total factor productivity

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pages: 504 words: 126,835

The Innovation Illusion: How So Little Is Created by So Many Working So Hard by Fredrik Erixon, Bjorn Weigel

"Robert Solow", Airbnb, Albert Einstein, American ideology, asset allocation, autonomous vehicles, barriers to entry, Basel III, Bernie Madoff, bitcoin, Black Swan, blockchain, BRICs, Burning Man, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, Clayton Christensen, Colonization of Mars, commoditize, corporate governance, corporate social responsibility, creative destruction, crony capitalism, dark matter, David Graeber, David Ricardo: comparative advantage, discounted cash flows, distributed ledger, Donald Trump, Elon Musk, Erik Brynjolfsson, fear of failure, first square of the chessboard / second half of the chessboard, Francis Fukuyama: the end of history, George Gilder, global supply chain, global value chain, Google Glasses, Google X / Alphabet X, Gordon Gekko, high net worth, hiring and firing, Hyman Minsky, income inequality, income per capita, index fund, industrial robot, Internet of things, Jeff Bezos, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, Joseph Schumpeter, Just-in-time delivery, Kevin Kelly, knowledge economy, laissez-faire capitalism, Lyft, manufacturing employment, Mark Zuckerberg, market design, Martin Wolf, mass affluent, means of production, Mont Pelerin Society, Network effects, new economy, offshore financial centre, pensions crisis, Peter Thiel, Potemkin village, price mechanism, principal–agent problem, Productivity paradox, QWERTY keyboard, RAND corporation, Ray Kurzweil, rent-seeking, risk tolerance, risk/return, Robert Gordon, Ronald Coase, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, Silicon Valley, Silicon Valley startup, Skype, sovereign wealth fund, Steve Ballmer, Steve Jobs, Steve Wozniak, technological singularity, telemarketer, The Chicago School, The Future of Employment, The Nature of the Firm, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, transaction costs, transportation-network company, tulip mania, Tyler Cowen: Great Stagnation, uber lyft, University of East Anglia, unpaid internship, Vanguard fund, Yogi Berra

(i) Taleb, Nassim Nicholas, “Soviet–Harvard illusion” (The Black Swan) (i) tax havens (i) taxes and debt vs. equity financing (i), (ii) and labor (i) and policy uncertainty (i) in Sweden (i) taxi services and driverless cars debate (i) and regulation (i) tech entrepreneurs (i) tech incubators (i) technofeudal society (i) technological platforms, and regulation (i) technological singularity (i) technological unemployment (i), (ii) technology and capitalism (i) dystopian visions of (i) and economy (i), (ii), (iii) and employment (i) and French dirigisme (i) and innovation success (i), (ii), (iii), (iv) and “scientific civilization” thinking (i) technology angst vs. technology frustration (i) technology blitz theory (i), (ii), (iii), (iv) and vertical specialization (i) see also artificial intelligence; automation; diffusion; innovation; New Machine Age thesis; robotics/robots technostructure (i), (ii), (iii), (iv) telecommunications and deregulation (i) and globalization (i) and investment (i) see also Ericsson telephone (i), (ii) see also mobile phones/technology; smartphones Teles, Steven (i) Teller, Astro (i) 1066 and All That (Sellar and Yeatman) (i) Tesla (i) Texas, Special/Permanent School Fund (i) TFP (total factor productivity) growth (i), (ii), (iii) Thiel, Peter (i), (ii) Thomson, George (i) Tiberius (i) Time magazine, “The Committee to Save the World” (i) TNT, attempted acquisition of by UPS (i) total factor productivity (TFP) growth (i), (ii), (iii) Toynbee, Arnold (i), (ii) trade interfirm vs. intrafirm trade (i) see also global trade; mercantilism; protectionism transaction costs (i), (ii), (iii), (iv), (v), (vi) transmission costs (i), (ii), (iii) transparency Linaburg Maduell Transparency Index (LMTI) (i) and regulation (i), (ii) and sovereign wealth funds (i), (ii) Transparency International (i) “triple helix” models (i) “triple revolution” (i) trucking industry (US), shortages of drivers (i) Trump, Donald (i), (ii) Tufts Center for the Study of Drug Development (i), (ii) Tullock, Gordon (i) Twitter, and Nobel Peace Prize (i) Uber (i), (ii), (iii) unbundling of production first (i) second (i), (ii), (iii), (iv) uncertainty and compliance officers (i), (ii) and entrepreneurship (i) and financial regulation (i) and globalist worldview (i), (ii) market uncertainty (i), (ii) policy uncertainty (i), (ii) and probabilistic approach (i), (ii) and risk (i), (ii) and strategy (i) see also predictability; regulatory complexity/uncertainty; volatility unemployment and decoupling (productivity/wages) thesis (i) and Great Recession (i) and New Machine Age hype (i) and productivity (i) technological unemployment (i), (ii) see also labor unicorns (firms) (i) United Kingdom (UK) “boom and bust” and Gordon Brown (i) business investment: declining trend (i); as a proportion of GDP (i) corporate net lending (i), (ii) corporate profit margins (1948–2014) (i), (ii) dependence on larger enterprises (i) EU Leave campaign and older generation (i) exports to China (i) financialization of real economy (i) and globalization (i), (ii), (iii) income inequality and generations (i) “Independent Review of UK Economic Statistics” (Charles Bean) (i) London Stock Exchange and sovereign wealth funds (i) managerialism (i) Middle Ages economy (i) pension deficits (i) pensioners vs. working-age households incomes (i) productivity and incomes (i) productivity puzzle (i) R&D spending (i) retirement savings (i) United States (US) academia and speech codes (i) American Financial Stability Oversight Council (i) banks: and compliance officers (i); and financial regulations (i) Blue Ribbon Commission (i) Burning Man festival (Nevada) (i) capital expenditure (capex) (i)n39 car industry: driverless cars (i); and environment-related regulations (i); and lean production (i) Code of Federal Regulations (i) Consumer Protection Act (i) corporate cash hoarding (i) corporate net lending (i), (ii) corporate profit margins (1948–2014) (i), (ii) corporate renewal levels (i) corporate retained earnings figures (i) corporations’ decline (1980s) (i) debt vs. equity (i) diffusion of innovations (i) dockers and containerization (i) Dodd–Frank Act (i), (ii), (iii), (iv) Energy Policy and Conservation Act (EPCA) (i) Federal Register (i) Federal Reserve (i) financial governance (1990s) (i) financialization of real economy (i) firm entry-and-exit rates (i), (ii), (iii) Food and Drug Administration (FDA) (i), (ii), (iii) GDP figures (i), (ii) and globalization (i), (ii), (iii) high-tech sector (i) Inc 500 ranking (i) incomes: and benefits (i); inequality and generations (i); inequality and productivity (i); and productivity (i), (ii), (iii), (iv), (v) information and communications technology: hardware investment as share of GDP (i), (ii); intensity and productivity (i); sector (i), (ii) investment: business investment declining trend (i), (ii); corporate borrowing and low investment levels (i); corporate investment and shareholders (i), (ii); institutional investors (i); private investment (i) labor: ATMs and teller jobs (i); farming occupation statistics (i); job creation and destruction trends (i), (ii), (iii); labor market flexibility, low rates of (i); occupational licenses (i), (ii); staff turnover rates (i); truck drivers, shortages of (i) market concentration (1997–2012) (i), (ii) Memphis International Airport and FedEx hub (i) mergers and acquisitions (i) New York Stock Exchange (i), (ii), (iii), (iv), (v) North American Free Trade Agreement (i) Organization Man (i) pessimism and capitalist decline (i) policy uncertainty (i), (ii) productivity: downward trend (i), (ii), (iii); via foreign operations (i)n46; and ICT intensity (i); and income inequality (i); and incomes (i), (ii), (iii), (iv), (v); total factor productivity (TFP) growth (i), (ii)n11; and un/employment (i) profit margins (i) public debt (i) public pensions (i) R&D spending (i), (ii), (iii) regulation/deregulation: air cargo services deregulation (i); car industry and environment-related regulations (i); Code of Federal Regulations (i); compliance officers and Dodd–Frank rules (i); drone aircraft rules (i); green building codes (i); index of regulatory freedom (i), (ii); index of regulatory trade barriers (i), (ii); medical devices (i); taxi services (i), (ii) retirement savings (i) robots, fear of (i) Silicon Valley (i), (ii), (iii) start-ups and entrepreneurship (i), (ii) stock market crash and modern portfolio theory (i) subprime mortgage crisis (i) subsidies to firms (i) Texas Special/Permanent School Fund (i) trade: and big business (i); index of regulatory trade barriers (i), (ii) Wall Street (i), (ii), (iii), (iv) universities, and erosion of dissent (i) University of Chicago (i) University of Oxford, Future of Humanity Institute (i) UPS, attempted acquisition of TNT (i) urbanization, and diffusion of innovations (i) value vs. numbers (i) value innovation (i) value chains fragmentation of (i), (ii), (iii) and German corporations (i) globalization of (i), (ii) and market concentration (i) marketization of (i) and outsourcing of supply chains (i) “slicing up” of (i), (ii) and specialization (i), (ii) see also supply chains Van Reenen, John (i) Vanguard Group (i) Vernon, John A.

Classification: LCC HC79.T4 E75 2016 | DDC 338/.064—dc23 LC record available at https://lccn.loc.gov/2016024731 A catalogue record for this book is available from the British Library. 10 9 8 7 6 5 4 3 2 1 CONTENTS List of Figures Preface Acknowledgments 1Introduction 2When Capitalism Became Middle-Aged 3The Color of Capitalism Is Gray 4The Rise and Rise Again of Corporate Managerialism 5The Two Faces (and Phases) of Globalization 6The Return of the Regulators 7Killing Frontier Innovation 8Capitalism and Robots 9The Future and How to Prevent It Notes References Index LIST OF FIGURES Figure 2.1 Growth of real GDP per capita, 1950–2007 Figure 2.2 Total factor productivity growth in selected EU countries and the US Figure 2.3 G7 labour productivity growth Figure 2.4 US business fixed investment as a proportion of GDP Figure 2.5 UK business investment as a proportion of GDP Figure 2.6 US real business R&D investment growth (change from previous year) Figure 2.7 R&D intensity in the European Union (R&D expenditure as percentage of net sales) Figure 2.8 Business net lending and borrowing in the US (percentage of GDP) Figure 2.9 Business net lending and borrowing in the UK (percentage of GDP) Figure 2.10 US ratio of investment to cash to shareholders Figure 3.1 Total assets by types of institutional investors in the OECD, 2001–13 Figure 5.1 Corporate profit margins in the US, the UK, and Germany, as a percentage of GDP Table 5.1 Changes in market share of top firms in the US between 1997 and 2012 Figure 6.1 Indicators of product market regulation (economy wide), OECD average Figure 6.2 Index of regulatory freedom in selected Western economies Figure 6.3 Index of regulatory trade barriers to international trade in selected Western economies Figure 6.4 Share of workers in the US with a state occupational license Figure 7.1 Economic policy uncertainty in the United States Figure 8.1 Firm entry and exit rates in the United States, 1977–2012 Figure 8.2 Job creation and destruction rates in the US private sector, 1994–2014 Figure 8.3 Investment in ICT hardware as a share of GDP Figure 8.4 Output per hour, real product compensation, and labor compensation share in net income in the US PREFACE Oddly, it was not until we began to pen this preface that it occurred to us that we have written the economic history of our own lifetime.

