences and Optimization”
Pages 484-489 “Asymmetric Information”
Pages 556-558 “Technological Knowledge”
Pages 578-580 “Financial Intermediaries”
Pages 598-600 “Present Value: Measuring the Time Value of Money”
Pages 603-604 “Diversification of Firm-Specific Risk”
Pages 606-609 “The Efficient Market Hypothesis”
Pages 630-631 “The Economics of Unions”
Pages 703-705 “The Prices for International Transactions: Real and Nominal Exchange Rates”
Pages 707-708 “The Basic Logic of Purchasing Power Parity”
Page 833 “Time Inconsistency”

December 15

Avinash Dixit

There is a brief biography of Avinash Dixit.

Textbook References:

Chapter 16 “Monopolistic Competition”
Pages 370-378 “The Economics of Cooperation”
Pages 566-567 “Property Rights and Political Stability”


December 5

200 Countries and 200 Years in 4 Minutes

A YouTube video shows how income per capita and life expectancy have changed for 200 countries over the last 200 years.

Textbook References:

Pages 522-523 “International Differences In GDP And The Quality Of Life”
Pages 550-554 “Economic Growth Around The World”


November 6

Laura Tyson and Me on NPR

Laura Tyson and Greg Mankiw discuss current fiscal policy on National Public Radio.

Textbook References:

Pages 246-248 “The Fiscal Challenge Ahead”
Page 560 “Saving and Investment”
Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 654-655 “The Financial Crisis of 2008”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-797 “Using Policy To Stabilize The Economy”
Pages 830-832 “Should Monetary And Fiscal Policymakers Try To Stabilize The Economy?”
Pages 842-843 “Dealing with Deficits”

September 13

Viard on Marginal Tax Rates

Alan Viard argues in favor of keeping the Bush tax cuts because they will promote growth.

Textbook References:

Pages 7-8 “Principle 4: People Respond to Incentives”
Page 560 “Saving and Investment”
Page 586 “Policy 1: Saving Incentives”
Pages 587-589 “Policy 2: Investment Incentives”

September 11

Miron on the Bush Tax Cuts

Jeffrey Miron argues in favor of making the Bush tax cuts permanent.

Textbook References:

Pages 7-8 “Principle 4: People Respond to Incentives”
Page 560 “Saving and Investment”
Page 586 “Policy 1: Saving Incentives”
Pages 587-589 “Policy 2: Investment Incentives”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”

August 4

Rogoff on the Current Policy Challenge

Kenneth Rogoff worries that an excessive concern with short-run aggregate demand management may cause us to ignore long-run issues such as productivity growth and innovation.

Textbook References:

Pages 554-560 “Productivity: Its Role and Determinants”

Pages 560-572 “Economic Growth and Public Policy”

Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”

Pages 830-832 “Should Monetary And Fiscal Policymakers Try To Stabilize The Economy?”


July 22

Solow on DSGE Models

Robert Solow suggests that the Dynamic Stochastic General Equilibrium models that dominate modern macroeconomics do not pass the smell test.

Textbook References:

Page 23 “The Role of Assumptions”

Pages 23-24 “Economic Models”

Pages 560-572 “Economic Growth and Public Policy”


July 21

The Dodd-Frank Anti-Stimulus Bill

The new financial-reform bill has had the unintended consequence of shutting down the bond market because of uncertainty about legal liability.

Textbook References:

Pages 566-567 “Property Rights and Political Stability”
Pages 576-577 “The Bond Market”

July 6

An Interview with Bob Hall

A wide-ranging interview with Robert Hall touches on a variety of topics.

Textbook References:

Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 566-567 “Property Rights and Political Stability”
Pages 604-605 “The Trade-Off Between Risk and Return”
Pages 654-655 “The Financial Crisis of 2008”
Pages 740-742 “Three Key Facts About Economic Fluctuations”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-797 “Using Policy To Stabilize The Economy”

July 1

The Influence of Alberto Alesina

Alberto Alesina argues that governments should take large, credible steps to reduce their deficits. That would calm bond markets and increase confidence for investors and consumers.

Textbook References:

Pages 246-248 “The Fiscal Challenge Ahead”
Pages 560-572 “Economic Growth and Public Policy”
Pages 576-577 “The Bond Market”
Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 842-843 “Dealing with Deficits”

June 27

Links

There are five links sent in by readers. Four of them are humorous, but one, "Ten Commandments for Fiscal Adjustment," is serious.

Textbook References:

Pages 246-248 “The Fiscal Challenge Ahead”
Pages 560-572 “Economic Growth and Public Policy”
Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Page 750 “The 2008 Fiscal Stimulus”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-797 “Using Policy To Stabilize The Economy”
Pages 842-843 “Dealing with Deficits”

May 4

A Talk from Esther Duflo

A 16 minute video shows John Bates Clark Medalist Esther Duflo discussing how the scientific method can improve the lot of the world's poorest.

