Chapter 25 - 586_CH25_Econ.qxp 4:33 PM Page 586 chapter 25...

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586 >> Long-Run Economic Growth chapter 25 N 1999 BRITAIN’S CHANNEL 4TV carried out an experiment in time travel. They filmed a documentary about a modern English family, the Bowlers, who spent three months living exactly the way an upper-middle-class family lived in the year 1900. That meant living in a house without electricity or modern appliances, doing the laundry took two days of hard, hot work, and most of their food was boiled on a coal-burning stove. There was no shampoo, toothpaste, packaged or frozen food, and frequently there was insufficient hot water for a bath. The toilet was an outdoor privy in the gar- den. Not surprisingly, the Bowlers found life very difficult. (At a point of despera- tion in the battle to stay clean, the family broke the rules and purchased a bottle of modern shampoo.) As one reviewer said, “[Viewing this] should kill any feelings of nostalgia [for the old days] once and for all.” The documentary, called 1900 House , vividly illustrated the huge improvement in living standards that has taken place in Britain over the past century. Nowadays the vast majority of people in Britain, even those considered poor, have com- forts that were not available even to well- off families in 1900. The same is true in the United States. For example, a century ago most American families didn’t even have indoor plumbing. THE BAD OLD DAYS What you will learn in this chapter: How long-run growth can be measured by the increase in real GDP per capita, how this measure has changed over time, and how it varies across countries Why productivity is the key to long-run growth, and how pro- ductivity is driven by physical capital, human capital, and technological progress The factors that explain why growth rates differ so much among countries How growth has varied among several important regions of the world and why the convergence hypothesis applies to economi- cally advanced countries I PBS/Photofest The Bowlers: a late-20th-century family that found life in the year 1900 very trying indeed. Yet old-fashioned discomfort isn’t an- cient history. Today, most of the world’s pop- ulation still has a standard of living far worse than that of the Bowlers in their 1900 house. In fact, billions of people still lack access to clean water and don’t get enough to eat. Why do residents of countries such as the United States, Canada, Japan, Britain, and others live so much better than they did a century ago? Why is the standard of living so much lower in countries such as India or Nigeria? The answer to both questions is that some, but not all, countries have been highly successful at achieving long-run economic 586_CH25_Econ.qxp 11/8/05 4:33 PM Page 586
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Comparing Economies Across Time and Space Before we analyze the sources of long-run economic growth, it’s useful to have a sense of just how much the U.S. economy has grown over time and how large the gaps are between wealthy countries like the United States and countries that have yet to match our growth record. So let’s take a look at the numbers.
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Chapter 25 - 586_CH25_Econ.qxp 4:33 PM Page 586 chapter 25...

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