America and Europe, it seems, have worn out their capacity for using and combining labor and capital in more productive ways. In particular, they have impaired their own ability to improve the performance of labor and capital through innovation. Economists have a way of measuring the growth of productivity in an economy by looking at all factors of – or inputs to – production, called total factor productivity (TFP). It is the preferred indicator of productivity when the task is to measure how much innovation adds to the improvement of the economy. Yet economists are hedging their bets, and if you do not like this version of productivity, well, there are others. A second approach to grading an economy’s productivity is labor productivity, certainly a better approach if the task is to understand the relation between wages, employment, and the health of the economy.


pages: 346 words: 89,180

Capitalism Without Capital: The Rise of the Intangible Economy by Jonathan Haskel, Stian Westlake

"Robert Solow", 23andMe, activist fund / activist shareholder / activist investor, Airbnb, Albert Einstein, Andrei Shleifer, bank run, banking crisis, Bernie Sanders, business climate, business process, buy and hold, Capital in the Twenty-First Century by Thomas Piketty, cloud computing, cognitive bias, computer age, corporate governance, corporate raider, correlation does not imply causation, creative destruction, dark matter, Diane Coyle, Donald Trump, Douglas Engelbart, Douglas Engelbart, Edward Glaeser, Elon Musk, endogenous growth, Erik Brynjolfsson, everywhere but in the productivity statistics, Fellow of the Royal Society, financial innovation, full employment, fundamental attribution error, future of work, Gini coefficient, Hernando de Soto, hiring and firing, income inequality, index card, indoor plumbing, intangible asset, Internet of things, Jane Jacobs, Jaron Lanier, job automation, Kenneth Arrow, Kickstarter, knowledge economy, knowledge worker, laissez-faire capitalism, liquidity trap, low skilled workers, Marc Andreessen, Mother of all demos, Network effects, new economy, open economy, patent troll, paypal mafia, Peter Thiel, pets.com, place-making, post-industrial society, Productivity paradox, quantitative hedge fund, rent-seeking, revision control, Richard Florida, ride hailing / ride sharing, Robert Gordon, Ronald Coase, Sand Hill Road, Second Machine Age, secular stagnation, self-driving car, shareholder value, sharing economy, Silicon Valley, six sigma, Skype, software patent, sovereign wealth fund, spinning jenny, Steve Jobs, survivorship bias, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Tim Cook: Apple, total factor productivity, Tyler Cowen: Great Stagnation, urban planning, Vanguard fund, walkable city, X Prize, zero-sum game

The final fact surrounding secular stagnation is that the sustained decrease in productivity growth that we have seen in developed countries does not seem to be driven solely by lower investment. Labor productivity growth (see box 5.1 for a fuller explanation of labor productivity, profitability, and total factor productivity) can fall for two broad reasons. It can fall because investment falls, thus giving workers less capital to work with. Or it can fall because workers are working less effectively with whatever capital they have; this is called a fall in “multi-factor” or “total factor” productivity (TFP). Now, since the financial crisis, investment has fallen, but not by enough to account for all the loss in labor productivity. In fact, the bulk of the slowdown in productivity growth has been a decline in total factor productivity. Figure 5.5 shows, since about the mid-2000s, a fall in OECD multi-factor productivity growth. Figure 5.5. Growth of labor and multi-factor productivity (OECD, 1995–2016, four-year moving average).

Suppose a firm invests in some tangibles and some intangibles. It should reap the benefits of both, but from intangibles it should get higher productivity, since it may be able to scale up those intangibles. In addition to that, if the benefits of intangibles spill over, other firms should be able to raise their productivity. We would expect these additional effects to show up in total factor productivity.4 The flip side of this is that if intangible capital growth falls, as we have seen in figure 5.8, then total factor productivity growth should fall as well. Figure 5.9. Multi-factor productivity and intangible capital services growth. The figure shows average annual growth rates between 1999 and 2007 (open diamonds) and 2008 and 2013 (closed circles). Data are whole-economy. Countries are Austria (AT), Finland (FI), France (FR), Germany (DE), Italy (IT), Netherlands (NL), Spain (ES), Sweden (SE), UK (UK), USA (US).

Most productivity analysts confine themselves to productivity, especially since it’s perfectly possible that productivity and profitability are negatively correlated. Returning to our main theme, let’s look at the measure of input. The rail network requires a host of inputs to produce the output: the trains, the track, the staff, the fuel, etc. So let’s define two productivity measures. Single-factor productivity is real output per single unit. Multi-factor productivity (MFP) (confusingly, sometimes called “total factor productivity” [TFP]) is real output per multiple inputs. An example might help. Consider agriculture (Pardey, Alston, and Chan-Kang 2013). Between 1961 and 2009, world population rose from 3 billion to 6.8 billion, a rise of 127 percent. How was everyone fed? In 1961 the world produced US$746bn worth of agricultural output and, controlling for inflation, that had risen to US$2,260bn in 2009, a rise in real output of 203 percent, far outpacing the rise in population.


pages: 1,104 words: 302,176

The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War (The Princeton Economic History of the Western World) by Robert J. Gordon

"Robert Solow", 3D printing, Affordable Care Act / Obamacare, airline deregulation, airport security, Apple II, barriers to entry, big-box store, blue-collar work, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Charles Lindbergh, clean water, collective bargaining, computer age, creative destruction, deindustrialization, Detroit bankruptcy, discovery of penicillin, Donner party, Downton Abbey, Edward Glaeser, en.wikipedia.org, Erik Brynjolfsson, everywhere but in the productivity statistics, feminist movement, financial innovation, full employment, George Akerlof, germ theory of disease, glass ceiling, high net worth, housing crisis, immigration reform, impulse control, income inequality, income per capita, indoor plumbing, industrial robot, inflight wifi, interchangeable parts, invention of agriculture, invention of air conditioning, invention of the sewing machine, invention of the telegraph, invention of the telephone, inventory management, James Watt: steam engine, Jeff Bezos, jitney, job automation, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, labor-force participation, Loma Prieta earthquake, Louis Daguerre, Louis Pasteur, low skilled workers, manufacturing employment, Mark Zuckerberg, market fragmentation, Mason jar, mass immigration, mass incarceration, McMansion, Menlo Park, minimum wage unemployment, mortgage debt, mortgage tax deduction, new economy, Norbert Wiener, obamacare, occupational segregation, oil shale / tar sands, oil shock, payday loans, Peter Thiel, pink-collar, Productivity paradox, Ralph Nader, Ralph Waldo Emerson, refrigerator car, rent control, Robert X Cringely, Ronald Coase, school choice, Second Machine Age, secular stagnation, Skype, stem cell, Steve Jobs, Steve Wozniak, Steven Pinker, The Market for Lemons, The Rise and Fall of American Growth, Thomas Malthus, total factor productivity, transaction costs, transcontinental railway, traveling salesman, Triangle Shirtwaist Factory, undersea cable, Unsafe at Any Speed, Upton Sinclair, upwardly mobile, urban decay, urban planning, urban sprawl, washing machines reduced drudgery, Washington Consensus, Watson beat the top human players on Jeopardy!, We wanted flying cars, instead we got 140 characters, working poor, working-age population, Works Progress Administration, yellow journalism, yield management

The same goes for the other individuals who developed Google’s search software and Facebook’s social network. Even though this wave of innovation is credited by the Patent Office to firms rather than individuals, it was made possible by individual inventors and entrepreneurs more directly than the earlier twentieth-century inventions of Bell Labs and the other large corporate research organizations. THE HISTORICAL RECORD: THE GROWTH OF TOTAL FACTOR PRODUCTIVITY We previously learned in figures 1–2 and 16–5 that growth in total factor productivity (TFP) was much faster between 1920 and 1970 than either before 1920 or since 1970. Now we take a closer look at the behavior of TFP growth for the years since 1970. Shown by vertical bars in figure 17–2 are the growth rates of TFP for 1890–1920, 1920–1970, and three subperiods since 1970. The first of these intervals, 1970–94, exhibits TFP growth of only 0.57 percent per year, less than a third of the 1.89 percent growth rate achieved in the fifty years before 1970.

See elderly people September 11th terrorist attacks, 406 servants, 47, 107, 276 service occupations, 53; women in, 274 services: impact of technology on, 578; spending for, 39 sewer systems, 51, 124, 217, 323 sewing machines, 293 sex, 486 sharecropping, 265–66; debts for, 291–92 Sharp, Jacob, 143 Shergold, Peter, 79, 279 Sherman Antitrust Act (1890), 313, 318 shipping disasters, 239 shipyards, 549 Shockley, William, 571 shopping centers and malls, 365–66 Sichel, Daniel, 110 sickness funds (health insurance), 236 Sidley Austin (law firm), 618 Sikorsky Igor, 394 Sildenafil (Viagra; drug), 486 Simpson, Gary, 409 Sinclair, Upton, 82, 221–22, 267, 313 Singer Sewing Machine Company, 293 Singing in the Rain (film), 201 60 Minutes (television program), 433 slaughterhouses, 267 small towns: automobiles in, 163–65; housing in, 110–12; teenagers in, 283 smartphones, 433, 437–38, 523, 577–78; Internet on, 456; personal use of, 581 Smith, C. R., 395–96 smog, 474 smoking, 472 social change, 630–32 social media, 456–57 social networks, 456–57 Social Security Act (1935), 315, 516, 520; financial strains for, 518; future payments under, 607; payments under, 500 Solow, Robert M.: on growth accounting, 543; on impact of computers, 17, 577, 579; Solow’s residual (total factor productivity; TFP), 16, 568–69 Solow’s residual (total factor productivity; TFP), 16, 568–69 Sombart, Werner, 503 sound: added to motion pictures, 200–201; See also phonograph; radio southern states: age of housing in, 99; agriculture in (1870), 55–56; blacks in (1870), 58–59; diet in, 40, 66; health in (1870), 52; homicide rates in, 241; housing for black tenant farmers in, 111–12; middle-class urban housing in, 46; retailing in, 77 Spanish flu pandemic (1918–19), 214–15 sports, 434 Spotify (website), 436 Sprague, Frank J., 146, 148 standardization of parts, 561–62 standard of living: in 1870, 27–30; after 1940, 485–87; changes in, 321; forecasting future of, 634–39; inequality in, 606; irregular advance of, 13–18; life expectancy and, 242–44; measurement of, 8–13, 208; revolution in (1870 - 1940), 316; tied to railroads, 137 Standard Oil, 313 Starr, Paul, 461, 477, 482 Star Wars (films), 420 State Farm (firm), 309 state governments: automobiles regulated by, 314; regulation of businesses by, 313, 629 steam boilers, 126 steam engines, 48–49; cable cars powered by, 146; commuter railroads powered by, 143; railroads powered by, 132–42, 168 Steckel, Richard, 83, 84 steel industry, 267–69 Stein, Rebecca, 208, 216, 219 stem cell therapy, 479 Stephenson, George, 568 stereoscopes, 198 Stevenson, Robert Louis, 141 stock exchanges, 582 stock options, 619 stove, 358 streetcars, 146–47, 149, 159; replaced by automobiles, 160 streetcar suburbs, 105, 107–8 street lights, 116–17 Streightoff, Frank, 45–46 streptomycin, 466 student loan debt, 512–13, 626, 648; delayed marriage tied to, 632 suburbs, 331, 333; after 1940, 363–70, 372; in nineteenth century, 104–5, 107–8 subways, 148 Sun City (Arizona), 517 supermarkets, 78–79, 334, 341–43 superstars, 618 Supreme Court (U.S.): on birth control, 486; on Standard Oil, 313 surgeons, 225 syphilis, 465 Taco Bell Restaurants, 344 Talbot Henry Fox, 197 tape recorders, 428 Tarbell, Ida, 280, 313 Target (firm), 349, 371, 617 tariffs, 554–55 Tavernise, Sabrina, 485 Tawney, R.

One of my current classes is a freshman seminar titled “Did Economics Win the Two World Wars?” which has provided the opportunity over 15 years to read extensively on the economics of the home front during World War II. This background helped lead me to the conclusion of Chapter 16, that the Great Depression and World War II taken together constitute the major explanation of the sharp jump in total factor productivity that occurred between the 1920s and 1950s. When it came time to write about the improving postwar quality of clothing, houses, household appliances, TV sets, and automobiles, I returned to my previous role as a critic of conventional measures of price indexes. Many of the estimates in Chapters 10 through 12 of changes in quality come from my 1990 book, The Measurement of Durable Goods Prices.


pages: 288 words: 64,771

The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality by Brink Lindsey

"Robert Solow", Airbnb, Asian financial crisis, bank run, barriers to entry, Bernie Sanders, Build a better mousetrap, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Cass Sunstein, collective bargaining, creative destruction, Credit Default Swap, crony capitalism, Daniel Kahneman / Amos Tversky, David Brooks, diversified portfolio, Donald Trump, Edward Glaeser, endogenous growth, experimental economics, experimental subject, facts on the ground, financial innovation, financial intermediation, financial repression, hiring and firing, Home mortgage interest deduction, housing crisis, income inequality, informal economy, information asymmetry, intangible asset, inventory management, invisible hand, Jones Act, Joseph Schumpeter, Kenneth Rogoff, Kevin Kelly, knowledge worker, labor-force participation, Long Term Capital Management, low skilled workers, Lyft, Mark Zuckerberg, market fundamentalism, mass immigration, mass incarceration, medical malpractice, Menlo Park, moral hazard, mortgage debt, Network effects, patent troll, plutocrats, Plutocrats, principal–agent problem, regulatory arbitrage, rent control, rent-seeking, ride hailing / ride sharing, Robert Metcalfe, Ronald Reagan, Silicon Valley, Silicon Valley ideology, smart cities, software patent, too big to fail, total factor productivity, trade liberalization, transaction costs, tulip mania, Uber and Lyft, uber lyft, Washington Consensus, white picket fence, winner-take-all economy, women in the workforce

See regulation; regulatory capture status quo bias, 100 Stiglitz, Joseph, 12, 61 stock market, 31, 38, 46–48 Stop Online Piracy Act, 176 student loans, 38 subprime mortgages, 42–47 subsidies, 17 of countervailing power, 154–59, 208n13, 208n14 debt financing and, 36–63 failure to limit, 55–58 financial sector and, 32, 55–58 mortgage lending and, 36–45, 47, 57–59, 63 “Tobin’s Q” and, 20 Sunstein, Cass, 137, 165 Supreme Court, 76, 100, 166 judicial review and, 170–75 Tabarrok, Alex, 186n14 tariffs, 29, 31, 95, 149 taxation, 7 high income, 11 post-New Deal, 30–31 rising costs of home ownership and, 113 technology. See digital era/information technology Teles, Steven M., 14, 36, 161 Temin, Peter, 11 temporary monopolies, 16, 73 TFP. See total factor productivity “third party support”, 155 Thomas, Diana, 186n14 “Tobin’s Q”, 19–20, 22–23 total factor productivity, 24–27, 78–79 “Treaty of Detroit”, 11 Trump, Donald, 2–4, 8 tulip mania, 46 unionization, 6, 11, 31, 146, 157 collective bargaining and, 28 decline of, 91–92 post-New Deal, 29 upstream innovation, 74 upward mobility, 1, 30, 97–98, 143 upward redistribution, 12–14, 28–31, 127. See also redistribution of wealth homeownership and, 121–22 land-use and, 110 mortgage lending and, 39 urban areas, 114–15 VA.

