growth

Growth slowdown (3): perhaps the mid-century growth spurt was just catch-up

(Back to the overview post)

This is much more speculative, but perhaps within-country divergence and convergence explains more of the time-variation in national growth rates than we realise.

One of the very useful reminders of William Easterly’s Tyranny of Experts is that the nation-state is often not the appropriate unit at which to consider big questions of growth and development. For example, if we look at per capita gross world product, there is no slowdown to explain. In fact growth seems to accelerate in the final quarter of the 20th century. The growth-pessimists will respond that this is merely ‘catch-up’, countries far from the technology- and productivity- frontier moving closer to it, rather than a pushing-forward of the frontier itself.

Of course they’re correct, but if that reasoning applies to the late-20th and early-21st century world, why should it not apply within the mid-20th century United States?

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Growth slowdown (2): GDP is a measure of a mid-20th century industrial economy

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The invention of modern national accounting, which includes the construction of GDP estimates, is credited to Kuznets and others, who did pioneering work on measuring output in the 1930s and 1940s. Ever since it was invented, thoughtful economists have cautioned against using GDP as a measure of welfare; all the while most other economists do just that.The standard criticisms of national output are outlined in clarity by the Stiglitz-Sen-Fitoussi commission, or more poetically by Robert Kennedy:

 

I would express these specific criticisms in a common way:

GDP measures the things that seemed important in 1940.

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Growth slowdown (1): Robert Gordon’s misleading chart

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Income growth is not a neat story, but technology pessimists would like you to think it is. Robert Gordon provides the following neat picture of ‘Growth in real GDP-per-capita, 1300-2100’ (here or unpaywalled summary, here).

Growth in real GDP per capita, 1300-2100

The end-date alone should be enough to make us realise that this is a stylised representation, at best (and the 2008 onwards data is purely imagined, a ‘provocative fantasy’ in Gordon’s words). But even with that caveat it is a highly selective and misleading representation of growth.

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