ilrle 344 1st half_StudyGuide - August 28, 2006 ILRLE344...

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August 28, 2006 ILRLE344 Three objectives: 1. Give you a basic introduction to the historical roots of some of the economic institutions that are dominant today (labor issues, welfare reform over previous centuries, etc.) 2. Look at the evolution of economics as a discipline (Why did Britain industrialize first? Why do some countries grow faster than others? Why has it taken so long for sustained economic growth in the world today?) 3. Read excerpts from great books Malthusian Cycles (very long waves in economies without sustained growth): Basically, pre-industrial Europe or China or India could not break out of these Malthusian Cycles. Mercantalism: Basically mercantalists believed that in order for a country to be rich they needed poor working people (country’s wealth comes before the economic well-being of the people/workers). Because in order for a country to get rich, it would need to import a lot of gold. In order to get gold, it’d have to export as much as possible (meaning it would need cheap labor). Econlib.org The key to economic growth is to have output grow faster than population, meaning you need technological change/progress to grow so rapidly that even if you have major population growth, output keeps up (per capita). This doesn’t mean there was no technological change before the Industrial Revolution, but it does mean that the technological change wasn’t significant enough to keep up with the growth in population The most important event in WRITTEN history was the Industrial Revolution Until the 18 th century, we only had extensive growth, but no intensive growth. Extensive growth is growth in output, but growth in output that is simply matched by growth in population; so that per capita income remained stagnant or the same. If output per person goes up, we have intensive growth! GDP/Population must go up for intensive growth We’ve gone from thousands of years of no economic growth, to 200 hundred years of phenomenal growth If you look at world history, you see a horserace between economic growth and population growth. When there is greater technological change and thus greater economic growth, this was usually met (before the Industrial Revolution) with greater population
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growth that left per capita income/wealth stagnant. But after the 1700s and especially after the 1800s, things change. What’s happening after 1800 is not just output going up and population staying put- what is happening is that the output horse is running so much faster than the population horse! GDP per capita in the Western World divided by the Rest of the World = In 1000AD, the ratio is 0.9 In 1500AD, the ratio is 1.4 In 1820AD, the ratio is 2.1 In 1913AD, the ratio is 4.6 In 1950AD, the ratio is 5.8 In recent years, there’s been a rise of new economic thoughts (California School): They’ve put forward the notion that the way most economists teach economics is way too Euro-centric. Palmer (from the California School) says that China was ahead of the West
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ilrle 344 1st half_StudyGuide - August 28, 2006 ILRLE344...

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