III STIFLING GROWTH Modern growth theory, beginning with the pioneering work of Robert Solow and continuing with more recent “endogenous growth” models, makes clear that the ultimate source of economic growth is innovation: the development of new products and production methods that increase the level of output per given unit of capital and labor inputs.15 Of course, the mere introduction of new products and methods is only the first step; innovation’s full effect comes as the new products and methods diffuse throughout the economy. Introduction and diffusion together make for the dynamic process of creative destruction: new ideas originate and spread, old ways of doing things are displaced, and resources are reallocated from less to more productive combinations of capital and labor. Economists’ best measure of this process is total factor productivity (TFP) growth, or growth in output per unit of capital and labor. Regulatory rents do their main damage by interfering with creative destruction. By hampering the formation and growth of new businesses, they impede both the introduction of new products and production methods and the reallocation of resources that accompanies the diffusion of innovations. Recent research shows that both the birth and death of firms contribute significantly to overall productivity growth.

To understand what’s going on, let’s break down measured economic growth into the constituent elements tracked by conventional growth accounting: (1) growth in labor participation, or annual hours worked per capita; (2) growth in labor quality, or the skill level of the workforce; (3) growth in capital deepening, or the amount of physical capital invested per worker; and (4) growth in so-called total factor productivity, or output per unit of quality-adjusted labor and capital. Over the course of the twentieth century, these various components fluctuated in their contributions to overall growth. The fluctuations, however, tended to offset each other, so that the long-term trend line of growth overall remained stable. In the twenty-first century, however, this pattern of offsetting fluctuations has come to a halt as all growth components have fallen off simultaneously.


pages: 242 words: 68,019

Why Information Grows: The Evolution of Order, From Atoms to Economies by Cesar Hidalgo

"Robert Solow", Ada Lovelace, Albert Einstein, Arthur Eddington, assortative mating, business cycle, Claude Shannon: information theory, David Ricardo: comparative advantage, Douglas Hofstadter, Everything should be made as simple as possible, frictionless, frictionless market, George Akerlof, Gödel, Escher, Bach, income inequality, income per capita, industrial cluster, information asymmetry, invention of the telegraph, invisible hand, Isaac Newton, James Watt: steam engine, Jane Jacobs, job satisfaction, John von Neumann, Joi Ito, New Economic Geography, Norbert Wiener, p-value, Paul Samuelson, phenotype, price mechanism, Richard Florida, Ronald Coase, Rubik’s Cube, Silicon Valley, Simon Kuznets, Skype, statistical model, Steve Jobs, Steve Wozniak, Steven Pinker, The Market for Lemons, The Nature of the Firm, The Wealth of Nations by Adam Smith, total factor productivity, transaction costs, working-age population

GDP considers the production of goods and services within a country. GNP considers the goods and services produced by the citizens of a country, whether or not those goods are produced within the boundaries of the country. 5. Simon Kuznets, “Modern Economic Growth: Findings and Reflections,” American Economic Review 63, no. 3 (1973): 247–258. 6. Technically, total factor productivity is the residual or error term of the statistical model. Also, economists often refer to total factor productivity as technology, although this is a semantic deformation that is orthogonal to the definition of technology used by anyone who has ever developed a technology. In the language of economics, technology is the ability to do more—of anything—with the same cost. For inventors of technology, technology is the ability to do something completely new, which often involves the development of a new capacity.

., 152–154, 162 Study of Disadvantaged Youth, 113 Tacit knowledge, knowhow and, 78, 80 Tasmanians, 169–170 Teams, physical embodiment of knowledge/knowhow in, 73–74 Technological transfer, 143 Technologies, social networks and, 44 Tesla, Nikola, 59, 60, 62, 69 TFP. See Total factor productivity (TFP) Theory of dissipative structures, 28 Theory of social capital, 111 Thermodynamic potentials, 31–32 Thermodynamics of the universe, 25–41 Thoreau, Henry David, 43 Time, irreversibility of, 25–26 in statistical system, 37–40 Time travel, birth as, 3–5 Toothpaste, access to practical use of creativity and, 65–66 Torres Islanders, 170 Toshiba, 92 Total factor productivity (TFP), 147 TP-Link, 92 Transaction cost theory, 89–91, 93, 123 economic sociology and, 117–118 trust and reduction of, 117–118 Transition points breaks in knowhow carrying capacity of networks and, 167–168 in structures of networks, 107 Travel, cost of market interactions and rates of, 95, 96–99 Tree, information processing by, 35–36 Triadic closure, formation of social networks and, 114 Trust, 109, 111 developed vs. developing countries and, 124 familial networks and, 121–123 formation of large networks and, 116–117, 118 formation of large social networks and, 123 formation of professional networks and, 115–117 reduction of transaction costs and, 117–118 social networks and, 119–121, 123 Trust (Fukuyama), 115 Turing, Alan, xiv Tweet, information contained in, 13–14 Twitter, 13–14, 92, 101 Uncertainty principle, 39 United Nations, bureaucratic burden and, 103 United States formation of large networks in, 115, 116 migration of manufacturing to China from, 161–162 Universe both frozen and dynamic, 35 organization of, xii, xviii, 30–31 thermodynamics of, 25–41 University of Notre Dame, 109 Value, of knowledge and knowhow, 61–62 Venezuela, 60 Vidal, Marc, 110 von Braun, Wernher, 143 von Neumann, John, 14–15 Watt, James, 60, 146 Wealth augmentation of human capacity and, 68–69 economic development vs., 60–61 Weaver, Warren, xiv, xv–xvi Weill, David, 148 Westinghouse, George, 59 What Is Life?

Simon Kuznets, the Russian-born economist who fathered GDP, had finished creating the system of national accounts a couple of decades earlier, helping generate the economic metric that dominated the twentieth century.4 Solow’s model, however, did not measure up well when it was compared with empirical data. As Kuznets famously remarked in his Nobel Prize acceptance speech, “The earlier theory that underlies these measures defined the productive factors in a relatively narrow way, and left the rise in productivity as an unexplained gap, as a measure of our ignorance.”5 Kuznets’ “measure of our ignorance” is what we know technically as total factor productivity (TFP). TFP is how economists refer to the gaps between the economic output predicted by a model and the one observed in the empirical data. (This gap is interpreted as the amount of output that an economy can produce with a given endowment of inputs).6 This gap motivated economists to build on Solow’s work, and during the second half of the twentieth century economists advanced a plethora of new economic growth models that improved the model of Solow.7 The new models included new factors and new mathematical tools to address the process of factor production and accumulation.


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The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism by Arun Sundararajan

additive manufacturing, Airbnb, AltaVista, Amazon Mechanical Turk, autonomous vehicles, barriers to entry, basic income, bitcoin, blockchain, Burning Man, call centre, collaborative consumption, collaborative economy, collective bargaining, commoditize, corporate social responsibility, cryptocurrency, David Graeber, distributed ledger, employer provided health coverage, Erik Brynjolfsson, Ethereum, ethereum blockchain, Frank Levy and Richard Murnane: The New Division of Labor, future of work, George Akerlof, gig economy, housing crisis, Howard Rheingold, information asymmetry, Internet of things, inventory management, invisible hand, job automation, job-hopping, Kickstarter, knowledge worker, Kula ring, Lyft, Marc Andreessen, megacity, minimum wage unemployment, moral hazard, moral panic, Network effects, new economy, Oculus Rift, pattern recognition, peer-to-peer, peer-to-peer lending, peer-to-peer model, peer-to-peer rental, profit motive, purchasing power parity, race to the bottom, recommendation engine, regulatory arbitrage, rent control, Richard Florida, ride hailing / ride sharing, Robert Gordon, Ronald Coase, Ross Ulbricht, Second Machine Age, self-driving car, sharing economy, Silicon Valley, smart contracts, Snapchat, social software, supply-chain management, TaskRabbit, The Nature of the Firm, total factor productivity, transaction costs, transportation-network company, two-sided market, Uber and Lyft, Uber for X, uber lyft, universal basic income, Zipcar

In a series of recent talks, the economist Robert Gordon from Northwestern University has lamented the slowdown in US productivity growth and, in particular, the absence of clear evidence that the digital revolution of the last two decades has had a significant impact on the growth rates of total factor productivity. A now-famous slide from one of his recent articles is replicated in figure 5.2.21 Figure 5.2 Growth rate of total factor productivity for each ten-year period (i.e., for the decades ending 1900 to 2010). Total factor productivity (TFP) increases when on average, over time, more output is produced with the same inputs—physical capital, financial capital, and labor. An increase in productivity in turn increases the rate at which an economy grows. As platforms expand beyond increasing the “capital impact” of digital goods that Shirky spoke of, and move toward increasing, over the next couple of decades, the impact of labor, financial capital, and especially physical capital, this particular effect of digital technologies will quite possibly expand into much broader swaths of the economy, such as real estate, transportation, energy, healthcare, and labor of myriad forms.

Figure 0.2 Some sharing economy platforms and the venture capital they have raised as of December 2015. Figure 2.1 Sharing economy platforms across a few industries, 2015. Figure 2.2 Example of a Traity profile. Figure 3.1 A simple schematic of the MYB framework. Figure 3.2 A schematic of Gansky’s Meshy-ness Grid. Figure 3.3 Collaborative Economy Honeycomb. Figure 5.1 Vehicle usage in the United States (compiled from NHTS data as of 2009). Figure 5.2 Growth rate of total factor productivity for each ten-year period (i.e., for the decades ending 1900 to 2010). Figure 5.3 The geographic footprint of Airbnb listings in New York City. Figure 5.4 Lower-income neighborhoods in San Francisco are more active users of peer-to-peer car rental. Figure 6.1 The “de Blasio” button, part of 2015 Uber campaign to fight a proposed cap on providers. Figure 6.2 The many facets of trust in the sharing economy.

background screening, 50–51 contractor classification and, 160, 161 new social safety net and, 191 platform, 43–44 platform independence, 194 pricing, supply, and merchandizing, 194 TechCrunch, 11 Telang, Rahul, 112 Teran, Dan, 160 “There’s an Uber for Everything” (Fowler), 11 Thierer, Adam, 146 Thin sharing economies, 34 Threadless, 76 ThreeBirdNest, 107, 125, 177 3-D printing, 57–58 Thumbtack, 3, 6, 77, 164 Tiger Global Management, 25 TimeRepublik, 35 TimesFree, 43 Timms, Henry, 23, 136 Tincq, Benjamin, 23–25, 199 Tool libraries, 15 Total factor productivity (TFP), 116–117 Trade School, 43, 82 Traity, 64–65, 98 Transparency, mandated, 157 Transportation Network Companies (TNCs), 153 Trust, 4, 6, 12, 28, 35, 39, 47–50 brand-based, 144–146 history of (in world trade), 142–143 digitization of, 60–65 reputation and, 97–98 Tujia, 6, 121 Tumblr, 85 Turkle, Sherry, 45 Turo, 3, 80, 107, 177, 190 Tusk, Bradley, 136 Tuzhilin, Alexander, 112 Twitter, 29, 85 Uber, 2, 3, 6, 10, 19, 48, 154, 161, 186, 197, 203 class-action lawsuit and, 160 consumer behavior changed by “data Darwinism” and, 200–201 data science and, 157, 200–201 driver classifications, 159, 160, 176, 182, 183 driver protests, 200 entrepreneurial nature of, 192, 194 financing of, 25 gift economy aspects, 35 impact on traditional taxis, 122–123 local network effects, 119–120 as microbusiness, 77, 113 new social safety net and, 191 platform, 84 platform independence, 194 pricing, supply, and merchandizing, 194, 195 regulatory challenges, 135 social capital and, 62, 64 trust and, 145 UberPool, 66 “Uber Alles” (Surowecki), 19 Ulbricht, Ross, 86 Union Square Ventures (USV), 17, 23, 25, 85–86, 90, 157, 189 United States Conference of Mayors, 131, 147 Universal Avenue, 77 UnSYSTEM, 85–86 Upwork, 77, 162, 163.


