2.7Q: what was the average annual growth rate of real per capita GDP? 3
Q: Is the US growth rate of about 2% since 1963 common? Q: what’s china’s annual growth rate? Q:what annual rate of growth will make your life radically different from the lives of your grandparents? 4
Q: are natural resources part of the per-worker production function? Some places with and without natural resources: The Role of Capital (K) and TechnologyQ: Why does Y/L vary so much? What can a poor country do? 4.TFP (A) more important than K/L due to diminishing returns to capital 5
tiny A and K/L Haiti today life expectancy: 63 yrs literacy: 49% Markets • people and firms freely buying and selling prices and wages proved signals and incentives not many American workers earn the min wage.. only 2.6%’ markets set the wage of just about everyone at rates far above the minimum more broadly.. almost all nominal wages & prices are set in markets and are flexible • this movement changes signals and incentives • creative destruction .. one industry or business replaces another in search of profits ◦ ie.. nooks replace bookstores ◦ not perfect substitution • Promote innovation to be rich, a country needs a lot of technology (A) and capital per worker (K/L) to grow, these need to increase. How? markets generate incentives and signals to add capital and technology ex. UPS, apple, you in college every economy that has had sustained growth used or uses free markets Part E: Institutions rule of law • Peace • commercial law • limits on government power • rewards for innovations • patents and keep profits • property rights 6
You've reached the end of your free preview.
Want to read all 37 pages?