Textbook References:

Pages 22-29 “The Economist as Scientist”

Pages 550-554 “Economic Growth Around the World”


April 21

Zipf's Law

Edward Glaeser discusses Zipf's Law, which is the idea that "the number of people in a city is inversely proportional to the city's rank among all cities."

Textbook References:

Pages 571-572 “Promoting Technological Progress”

February 23

Financing Healthcare Reform

The most recent healthcare reform proposal does not include a tax on "Cadillac" health insurance and adds a tax on capital. It will not reduce demand for healthcare and will likely slow growth.

Textbook References:

Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 125-127 “How Taxes on Buyers Affect Market Outcomes”
Page 560 “Saving and Investment”
Pages 586-587 “Policy 1: Saving Incentives”
Pages 587-589 “Policy 2: Investment Incentives”

February 4

Defending Jobs Abroad

Matthew Slaughter argues that taxing U.S. firms' foreign operations will destroy jobs in the U.S.

Textbook References:

Pages 7-8 “Principle 4: People Respond to Incentives”
Page 8 “Principle 5: Trade Can Make Everyone Better Off”
Pages 54-57 “Comparative Advantage: The Driving Force of Specialization”
Page 567 “Free Trade”

How to Help Haiti

The Changing Face of the World Economy

Paul Collier and Jean-Louis Warnholz explain both why Haiti needs private investment and why private investors hesitate to invest in Haiti.

Textbook References:

Pages 560-572 “Economic Growth and Public Policy”

Chapter 25: Production and Growth
Archived Posts

 

November 23

The Changing Face of the World Economy

Mankiw presents a graph showing how the share of world GDP for different regions has changed over time.

Textbook References:

Pages 550-554 “Economic Growth Around the World”


November 20

What Makes a Nation Rich?

Daron Acemoglu argues that good institutions are the key to prosperity.

Textbook References:

Pages 560-572 “Economic Growth and Public Policy”


August 19

Blanchard on the Outlook

Olivier Blanchard notes that in previous banking crises, output does not return to its previous growth path. It remains below it, though the average growth rate returns to what it was.

Textbook References:

Pages 246-248 “The Fiscal Challenge Ahead”
Pages 581-582 “Some Important Identities”
Pages 550-554 “Economic Growth Around the World”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 654-655 “The Financial Crisis of 2008”
Pages 740-742 “Three Key Facts About Economic Fluctuations”


May 6

Is the White House bullying hedge funds?

Cliff Asness argues that the Obama administration’s attack on hedge funds is “the big lie writ large,” and is politically motivated.

Textbook References:

Pages 7-8 “Principle 4: People Respond to Incentives”
Page 237 “The Importance of Property Rights”
Pages 566-567 “Property Rights and Political Stability”


Apr. 30

The Rule of Law – Not!

Mankiw fears that recent government actions may erode property rights.

Textbook References:

Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 8-10 “Principle 6: Markets are Usually a Good Way to Organize Economic Activity”
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Page 237 “The Importance of Property Rights”
Pages 566-567 “Property Rights and Political Stability”


Apr. 6

The Four Pillars of Sound Policy

Edward Glaeser worries that the “Washington Consensus” (fiscal restraint, the rule of law, free trade and privitazation) may be coming to an end.

Textbook References:

Pages7-8 “Principle 4: People Respond to Incentives”
Pages 8-10 “Principle 6: Markets Are Usually A Good Way To Organize Economic Activity”
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Chapter 3 “Interdependence and the Gains from Trade”
Pages 566-567 “Property Rights and Political Stability”
Pages 589-593 “Policy 3: Government Budget Deficits”


Mar. 24

The Coming Slowdown in Potential Growth

The CBO projects slower than normal growth for next decade, partly because of slower growth in the labor force as the baby-boom generation retires.

Textbook Reference:

Chapter 25 “Production and Growth”


Dec. 27

Summers on the Obama Plan

There is a link to an editorial by Larry Summers that argues that stimulus spending should focus on investment rather than consumption.

Textbook Reference:

Chapter 25 “Production and Growth”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?


Dec. 27

Summers on the Obama Plan

There is a link to an editorial by Larry Summers that argues that stimulus spending should focus on investment rather than consumption.

Textbook Reference:

Chapter 25 “Production and Growth”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?

Lindsey on Stimulus

Larry Lindsey prefers tax cuts to more government spending.

Textbook References:

Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Pages 838-841 “Should the Government Balance its Budget?”