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An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy by Marc Levinson

affirmative action, airline deregulation, banking crisis, Big bang: deregulation of the City of London, Boycotts of Israel, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, car-free, Carmen Reinhart, central bank independence, centre right, clean water, deindustrialization, endogenous growth, falling living standards, financial deregulation, floating exchange rates, full employment, George Gilder, Gini coefficient, global supply chain, income inequality, income per capita, indoor plumbing, informal economy, intermodal, invisible hand, Kenneth Rogoff, knowledge economy, late capitalism, linear programming, manufacturing employment, new economy, Nixon shock, North Sea oil, oil shock, Paul Samuelson, pension reform, price stability, purchasing power parity, refrigerator car, Right to Buy, rising living standards, Robert Gordon, rolodex, Ronald Coase, Ronald Reagan, Simon Kuznets, statistical model, strikebreaker, structural adjustment programs, The Rise and Fall of American Growth, Thomas Malthus, total factor productivity, unorthodox policies, upwardly mobile, War on Poverty, Washington Consensus, Winter of Discontent, Wolfgang Streeck, women in the workforce, working-age population, yield curve, Yom Kippur War, zero-sum game

For growth in labor productivity, I rely on a series developed by Angus Maddison, “GDP per Hour, in 1990 GK $,” published as “The Conference Board Total Economy Data Base, Output, Labor and Labor Productivity Country Details,” www.conference-board.org/data/economydatabase/. The labor productivity growth story is widely accepted among specialists, but its causes are hotly debated. The key variable at issue is “total factor productivity,” or “multifactor productivity,” which is the portion of productivity growth that remains unexplained after factors such as improved education and greater fixed capital are taken into account. Total factor productivity growth is usually attributed to technological innovation. Relevant statistics for most countries are lacking before the 1960s, but Nicholas Crafts contends the United Kingdom, the United States, France, Germany, and Japan all had significantly faster multifactor productivity growth over the 1950–73 period than before or since.

Will, “Defining Economic Failure Down,” Washington Post, February 5, 2015. 12. Paul M. Romer, “Crazy Explanations for the Productivity Slowdown,” in Stanley Fischer, ed., NBER Macroeconomics Annual 1987, Vol. 2 (Cambridge, MA, 1987), 163–210; Dale W. Jorgenson, “Productivity and Postwar U.S. Economic Growth,” Journal of Economic Perspectives 2 (Fall 1988): 23–41; Steven Englander and Axel Mittelstädt, “Total Factor Productivity: Macroeconomic and Structural Aspect of the Slowdown,” OECD Economic Studies 10 (Spring 1988): 28; Zvi Griliches, “Productivity Puzzles and R&D: Another Nonexplanation,” Journal of Economic Perspectives 2 (Fall 1988): 19. 13. Jefferson Cowie, Stayin’ Alive: The 1970s and the Last Days of the Working Class (New York: New Press, 2010); Dominick Sandbrook, State of Emergency: The Way We Were: Britain, 1970–1974 (London: Penguin, 2010); Serge Bernstein and Pierre Milza, Histoire de la France au XXe siècle: Tome 5, De 1974 à nos jours (Paris: Editions Complexe, 2006). 14.

., Pacific Basin Industries in Distress (New York: Columbia University Press, 1990), 437. 15. William Diebold Jr., Industrial Policy as an International Issue (New York: McGraw-Hill, 1980), 162; Japan Automobile Manufacturers Association, Motor Vehicle Statistics of Japan 2014, 16, 32. 16. Imuta, “Transition to a Floating Exchange Rate,” 527. Data on Japanese R&D spending are from Steven Englander and Axel Mittelstädt, “Total Factor Productivity: Macroeconomic and Structural Aspects of the Slowdown,” OECD Economic Survey 10 (1988): 36. 17. Dale W. Jorgenson and Masahiro Kuroda, “Productivity and International Competitiveness in Japan and the United States, 1960–1985,” in Hulten, ed., Productivity Growth in Japan and the United States, 45. 18. The term “deindustrialization” was popularized by Barry Bluestone and Bennett Harrison, The Deindustrialization of America (New York: Basic Books, 1982). 19.


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The Complacent Class: The Self-Defeating Quest for the American Dream by Tyler Cowen

affirmative action, Affordable Care Act / Obamacare, Airbnb, Alvin Roth, assortative mating, Bernie Sanders, Black Swan, business climate, business cycle, circulation of elites, clean water, David Graeber, declining real wages, deindustrialization, desegregation, Donald Trump, drone strike, East Village, Elon Musk, Ferguson, Missouri, Francis Fukuyama: the end of history, gig economy, Google Glasses, Hyman Minsky, Hyperloop, income inequality, intangible asset, Internet of things, inventory management, knowledge worker, labor-force participation, low skilled workers, Marc Andreessen, Mark Zuckerberg, medical residency, meta analysis, meta-analysis, obamacare, offshore financial centre, Paul Samuelson, Peter Thiel, purchasing power parity, Richard Florida, security theater, sharing economy, Silicon Valley, Silicon Valley ideology, Skype, South China Sea, Steven Pinker, Stuxnet, The Great Moderation, The Rise and Fall of American Growth, total factor productivity, Tyler Cowen: Great Stagnation, upwardly mobile, Vilfredo Pareto, working-age population, World Values Survey

It’s not that any one of these metrics proves so much, but when you put them all together, it is hard to avoid the impression of a less vibrant and dynamic American economy. MEASURES OF PRODUCTIVITY INDICATE PESSIMISM The most direct way to measure whether innovation has declined is to look directly at available measures of productivity. Economists have two primary measures of business productivity. One is called “total factor productivity,” and the other is known as “productivity per worker hour.” Unfortunately, both measures show the American economy to be underperforming, albeit to differing degrees. Total factor productivity (TFP, for short) tries to measure how much new ideas add to national output, once we’ve adjusted for the contributions of capital and labor. This is a highly imperfect metric, in part because measuring the value of capital is not easy, but it is the single calculation that comes closest to measuring the innovation-generating capacity of an advanced economy.

., Beyond Zuccotti Park: Freedom of Assembly and the Occupation of Public Space, 74–86. Oakland, CA: New Village Press, 2012. Eligon, John. “Black Students See a University Riven by Race.” The New York Times, November 12, 2015. Fernald, John. “Productivity and Potential Output Before, During, and After the Great Recession.” National Bureau of Economic Research Working Paper 20248, June 2014a. Fernald, John. “A Quarterly, Utilization-Adjusted Series on Total Factor Productivity.” Federal Reserve Board of San Francisco, April 2014b. Fernald, John, and Bing Wang. “The Recent Rise and Fall of Rapid Productivity Growth.” Federal Reserve Bank of San Francisco, February 9, 2015. Ferrie, Joseph P. “The End of American Exceptionalism? Mobility in the U.S. since 1850.” Northwestern University working paper, 2005. Field, Alexander J. “US Economic Growth in the Gilded Age.”

See Affordable Care Act Occupy Wall Street movement oil industry oil price shock (1973) On the Road (Kerouac) outsourcing pantheism Pareto, Vilfredo patents Patriot Act pets philanthropy Pinker, Steven Pissarides, Christopher play, outdoor polarization policing political science poverty and mobility and segregation Princeton University prison riots productivity and cities diffusion problem firm-specific productivity and innovation and the internet and matching and mobility productivity per worker hour total factor productivity (TFP) worker productivity profiling progress and the Complacent Class and democracy and innovation and mobility model of history and segregation progressivism protests. See social protests and riots Putin, Vladimir Putnam, Robert D. R&D (research and development) race relations racism Rauch, Jonathan Reagan, Ronald Reformation, Protestant regional specialization Republican Party riots.


India's Long Road by Vijay Joshi

Affordable Care Act / Obamacare, barriers to entry, Basel III, basic income, blue-collar work, Bretton Woods, business climate, capital controls, central bank independence, clean water, collapse of Lehman Brothers, collective bargaining, colonial rule, congestion charging, corporate governance, creative destruction, crony capitalism, decarbonisation, deindustrialization, demographic dividend, demographic transition, Doha Development Round, eurozone crisis, facts on the ground, failed state, financial intermediation, financial repression, first-past-the-post, floating exchange rates, full employment, germ theory of disease, Gini coefficient, global supply chain, global value chain, hiring and firing, income inequality, Indoor air pollution, Induced demand, inflation targeting, invisible hand, land reform, Mahatma Gandhi, manufacturing employment, Martin Wolf, means of production, microcredit, moral hazard, obamacare, Pareto efficiency, price mechanism, price stability, principal–agent problem, profit maximization, profit motive, purchasing power parity, quantitative easing, race to the bottom, randomized controlled trial, rent-seeking, reserve currency, rising living standards, school choice, school vouchers, secular stagnation, Silicon Valley, smart cities, South China Sea, special drawing rights, The Future of Employment, The Market for Lemons, too big to fail, total factor productivity, trade liberalization, transaction costs, universal basic income, urban sprawl, working-age population

If India has a growth problem, it is of its own making. At a proximate level, growth of income and output needs rising supplies of basic resources (‘factors of production’) such as labour, physical capital, and human capital (i.e. education and skills), combined with improvements in ‘total factor productivity’. Total factor productivity (TFP) is economists’ jargon for the overall efficiency with which basic resources are used.2 But TFP is an ungainly term and I shall often use the word ‘productivity’ instead; so, ‘productivity’ and ‘total factor productivity’ (TFP) are used as synonymous and equivalent throughout this book. (Note that they should not be confused with ‘labour productivity’, which means output per worker.) How does India measure up on these sources of growth? Labour Raw labour is not a constraint on growth in India.

In the coming decades, India will have to raise sharply the proportion of the labour force that has secondary education or better. There is evidence that the private returns to secondary education are high (and social returns even higher) but poverty and credit constraints limit the ability of people to educate their children. Quality of education is as important as its quantity. Unfortunately, the quality of education in India is abysmal at all levels (see Chapter 9). Total Factor ProductivityTotal factor productivity’ (TFP) is the effectiveness or efficiency with which the supplies of factors of production (labour, physical capital, and human capital) are converted into output. Improvements in TFP are a critical ingredient in the growth process. In their absence, growth would slow down sharply because of ‘diminishing returns’ to the application of capital. TFP has a broad as well as a narrow meaning.

., 151, 281 payments regime, see external payments regime per capita: growth, 5–​6, 306, 317 income, 4–​5, 6, 30, 51, 75, 240, 256, 276, 316 planning, 17, 39, 40 plurilateral agreements, 267, 269, 298 police, 234 political: awakening, 226, 228, 306 economy, 8, 30, 209, 225–​30, 278, 315, 317 political parties, 92, 227, 229, 237, 238, 241–​2, 306–​7, 308 financing of, 241, 307 pollution, 38, 124, 125–​6, 189, 235–​6, 293 population, 21, 27–​8, 52–​3, 72–​3, 77, 101, 105, 123, 163–​4, 210–​12, 215 age-​distribution of, 72 poverty, 4, 15, 21, 27–​30, 44, 53, 65, 66, 77, 88, 201, 210–​11 among disadvantaged groups, 28 extreme, 4, 28, 211, 215, 277, 286–​7, 300, 309 in states, 28 programmes, 205 power, 8–​10; see also electricity Pratham, 177, 180 preferential trade agreements (PTAs), 264–​7 price/​prices/​price system, 19, 42–​4, 87–​91, 96, 103, 122, 126, 128, 130, 141, 202–​3, 212, 214, 237, 285, 293 [ 344 ] Index price and output stability 141–​55 price controls, 7, 87–​91, 102, 236, 285 price stabilization, 203 price subsidies, 90, 206, 285, 300 reform, 87–​91, 92–​7, 101–​3, 121–​2, 125–​6, 130–​1, 285, 290, 292, 293, 294, 296 see also inflation; monetary policy; issue prices; procurement prices priority sector lending, 99 private: companies, 7, 61, 94, 95, 102, 114–​16, 119, 291 health insurance markets, 190–​1 ownership, 36, 101, 116 partners, 42, 119 providers, 43, 175, 190–​3, 234, 303–​4 sector, 17, 37, 41–​4, 62, 101, 191–​2, 194–​6, 232–​6, 292–​3, 302–​3, 306 privatization, 24, 41–​2, 92, 113–​18, 121, 165, 213, 287, 291, 295 and efficiency, 116 fiscal case for, 116 procurement prices, 91, 143, 145, 152 production, pattern of, 69 productivity, 23, 26, 27, 52, 53–​4, 60–​2, 66, 70, 87, 94, 233, 288–​9 growth of, 62, 87, 113, 116, 247, 253, 288, 290–​2, 297, 310, 312 see also labour productivity; total factor productivity promoter/​promoters, 62, 98, 128, 154, 308 prosperity, 4, 276 public and private providers, 43, 193, 303–​4 public distribution system (PDS), 41, 91, 143, 164, 202–​3, 209, 239, 253 reform of, 202–​3 public goods/​public services, 7–​8, 37–​8, 41–​3, 92, 175, 181, 201, 210, 228, 230, 242, 277, 313–​14 public health, see ‘traditional public health’; see also health/​health care public interest litigation, 125–​6 public–​private partnerships, 42, 59, 95, 119–​23, 292, 296, 309 reform of, 119–​20, 295–​6 Public Procurement Bill, 241 345 public sector, 7, 19–​20, 42–​3, 58, 66, 115, 119–​21, 180, 193, 196 public sector banks (PSBs), 118, 154–​5, 284, 295, 309 reform of, 118, 154, 295 public sector enterprises (PSEs), 19–​20, 24, 41, 93, 113–​18, 164–​5, 180, 213, 287, 291, 295, 309 and the Modi government, 294 reform of, 115–​18, 291, 295 public telecom companies, 114 Punjab, 30, 102, 127, 226, 227 separatist movement in, 22 purchasing power parity (PPP), 5, 276 pure public goods, 37–​8, 43, 102, 140, 164, 188, 191, 210, 212, 277, 285–​6 quantitative easing, 158, 262 Radical Reform Model, 276 -​308 Ram, K., 227 rail services, 90, 285 Rajan, R., 99, 152, 159 Rangarajan, C., 28, 210 Rashtriya Swasthya Bima Yojana (RSBY), 191, 195–​6, 205, 303, 305 Rashtriya Swayamsevak Sangh (RSS), 311–​12 real effective exchange rate (RER), 158, 281 recapitalization, 118, 154, 162, 285 recession, 18, 23, 36, 160; see also slowdown Reddy, Y.V., 157 reform/​reforms, see economic reform/​ reforms Regional Comprehensive Economic Partnership (RCEP), 265, 266, 297 regulation, 7, 43–​4, 77–​8, 117–​18, 125, 240–​2, 258–​9, 276–​7, 288–​93, 303–​4, 307 remittances, 249, 254 reservations, 22, 72, 234, 276 Reserve Bank of India (RBI), 100, 145, 151–​2, 154, 156–​9, 162, 258, 279, 281–​2, 284, 295 resource/​resources allocation, 7, 36, 44, 87, 91–​3 degradation of, 124, 127 scarcity of, 38, 40, 236–​7, 260 Right to Education Act (RTEA), 181–​3, 231, 301; see also education Right to Information Act (RTIA), 240 rights, 18, 36, 38, 40, 43, 76, 95, 96, 98, 123–​4, 231–​2, 236–​7, 268, 293, 307, 311, 313, 315 sanitation, 28, 76, 126, 188–​9, 196, 201, 203, 302, 312 Sarva Shiksha Abhiyan, 177 savings, 19, 26–​7, 52–​3, 58–​9, 70, 73, 92, 152, 213, 282, 286–​7 domestic, 56, 156 household, 27, 58–​9 public, 58–​9, 148 scandals and scams, 25, 27, 62, 151, 191, 203, 237 security, 9–​10 services, 41–​3, 55, 67–​8, 70, 71, 72, 93–​4, 100, 104–​5, 247–​50, 266–​8, 290–​2, 298 shadow banks, 258 Shanta Kumar committee, 203 Shastri, Lal Bahadur, 17 Sick Industrial companies Act (SICA), 97–​8 Singh, Manmohan, 23–​5, 206 Singh, V.P. 22–​3; see also Mandal Commission; reservations skill/​skills, 77, 252, 310; see also human capital; vocational and technical education and training skill-​intensive sectors, 69–​70, 104–​5 small firms, 71, 72, 73–​7, 283, 295 small-​scale industry reservations, 72 social: awakening, 226, 306 democracy, 36, 201–​2, 300 security benefits, 66–​7 social enablement 163, 165, 201, 202, 300-​6 Modi government and, 304–​6 social protection, 163, 201–​22, 279, 300, 304 framework for, 202, 203, 210, 300–​4 Modi government and, 304 reform, 208-​15 schemes, 202, 206, 210, 300 social safety net, 201–​22, 239, 277 Index [ 345 ] 346 South Korea, 5, 6, 20, 68, 70, 157, 262, 265, 316 Special Drawing Rights (SDRs), 261–​2 state: accountability, 230–​5 capacity, 231–​5, 254 intervention, 7, 19, 36, 37-​44, 142, 187–​90, 192, 226, 228, 300, 302 and market relationship, 8, 36–​44 ownership, 18, 36, 40, 41, 113-​18, 163 political economy of, 225–​30 reform of, 233–​5, 241–​3, 247 state electricity boards (SEBs), 89–​90, 122, 309; see also UDAY state public sector enterprises (SPSEs), 114, 115, 116 states: deprivation in, 28 growth in, 27 inequality between, 29–​30 poverty in, 28 see also Centre and States sterilized intervention, 156 stressed assets, 122, 154, 284 subsidies, 30, 38, 43–​4, 87–​92, 101–​4, 163–​4, 205–​8, 212–​13, 230, 285–​8, 293–​4 elimination of, 214–​15, 230 explicit, 163–​4 hidden, 87, 92, 123, 164, 212, 285 problems in unwinding, 214 Subbarao, D., 158–​9 Subramanian, T.S.R., 127 Swachh Bharat, 306, 310 Targeted Public Distribution System (TPDS), see Public Distribution System tax/​taxes/​tax system, 35, 38, 40, 44, 89, 92–​3, 124–​5, 128, 131, 163, 286–​7, 290–​1 exemptions, 93, 163, 213, 284 indirect tax, 92–​3, 163, 290–​1 on international trade, 93, 247; see also trade liberalization minimum alternate tax, 299 reform, 92-​3, 162–​3, 291, 293 retrospective, 151, 299 and revenue, 35, 37, 51, 163 [ 346 ] Index see also government expenditure; subsidies teachers, 179–​83 telecom spectrum, 38, 236 Tendulkar, S., 28, 210–​11, 216 total factor productivity (TFP), 52, 53–​7, 72, 80, 87, 104; see also productivity tradable goods, 88, 117, 291 trade, see international trade Trade Facilitation Agreement (TFA), 264–​5 Trade in Services Agreement (TISA), 269, 298 trade unions, 66, 79, 82 and political parties, 82 teachers’ unions, 179, 183, 229 ‘traditional public health’ (TPH), 188–​9, 196, 303 tragedy of the commons, 38 Transatlantic Trade and Investment Partnership (TTIP), 265 Trans-​Pacific Partnership (TPP), 265–​6, 298 transparency, 44, 240 UDAY, 296 unemployment, 65 United Progressive Alliance (UPA), 24–​5, 95, 97, 117, 143, 164, 202, 283, 307–​8 United States, 8, 252, 255 and China rivalry, 10 gilded age, 240, 243 as ‘hyper-​power’, 9 and India, civil nuclear agreement, 9 University Grants Commission (UGC), 184–​5 unorganized sector, 66–​7, 69–​70, 76–​7, 78, 99, 288–​9 definition of, 66 low-​labour-​productivity in, 66 low-​quality jobs in, 73 output of, 67, 69 as ‘own account enterprises’, 76 workers in, 65 urban: infrastructure, 97, 120, 123, 292 land, 96, 131 urbanization, 96 347 Vajpayee, Atal Behari, 24 value-​added tax (VAT), 92–​3 vocational and technical education and training (VTET), 185 water, 75, 90–​1, 101–​3, 125–​7, 206, 212, 285, 290, 293, 309 over-​extraction of, 126 pricing, 126–​7 women, 29, 72, 73, 204, 205, 210, 233, 304, 311; see also female labour force participation rate; literacy, female workforce, 66–​7, 77, 80, 94, 292 income of organized, 145 informal, 67, 69 mal-​distributed, 66 non-​farm, 67 poor, 100 in unorganized sector, 66–​7 see also labour/​labour force World Bank, 28, 186 ‘Ease of Doing Business’ reports of, 74, 283 and foreign aid, 18 survey of Indian firms, 74 World Trade Organization (WTO), 263–​4, 267–​8 Yadav, Lalu Prasad, 227 Yadav, Mulayam Singh, 227 zamindari, abolition of, 226 Index [ 347 ] 348


pages: 371 words: 98,534

Red Flags: Why Xi's China Is in Jeopardy by George Magnus

3D printing, 9 dash line, Admiral Zheng, Asian financial crisis, autonomous vehicles, balance sheet recession, banking crisis, Bretton Woods, BRICs, British Empire, business process, capital controls, carbon footprint, Carmen Reinhart, cloud computing, colonial exploitation, corporate governance, crony capitalism, currency manipulation / currency intervention, currency peg, demographic dividend, demographic transition, Deng Xiaoping, Doha Development Round, Donald Trump, financial deregulation, financial innovation, financial repression, fixed income, floating exchange rates, full employment, Gini coefficient, global reserve currency, high net worth, hiring and firing, Hyman Minsky, income inequality, industrial robot, Internet of things, invention of movable type, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, labour market flexibility, labour mobility, land reform, Malacca Straits, means of production, megacity, money market fund, moral hazard, non-tariff barriers, Northern Rock, offshore financial centre, old age dependency ratio, open economy, peer-to-peer lending, pension reform, price mechanism, purchasing power parity, regulatory arbitrage, rent-seeking, reserve currency, rising living standards, risk tolerance, smart cities, South China Sea, sovereign wealth fund, special drawing rights, special economic zone, speech recognition, The Wealth of Nations by Adam Smith, total factor productivity, trade route, urban planning, Washington Consensus, women in the workforce, working-age population, zero-sum game

For women the rise was even more dramatic – from 0.5 to 5 years.9 Mao’s China, though, could not overcome three very familiar and self-inflicted problems: a standard Malthusian problem of inadequate food production; a typical Keynesian problem of inadequate employment creation to drive sustainable demand; and, despite quite respectable GDP and industrial growth, a Soviet-style neglect of efficiency and incentives. There was no material growth in what economists call total factor productivity, an efficiency term that captures the growth generated by the smart deployment of capital and labour resources, and technical progress.10 While the labour force grew to close to 200 million people, less than two-fifths of the rise was absorbed into the modern sector. In an outcome that flies in the face of ‘normal’ economic development, the agricultural labour force was 70 per cent bigger in 1978 than it had been in 1952, and significantly worse off relative to urban dwellers.

Development economists nowadays ask important questions not only about what countries such as Brazil, Argentina, Venezuela and Russia have to do to spring their traps, but also whether the list of trapped countries might also now extend to countries such as Chile. What about China, then, which only became a low-middle-income country in 2001 and a high-middle-income country in 2010? The key is total factor productivity China certainly has all the ingredients of an economy facing a structural growth slowdown. It has had an unusually long period of high growth that’s ended. Debt has accounted for a lot of growth in recent years, and this cannot continue forever. In any event, there are many things that China has proved successful at doing in the past, but which it can no longer repeat because they were one-off accomplishments.

Put simply, complex upper-middle-income countries such as China have, by definition, exhausted much if not most of the potential to get growth by deploying and exploiting physical capital and labour. Rebalancing requires a switch in focus, policy and resources away from investment and credit towards efficiency and innovation, human capital and productivity, and coping mechanisms to deal with the consequences of ageing and new technologies. In a nutshell, China, like many countries, is faced with the challenge of having to boost its total factor productivity (TFP). A brief explanation would be helpful here because TFP isn’t actually measurable. It is in fact a residual in GDP growth accounting, once we have accounted for the more measurable contributions made by changes in labour and capital inputs. It is, basically, an efficiency term that captures the impact of technical progress and institutional arrangements that enable total GDP growth to exceed the sum of its labour and capital parts.


pages: 265 words: 74,941

The Great Reset: How the Post-Crash Economy Will Change the Way We Live and Work by Richard Florida

banking crisis, big-box store, blue-collar work, business cycle, car-free, carbon footprint, collapse of Lehman Brothers, congestion charging, creative destruction, deskilling, edge city, Edward Glaeser, falling living standards, financial innovation, Ford paid five dollars a day, high net worth, Home mortgage interest deduction, housing crisis, if you build it, they will come, income inequality, indoor plumbing, interchangeable parts, invention of the telephone, Jane Jacobs, Joseph Schumpeter, knowledge economy, low skilled workers, manufacturing employment, McMansion, Menlo Park, Nate Silver, New Economic Geography, new economy, New Urbanism, oil shock, Own Your Own Home, pattern recognition, peak oil, Ponzi scheme, post-industrial society, postindustrial economy, reserve currency, Richard Florida, Robert Shiller, Robert Shiller, secular stagnation, Silicon Valley, Silicon Valley startup, social intelligence, sovereign wealth fund, starchitect, the built environment, The Wealth of Nations by Adam Smith, Thomas L Friedman, total factor productivity, urban decay, urban planning, urban renewal, white flight, young professional, Zipcar

He developed his homage to the power of creative destruction against the backdrop of what has turned out to be the most technologically dynamic epoch of the twentieth century.”4 Field’s contention about the innovativeness of the Second Reset is based on detailed and meticulous research. Delving deeply into the statistical record, he tracks trends in innovation and in total factor productivity over the entire twentieth century, and examines in detail the rise of specific new technologies. “Total factor productivity” is a term economists use to describe the output of production not attributable to the amount of inputs used in production, which is to say that it reflects efficiency—how well the available inputs are used in production. Total factor productivity, Field finds, grew fastest during the Depression years, when it increased at a rate of 2.3 percent annually. This rate was better than both the “boom years” of the twenties—when productivity grew at a 2 percent annual clip—and the golden era of postwar expansion, the years spanning 1948 to 1973, when productivity grew at 1.9 percent annually.

Regis hotels, 176 Strumsky, Deborah, 64–65 suburbs current growth inward from rural areas, 144–146 current spatial fix and redevelopment of, 145 roots of current economic crisis, 41–45, 129–130 Second Reset and, 33–39 Sunbelt, 36, 99 future of, 99–102 housing growth and decline in, 53, 92–98 Surowiecki, James, 140 Tampa, Florida, 94, 166 Tata, 60, 176 tax revenues, housing bubble and, 93 Taylor, Frederick, 28 Telegraph, 82 Tesla, Nikola, 12, 14 Thoma, Mark, 106 Tokyo, as global financial center, 50, 51, 56, 57, 58–59 Tor-Mon-tawa megaregion, 143 Toronto, Canada banking sector in, 89–90 economic polarization in, 91 high-speed rail service and, 168 resilience of, 87–91 Toronto Dominion Bank, 90 Total factor productivity, 26–27 Toyota Motors, 121, 122, 138–139 Trader Joe’s, 121 transportation infrastructure, in Current Reset decreased use of automobiles, 7–8, 156–163 high-speed rail and, 164–170, 185 principles for, 184–185 transportation infrastructure, in First Reset expansion of cities, 21 infrastructure advances, 15–16 revolution in technology, 10–11 transportation infrastructure, in Second Reset, 34 Truman, Edwin, 59 Tyagi, Amelia Warren, 131 U.N.


pages: 401 words: 109,892

The Great Reversal: How America Gave Up on Free Markets by Thomas Philippon

airline deregulation, Amazon Mechanical Turk, Amazon Web Services, Andrei Shleifer, barriers to entry, bitcoin, blockchain, business cycle, business process, buy and hold, Carmen Reinhart, carried interest, central bank independence, commoditize, crack epidemic, cross-subsidies, disruptive innovation, Donald Trump, Erik Brynjolfsson, eurozone crisis, financial deregulation, financial innovation, financial intermediation, gig economy, income inequality, income per capita, index fund, intangible asset, inventory management, Jean Tirole, Jeff Bezos, Kenneth Rogoff, labor-force participation, law of one price, liquidity trap, low cost airline, manufacturing employment, Mark Zuckerberg, market bubble, minimum wage unemployment, money market fund, moral hazard, natural language processing, Network effects, new economy, offshore financial centre, Pareto efficiency, patent troll, Paul Samuelson, price discrimination, profit maximization, purchasing power parity, QWERTY keyboard, rent-seeking, ride hailing / ride sharing, risk-adjusted returns, Robert Bork, Robert Gordon, Ronald Reagan, Second Machine Age, self-driving car, Silicon Valley, Snapchat, spinning jenny, statistical model, Steve Jobs, supply-chain management, Telecommunications Act of 1996, The Chicago School, the payments system, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, transaction costs, Travis Kalanick, Vilfredo Pareto, zero-sum game

But the major contributor to long-term growth is technology—and that contribution is slowing down. When we say that technological progress has slowed, we are simply saying that, on average, businesses are not as good as they used to be at reducing the unit cost of production or at coming up with higher quality products. To assess the rate of technological progress, economists construct total factor productivity (TFP) growth, which measures the extent to which we can do more with less (or with the same). In other words, it measures how we can expand output for given levels of capital and labor inputs. Economic theory shows that this kind of technological progress is the only sustainable source of growth in the long run. The slowdown in TFP growth started in 2000 and is now widespread among rich countries.

These are delicate empirical questions, and we will need to look at a broad set of economic indicators. You guessed it: we need data, more data! In Chapters 3, 4, and 5 we will review the broad trends in the US economy over the past twenty years, looking at entry and exit of businesses, market shares, mergers, profits, stock buybacks, and investment. * * * a  Olivier Blanchard (2003) explains in his discussion of Basu et al. (2003), “fully one-third of the increase in TFP [total factor productivity] growth from the first to the second half of the 1990s in the United States came from the retail trade sector.” A study by the McKinsey Global Institute (Lewis et al., 2001) focused on the factors behind US TFP growth in the 1990s. In general merchandise (representing 16 percent of the TFP growth acceleration), the study found that “Wal-Mart directly and indirectly caused the bulk of the productivity acceleration through ongoing managerial innovation that increased competitive intensity and drove the diffusion of best practice.”

The retail trade industry became substantially more concentrated and more productive during that decade. But the 1990s are long gone. Are rising superstar firms the main driver of concentration over the past twenty years, as hypothesized by David Autor, David Dorn, Lawrence Katz, Christina Patterson, and John Van Reenen (2017)? To test this idea, Matias Covarrubias, Germán Gutiérrez, and I (2019) study the relationship between changes in concentration and changes in total factor productivity (TFP) across industries during the 1990s and 2000s. We use our trade-adjusted concentration measures to control for foreign competition and for exports. Box 4.2 and its table summarize our results and discuss the interpretation of the various numbers in statistical models. We find that the relationship between concentration and productivity growth has changed over the past twenty years.


pages: 470 words: 148,730

Good Economics for Hard Times: Better Answers to Our Biggest Problems by Abhijit V. Banerjee, Esther Duflo

"Robert Solow", 3D printing, affirmative action, Affordable Care Act / Obamacare, Airbnb, basic income, Bernie Sanders, business cycle, call centre, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, charter city, correlation does not imply causation, creative destruction, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, decarbonisation, Deng Xiaoping, Donald Trump, Edward Glaeser, en.wikipedia.org, endowment effect, energy transition, Erik Brynjolfsson, experimental economics, experimental subject, facts on the ground, fear of failure, financial innovation, George Akerlof, high net worth, immigration reform, income inequality, Indoor air pollution, industrial cluster, industrial robot, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, Jean Tirole, Jeff Bezos, job automation, Joseph Schumpeter, labor-force participation, land reform, loss aversion, low skilled workers, manufacturing employment, Mark Zuckerberg, mass immigration, Network effects, new economy, New Urbanism, non-tariff barriers, obamacare, offshore financial centre, open economy, Paul Samuelson, place-making, price stability, profit maximization, purchasing power parity, race to the bottom, RAND corporation, randomized controlled trial, Richard Thaler, ride hailing / ride sharing, Robert Gordon, Ronald Reagan, school choice, Second Machine Age, secular stagnation, self-driving car, shareholder value, short selling, Silicon Valley, smart meter, social graph, spinning jenny, Steve Jobs, technology bubble, The Chicago School, The Future of Employment, The Market for Lemons, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, total factor productivity, trade liberalization, transaction costs, trickle-down economics, universal basic income, urban sprawl, very high income, War on Poverty, women in the workforce, working-age population, Y2K

Robert Gordon reckons that rising education explains about 14 percent of the increase in labor productivity over the period, and the capital investment that gave workers more and better machines to work with explains a further 19 percent of the increase. The rest of the observed productivity improvement cannot be explained by changes in things economists can measure. To make ourselves feel better, economists have given it its own name: total factor productivity, or TFP. (The famous growth economist Robert Solow defined TFP to be “a measure of our ignorance.”) Growth in total factor productivity is what is left after we have accounted for everything we can measure. It captures the fact that workers with the same education level working with the same machines and inputs (what economists refer to as capital) produce more output today for each hour they work than they did last year. This makes sense. We constantly look for ways to use our existing resources more effectively.

This reflects in part technological progress: computer chips become cheaper and faster, so one secretary can now do in a few hours the work a small team used to do; new alloys are invented; new varieties of wheat that grow faster and require less water are introduced. But total factor productivity also increases when we discover new ways to reduce waste or shrink the time either raw materials or workers are forced to stay idle. Innovations in production methods like chain production or lean manufacturing do that, as does, say, the creation of a good rental market for tractors. What made the few decades before 1970 extraordinary compared to much of history is that total factor productivity increased particularly rapidly. In the United States, TFP growth was four times faster between 1920 and 1970 than between 1890 and 1920.7 In fact, it was this rather than growth in education or capital per worker that gave the later period its special mojo.

,” World Economics 5, no. 2 (2004): 131–45. 9 Robert Gordon, The Rise and Fall of American Growth (Princeton, NJ: Princeton University Press, 2016). 10 Annualized TFP growth in the US was 1.89 percent per year between 1920 and 1970 and 0.57 between 1970 and 1995; Robert Gordon, The Rise and Fall of American Growth (Princeton, NJ: Princeton University Press, 2016), 575, figure 17.2. 11 Robert Gordon, The Rise and Fall of American Growth (Princeton, NJ: Princeton University Press, 2016), 575, figure 17.2. Annual TFP growth was 0.40 from 2014 to 2014, even lower than the 0.70 annual TFP growth during the 1973–1994 period and the annual 0.46 TFP growth during the 1890–1920 period. 12 “Total Factor Productivity,” Federal Reserve Bank of San Francisco, accessed June 19, 2019, https://www.frbsf.org/economic-research/indicators-data/total-factor-productivity-tfp/. 13 Robert Gordon and Joel Mokyr, “Boom vs. Doom: Debating the Future of the US Economy,” debate, Chicago Council of Global Affairs, October 31, 2016. 14 Robert Gordon, The Rise and Fall of American Growth (Princeton, NJ: Princeton University Press, 2016), 594–603. 15 Robert Gordon and Joel Mokyr, “Boom vs.


pages: 295 words: 90,821

Fully Grown: Why a Stagnant Economy Is a Sign of Success by Dietrich Vollrath

"Robert Solow", active measures, additive manufacturing, American Legislative Exchange Council, barriers to entry, business cycle, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, creative destruction, Deng Xiaoping, endogenous growth, falling living standards, hiring and firing, income inequality, intangible asset, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, labor-force participation, light touch regulation, low skilled workers, manufacturing employment, old age dependency ratio, patent troll, Peter Thiel, profit maximization, rising living standards, Robert Gordon, Second Machine Age, secular stagnation, self-driving car, Silicon Valley, The Rise and Fall of American Growth, total factor productivity, women in the workforce, working-age population

What the accounting in chapter 4 showed was that something happened around the turn of the century that led the residual growth rate to fall. But because there is no single economic activity or concept that the residual measures, it isn’t obvious why it fell. Residual growth does have another name that you may be familiar with: productivity growth. Depending on what you read, you might also see it as total factor productivity growth or multifactor productivity growth. Productivity growth—which I’ll stick with from now on given its general usage—is not part of residual growth or an estimate of residual growth. It is residual growth. Residual growth and productivity growth are just synonyms. What I will try to do over the next few chapters is provide some of the main explanations for the fall in productivity growth and share why one of them in particular is a sign of success.

Table 7.1 Decomposing productivity growth, by industry Productivity growth, 2000–2015 Value-added share of GDP (%) Industry 1980 1990 2000 2015 Agriculture 0.91 2.19 1.63 0.97 0.98 Mining 3.02 3.22 1.50 1.09 1.84 Manufacturing 1.36 20.63 17.60 15.32 12.20 Utilities –2.12 2.35 2.73 2.03 1.85 Construction –1.70 4.65 4.18 4.55 4.11 Wholesale and retail trade 0.73 13.63 12.70 13.01 12.08 Transportation –0.28 4.29 3.60 3.63 3.35 Accommodation and food service –0.31 2.31 2.58 2.83 2.95 Information and communication 3.03 4.50 5.11 5.77 6.22 Finance and insurance 0.09 4.84 5.89 7.39 7.27 Real estate 0.89 9.99 10.68 10.89 12.13 Professional services 0.27 5.83 7.89 9.60 10.45 Public administration –0.36 13.76 14.06 12.47 12.84 Education 0.36 0.63 0.70 0.85 1.14 Health and social work –0.23 4.10 5.71 5.87 7.30 Arts and entertainment 0.39 0.64 0.83 0.98 1.04 Other services –1.37 2.44 2.62 2.76 2.26 Note: Data is from the KLEMS database. Shares using current price value-added in each noted year were calculated by the author. Annualized productivity growth was calculated using the KLEMS series on value-added total factor productivity. I’ll spare you any more detail, but see the appendix if you’d like to bore yourself with the calculations. What is important for our purposes here is the final answer. Based on the industry-level data from the BEA database that lies behind figure 7.1 and table 7.1, the growth rate of aggregate productivity was 0.4% per year. If you have been paying close attention, you’ll catch that this is not the same growth rate for aggregate productivity that I reported for the period 2000–2016 in table 4.2, which was 1.26% per year.

KLEMS differs from my calculations in using measures of labor and capital compensation to measure the flow of input services used, whereas I used stocks of human capital and physical capital. KLEMS also allows the elasticity of output with respect to physical capital and labor to vary by industry, whereas my aggregate calculation assumes a single elasticity. As noted in the text, this all results in my estimate of a larger growth rate of productivity in absolute terms. One other note is that I am using the value-added TFP (total factor productivity) growth for each industry from KLEMS. This first calculates value-added (gross output minus intermediate input use) growth and then subtracts input growth to find productivity growth. For value-added TFP growth, the proper weights are value-added shares of GDP. An alternative would be to use gross-output TFP growth. This takes gross-output growth and subtracts input growth to find productivity growth.


pages: 116 words: 31,356

Platform Capitalism by Nick Srnicek

3D printing, additive manufacturing, Airbnb, Amazon Mechanical Turk, Amazon Web Services, Capital in the Twenty-First Century by Thomas Piketty, cloud computing, collaborative economy, collective bargaining, deindustrialization, deskilling, disintermediation, future of work, gig economy, Infrastructure as a Service, Internet of things, Jean Tirole, Jeff Bezos, knowledge economy, knowledge worker, liquidity trap, low skilled workers, Lyft, Mark Zuckerberg, means of production, mittelstand, multi-sided market, natural language processing, Network effects, new economy, Oculus Rift, offshore financial centre, pattern recognition, platform as a service, quantitative easing, RFID, ride hailing / ride sharing, Robert Gordon, self-driving car, sharing economy, Shoshana Zuboff, Silicon Valley, Silicon Valley startup, software as a service, TaskRabbit, the built environment, total factor productivity, two-sided market, Uber and Lyft, Uber for X, uber lyft, unconventional monetary instruments, unorthodox policies, Zipcar

This, combined with increases in corporate savings and with the expansion of tax havens, has let loose a vast glut of cash, which has been seeking out decent rates of investment in a low-interest rate world. Finally, workers have suffered immensely in the wake of the crisis and have been highly vulnerable to exploitative working conditions as a result of their need to earn an income. All this sets the scene for today’s economy. Notes 1. Unless otherwise stated in the text, ‘productivity’ will refer to labour productivity rather than total factor productivity. 2. The following paragraph summarises Robert Brenner’s insights in Brenner, 2007. 3. Braverman, 1999. 4. Piketty, 2014; Gordon, 2000; Glyn, Hughes, Lipietz, and Singh, 1990. 5. In many ways, this balance was the result of the defeat of radical labour and shop floor agitation rather than reflecting the success of the labour movement. 6. The following three paragraphs draw heavily on the account in Brenner, 2006. 7.

The platform owners will simply siphon off more of the revenue generated, leaving direct manufacturers with even less. On top of this, the widespread turn to austerity is continuing to depress aggregate demand across the world, and the global trends for productivity are in decline. Between 1999 and 2006 labour productivity grew by 2.6 per cent annually, but since the crisis the trend has been downwards to around 2.0 per cent.41 Total factor productivity is even lower, at about zero per cent growth in the past few years – a trend that holds in nearly every major economy.42 In this context – given also the pushing down of short-term and long-term interest rates (into negative territory at points) – it is understandable that surplus capital would seek out returns wherever it can find them. Much like the 1990s boom, the start-up boom today appears to be driven largely by these forces: it is a continuation of asset-price Keynesianism rather than an abdication of its basic tenets.


pages: 363 words: 107,817

Modernising Money: Why Our Monetary System Is Broken and How It Can Be Fixed by Andrew Jackson (economist), Ben Dyson (economist)

bank run, banking crisis, banks create money, Basel III, Bretton Woods, business cycle, call centre, capital controls, cashless society, central bank independence, credit crunch, David Graeber, debt deflation, double entry bookkeeping, eurozone crisis, financial exclusion, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, Fractional reserve banking, full employment, Hyman Minsky, inflation targeting, informal economy, information asymmetry, intangible asset, land reform, London Interbank Offered Rate, market bubble, market clearing, Martin Wolf, means of production, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, negative equity, Northern Rock, price stability, profit motive, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, risk-adjusted returns, seigniorage, shareholder value, short selling, South Sea Bubble, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, unorthodox policies

For example, for a bakery the quantity of factor inputs would include ingredients, equipment (capital), the kitchen (land) as well as the people (labour) doing the baking. The second factor which contributes to potential output is ‘total factor productivity’ (TFP). TFP is the output in an economy over and above that which is accounted for by the quantity of inputs. Some think of it as the skill of those within the economy in combining inputs, or alternatively the level of technology in the economy. If we return to our example of the baker, then total factor productivity could measure the skill of the person doing the baking. It may also represent an improvement in the technology used by the baker. Putting the two together, Potential Output (Y*) is dependent on the ‘quantity of factor inputs’ and ‘total factor productivity’ so that: eq. 4.5 Potential output therefore measures the maximum level of output that an economy could achieve if everyone who wanted to work was working as efficiently as they could and every machine was running at full capacity.

As with money creation for consumer spending, this increases the purchasing power in the economy (the MI R portion of MR), but also increases the quantity of goods produced – the productive capacity of the economy. For example, investment includes money spent on research and development, which can lead to the discovery of new technology, inventions, and production techniques that increase the potential output of the economy beyond its current level (i.e. they increase ‘total factor productivity’). Credit creation for investment also allows firms to put in place new technologies or production techniques (i.e. increase the quantity of factor inputs). In a situation where the economy is operating below potential output (less than full employment, however it is defined) credit creation for productive purposes will increase the quantity of goods and services produced in the economy, without bidding up the price of any inputs (as they are currently idle).


pages: 333 words: 76,990

The Long Good Buy: Analysing Cycles in Markets by Peter Oppenheimer

"Robert Solow", asset allocation, banking crisis, banks create money, barriers to entry, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, business cycle, buy and hold, Cass Sunstein, central bank independence, collective bargaining, computer age, credit crunch, debt deflation, decarbonisation, diversification, dividend-yielding stocks, equity premium, Fall of the Berlin Wall, financial innovation, fixed income, Flash crash, forward guidance, Francis Fukuyama: the end of history, George Akerlof, housing crisis, index fund, invention of the printing press, Isaac Newton, James Watt: steam engine, joint-stock company, Joseph Schumpeter, Kickstarter, liberal capitalism, light touch regulation, liquidity trap, Live Aid, market bubble, Mikhail Gorbachev, mortgage debt, negative equity, Network effects, new economy, Nikolai Kondratiev, Nixon shock, oil shock, open economy, price stability, private sector deleveraging, Productivity paradox, quantitative easing, railway mania, random walk, Richard Thaler, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, Simon Kuznets, South Sea Bubble, special economic zone, stocks for the long run, technology bubble, The Great Moderation, too big to fail, total factor productivity, trade route, tulip mania, yield curve

Index 100 year bond 34 1920s, United States 148, 154, 157, 160 1945-1968, post-war boom 129–131 1960s ‘Nifty Fifty’ 114, 130–131, 233, 235 structural bear market 130 1970s Dow Jones 131 equity cycle 56 oil crisis 108 1980s bull markets 131–133 Dow Jones 15–16, 131–132 equity cycle 56–57 Japan 114, 148–149, 155–156, 158, 160–161, 162, 164 technology 12–15 1990s 16–17 Asia crisis 108, 133 equity cycle 57 S&P concentration 114 technology bubble 33, 93–94, 149–150, 156–157, 158–159, 161, 164 2000-2007 equity cycle 57 2007-2009 financial crisis 169–174 emerging markets 171–173 forecasting 19–21 growth vs. value company effects 94–96 impact 169–170 phases 171–174 quantitative easing 173–174, 178–179 sovereign debt 170, 171–173 structural bear market 110, 118–119 A accounting, bubbles 163–165 adjustment speed 74, 89–90 Akerflof, G.A. 23 American Telephone and Telegraph (AT&T) 154, 225, 235–236, 238 Asia crisis, 1998 108, 133 ASPF see Association of Superannuation and Pension Funds asset classes across phases 66–68 contractions and expansions 63–65 cyclical 83–89 defensive 83–89 diversification 42, 45–47, 178–179 growth 83–84, 90–96 and inflation 65–66, 70 levels of yield 74–76 relationship through cycle 68–76 returns across cycle 63–79 speed of adjustment 74 structural shifts 76–79 value 83–84, 90–96 see also bonds; commodities; equities Association of Superannuation and Pension Funds (ASPF) 77 AT&T see American Telephone and Telegraph austerity 239 Austria, 100 year bond 34 B bank margins 214–215 bear markets 49, 99–125 1960s 130 characteristics 100–106, 117–118 cyclical 105, 106–107 deflation 109, 113 duration 100–101, 106–111, 117 employment 121–124 event-driven 105, 107–109 false negatives 119–120 financial crisis 118–119 growth momentum 122–123 indicators 106, 108, 109–110, 119–125 inflation 101–103, 109, 121–122 interest rates 106, 111–113 prior conditions 121–124 private sector financial balance 124 profitability 115–117 recovery 101 risk indicator vs MSCI index 124–125 S&P 500 103–105 structural 105 triggers 101–105, 106, 108, 111 valuations 123 yield curve 122 behavioural factors 5, 22–25 Berlin Wall, fall of 133 Bernanke, B. 133 betas 65, 85 ‘Big Bang’ deregulation 12 Bing 237 Black Monday 16, 102, 148 Black Wednesday 16–17 ‘bond-like’ equities 96 bonds, 100 year 34 bond yields across phases 66–68, 72–76 current cycle 95–96, 191–193, 201–220 cyclical vs. defensive companies 87–88 and demographics 215–217 and equity valuations 72–76, 206–208 and growth companies 92–94 historical 43, 202 and implied growth 210–215 and inflation 65, 70 quantitative easing 173–174, 202–205 and risk asset demand 217–220 S&P 500 correlation 72–73 speed of adjustment 74, 89–90 ultra-low 201–220 and value companies 92–94 vs. dividends 78–79 vs. equities 43–45, 68–76, 78–79 Bretton Woods monetary system 102, 130–131 broadcast radio 154, 225 Bubble Act 147, 157 bubbles 143–165 1920s US 148, 154, 157, 160 1980s Japan 114, 148–149, 155–156, 158, 160–161, 162, 164 accounting 163–165 canal mania 152 characteristics 145–146 deregulation 157–159 easy credit 160–161 famous 145 financial innovation 158–159 government-debt-for-equity swaps 151–152 Mississippi Company 147, 151 ‘new eras’ 150–157 personal computers 155 psychology 144–145 radio manufacturing 154 railways 148, 152–154, 157, 160, 163 Shanghai composite stock price index 156 South Sea Company 147, 151, 153 structural bear markets 113 sub-prime mortgages 70, 102, 118, 133, 145, 159 technology, 1990s 33, 93–94, 149–150, 156–157, 158–159, 161, 164 tulip mania 146–147 valuations 161–162 bull markets 49, 127–142 characteristics 127–141 composition 138 cyclical 134–136 disinflation 131–133 duration 136–138, 139–141 equity performance 135–136 Great Moderation 133–134, 187–189 non-trending 138–141 post-war boom 129–131 quantitative easing 134 secular 127–134 United States 136 C canal mania 152 CAPE see cyclically adjusted price-to-earnings ratio capital investment, Juglar cycle 3 CDO see collateralised debt obligations characteristics bear markets 100–109, 111, 117–118 bubbles 145–146 bull markets 127–141 cyclical bear markets 106–107 event-driven bear markets 108–109 structural bear markets 111 China 15, 156 Cold War 14–15, 133 collateralised debt obligations (CDO) 159 commodities across phases 66–68 Kitchin cycle 3 composition of bull markets 138 concentration structural bear markets 115 and technology 238–240 contractions asset performance 63–65 mini cycles 60 see also recessions Cooper, M. 162 corporate debt 65, 110, 114, 160–161 corporate profitability bear markets 107, 115–117 current equity cycle 185–186 monetary policy 239 credit crunch 78–79, 170, 171 crowds, psychology of 21–22, 144–145 cult of the equity 77–78 current equity cycle 57–58, 167–240 bank profitability 214–215 bond yields 191–193 demographic shifts 215–217 drivers 179–180 earnings per share 195–196 employment and unemployment 183–185 equity valuations 206–208 ‘first mile problem’ 226–227 future expectations 246–247 global relative performance 193–196 growth momentum 174–178, 182–183, 227–231 growth and value companies 190–196, 239–240 implied growth 210–215 inflation 180–182, 203–205 interest rates 180–182, 239–240 Japan, lessons from 196–200 lessons from 244–245 market and economy incongruence 174–178 monetary policy 178–179, 201–205 opportunities 230–231 profitability 185–186 quantitative easing 202–205 returns 174–179 risk asset demand 217–220 structural changes 76–79, 93–96, 169–200 technology 189–190, 221–241 term premium collapse 204–205 ultra-low bond yields 201–220 valuations 233–235 volatility 187–189 cycles 1970s 56 asset returns 63–79 cyclical vs. defensive companies 85–89 equities 49–62 growth vs. value companies 90–96 investment styles 81–96 long-term returns 29–47 riding 11–27 sectors 83–85 valuations 53 cyclical bear markets 105, 106–107, 117, 118 vs. event-driven 109 cyclical bull markets 134–136 cyclical companies bond yields 193 inflation 88 sectors 83–84 vs. defensive 85–89 cyclical growth 83–84 cyclically adjusted price-to-earnings ratio (CAPE) 37–38, 44–45 cyclical value 83–84 D DDM see discounted dividend model debt levels bubbles 160–161 structural bear markets 110, 114 decarbonization 13 defensive companies 63–65 bond yields 193 inflation 88 Japan 198 sectors 83–84 vs. cyclical 85–89 defensive growth 83–84 defensive value 83–84 deflation bear markets 109, 113 Volker 102, 131 delivery solutions 226–227 demographics and zero bond yields 215–217 deregulation 12, 132–133, 157–159 derivative markets 158–159 design of policy 25–26 despair phase 50–52, 53, 55–56, 60, 66–68 cyclical vs. defensive companies 86, 88 growth vs. value companies 92 Dice, C. 161 Dimitrov, O. 162 discounted dividend model (DDM) 36, 69 discount rate 68 disinflation 131–133 disruption 1980s 12–15 current equity cycle 189–190, 221–241 electricity 226 historical parallels 222–227 printing press 223–224 railway infrastructure 224–227 telecoms 225–226 divergence, and technology 238–240 diversification 42, 45–47, 178–179 dividends asset yields 38–41, 69 reinvestment 38–40 value of future streams 209 vs. bonds 78–79 Dodd, D. 163, 164 domain registrations 12–13 dominance of technology 231–233 dotcoms 12–13, 33, 93–94, 102, 161, 237 Dow Jones 1970s 131 1980s 15–16, 131 Black Monday 16, 102, 148 Draghi, M. 17, 173 drivers of bull markets 138 current equity cycle 179–180 duration bear markets 100–101, 106–111, 117 bull markets 135–138, 139–141 cyclical bear markets 106–107, 117, 118 cyclical bull markets 135–136 dominance of technology 231–233 event-driven bear markets 108–109, 117–118 non-trending bull markets 139–141 structural bear markets 109–111, 117 term premia 204–205 DVDs 227 E earnings per share (EPS) bear markets 115–117 historical 189 since pre-financial crisis peak 195–196, 209–210 easy credit, and bubbles 160–161 ECB see European Central Bank Economic Recovery Act, 1981 132 efficient market hypothesis 4 electricity 226 email 13 employment 121–124, 183–185 Enron 164 environmental issues 13 EPS see earnings per share equities across phases 66–68 ‘bond-like’ 96 and bond yields 72–73, 74–76, 206–208 bull market performance 135–136 CAPE 37–38, 44–45 dividends 38–41, 69, 78–79, 209 and inflation 65–66, 70 mini/high-frequency cycles 58–61 narrowing and structural bear markets 114–115 overextension 36–37 phases of investment 50–58 quantitative easing 173–174, 178–179 S&P 500 historical performance 42 valuations and future returns 43–45 vs. bonds 43–45, 68–76, 78–79 equity cycle 49–62 1970s 56 1980s 56–57 1990s 57 2000-2007 57 current 57–58, 76–79 historical periods 56–58 length 49 mini/high-frequency 58–61 phases 50–56 structural shifts 76–79 equity risk premium (ERP) 35–38, 69–72, 210 ERM see exchange rate mechanism ERP see equ ity risk premium ESM see European stability mechanism Europe dividends 39–40 exchange rate mechanism 16–17, 111 Maastricht Treaty 17 market narrowing in 1990s 115 privatisation 132 quantitative easing 17, 204–205 sovereign debt crisis 170, 171–173 European Central Bank (ECB) 17, 171, 173 European Recovery Plan 129–131 European stability mechanism (ESM) 173 event-driven bear markets 105, 107–109, 117–118 vs. cyclical 109 excess see bubbles exchange rate mechanism (ERM) 16–17, 111 exogenous shocks 108 expansions, asset performance 63–65 F false negatives, bear markets 119–120 fat and flat markets 128, 139 features see characteristics Federal Reserve 16, 102, 131, 134, 150–151, 157, 203 financial crisis, 2007–2009 169–174 forecasting 19–21 growth vs. value company effects 94–96 impact 169–170 structural bear market 110, 118–119 financial innovation 158–159 ‘first mile problem’ 226–227 Fish, M. 19 fixed costs 84–85, 173–174 fixed income assets 35, 65, 69–70, 205 flat markets 138–141 see also non-trending bull markets forecasting 2008 financial crisis 19–21 bear markets 106, 108, 109–110, 119–125 behavioural aspects 22–25 difficulties of 18–22 future growth 211–212 neuroeconomics 24–25 and policy setting 25–26 recessions 20–21 and sentiment 21–25 short-term 17–18 weather 18–19 France Mississippi Company 147, 151 privatisation 132 Fukuyama, F. 15 future expectations 246–247 G Galbraith, J.K. 160 GATT see General Agreement on Tariffs and Trade General Agreement on Tariffs and Trade (GATT) 129 Germany Bund yield 207 fall of Berlin Wall 133 wage inflation 185 Glasnost 14 Glass-Steagall Act, 1933 132 global growth 182–183 globalisation 14–16 global relative performance 193–196 global sales growth 212 global technology bubble 33, 93–94, 149–150, 156–157, 158–159, 161, 164 Goetzmann, F. 151 ‘Golden Age of Capitalism’ 129–131 Gold Standard 130 see also Bretton Woods monetary system Goobey, G.R. 77 Google 237 Gorbachev, M. 14 Gordon Growth model 209 government-debt-for-equity swaps 151–152 Graham, B. 161, 163, 164 Great Britain South Sea Company 147, 151, 153 see also United Kingdom Great Depression 4 Great Moderation 133–134, 187–189 Greenspan, A. 16, 113, 150–151 gross domestic product (GDP) cyclical vs. defensive companies 87 labour share of 185, 238–239 phases of cycle 52–53 profit share of, US. 186 growth bear markets 122–123 current equity cycle 174–178, 182–183, 227–231 technology impacts 227–231 and zero bond yields 208–210, 210–215 growth companies bond yields 92–94, 191–193 current cycle 190–196 definition 90–91 since financial crisis 94–96 interest rates 92–94 outperformance 239–240 sectors 83–84 vs. value 90–96 growth phase 50–52, 54–56, 67–68 cyclical vs. defensive companies 86 growth vs. value companies 92 Gulf war 102 H herding 21–22, 144–145 high-frequency cycles 58–61 historical performance 10 year bonds, US 43 bonds 43, 202 equities cycles 49, 56–58 S&P 500 38–39, 42 trends 29–31 holding periods 31–34 Holland, tulip mania 146–147 hope phase 50–52, 53–54, 55–56, 66–67 cyclical vs. defensive companies 86 growth vs. value companies 92 housing bubble, US 70, 102, 118, 133, 145, 159 Hudson, G. 163 I IBM 13, 155, 236 IMAP see Internet Message Access Protocol IMF see International Monetary Fund impacts of diversification 42, 45–47 financial crisis, 2007-2009 169–170 technology on current cycle 221–241 ultra-low bond yields 201–220 Imperial Tobacco pension fund 77 implied growth 210–215 income, Kuznets cycle 3 indicators bear markets 106, 108, 109–110, 119–125 cyclical bear markets 106 event-driven bear markets 108 structural bear markets 109–110 industrial revolution 224–226 industry leadership, S&P 500 232–233, 237–238 inflation asset performance 65–66, 70 bear markets 101–103, 109, 121–122 current equity cycle 180–182, 203–205 cyclicals 88 Volker 102, 131 Institute of Supply Management index (ISM) 59–61 bear markets 123 cyclical vs. defensive companies 86–87 interest rates bear markets 106, 111–113 current equity cycle 180–182, 239–240 growth vs. value companies 92–94 structural bear markets 111–113 and yield 69, 74–76 International Monetary Fund (IMF) 129 internet 12–13, 225–227 search 237 see also dotcoms Internet Message Access Protocol (IMAP) 13 inventories 84–85 Kitchin cycle 3 investment, Juglar cycle 3 investment cycle bear markets 122–123 current 57–58, 76–79 historical periods 56–58 lengths 49 mini/high-frequency 58–61 phases 50–56 structural shifts 76–79 see also cycles ISM see Institute of Supply Management index J Japan bubbles 114, 148–149, 155–156, 158, 160–161, 162, 164 defensive companies 198 dividends 39–40 lessons from 196–200 John Crooke and Company 160 Juglar cycle 3 K Kahneman, D. 22–23 Kennedy Slide bear market 102 Keynes, J.M. 22 Kindleberger, C.P. 22 Kitchin cycle 3 Kondratiev cycle 3 Kuznets cycle 3 L labour share of GDP 185, 238–239 land and property bubble, Japan 114, 148–149, 155–156, 158, 160–161, 162, 164 laptop computers 13 largest companies S&P 500 237–238 technology 234–237 light touch regulation 157–159 see also deregulation Live Aid 13–14 Loewenstein, G. 21–22 long-term returns 29–47 M Maastricht Treaty 17 Mackay, C. 21 market forecasts short-term 17–18 see also forecasting market narrowing structural bear markets 114–115 and technology 238–240 markets current equity cycle 174–178 psychology of 21–25, 144–145 see also bear markets; bubbles; bull markets market timing 41–43 market value of technology companies 234, 235–238 Marks, H. 6–7 Marshall Plan 129–131 MBS see mortgage-backed securities Microsoft 12, 236–237 mini cycles 58–61 Mississippi Company 147, 151 monetary policy 157–159, 178–179, 201–205, 239 austerity 239 European Central Bank 17, 171, 173 Federal Reserve 16, 102, 131, 134, 150–151, 157, 203 quantitative easing 17, 70–71, 119, 133–134, 173–174, 178–179, 202–205 Montreal Protocol 13 mortgage-backed securities (MBS) 159 MSCI indices 91 N narrow equity markets 114–115, 238–240 NASDAQ 149–150, 161 negative bond yields 201–220 demographics 215–217 and equity valuations 206–208 and growth 208–210 implied growth 210–215 monetary policy 201–205 quantitative easing 202–205 risk asset demand 217–220 neuroeconomics 24–25 ‘new eras’ 113–114, 150–157 ‘Nifty Fifty’ 114, 233 non-trending bull markets 138–141 nudges 26 O oil 108, 226 opportunities, technology 230–231 optimism phase 50–52, 54–56, 67–68 cyclical vs. defensive companies 86 growth vs. value companies 91–92 output gaps 4 Outright Monetary Transactions (OMT) 171, 173 overextension 36–37 ozone layer 13 P pension funds 77, 218–219 Perestroika 14 Perez, C. 159 performance bull markets 134–136 current equity cycle 174–179 and cycles 53–56 diversification impacts 42, 45–47 dividends 38–41 equities vs. bonds 43–45 factors 41–45 historical trends 29–31 holding periods 31–34 interest rates 69, 74–76 long-term 29–47 market timing 41–43 risks and rewards 35–38 valuations 43–45 volatility 30–31 personal computing introduction 12–13, 155 phases 2007-2009 financial crisis 171–174 asset classes 66–68 bear markets 123 cyclical vs. defensive companies 86 of equities cycle 50–56 growth vs. value companies 91–92 Phillips curve 182 Plaza Accord, 1985 148–149, 158 PMI see purchasing managers’ index policy, design of 25–26 population decline 216 post-financial crisis see current equity cycle post-war boom 129–131 prediction see forecasting price-to-earnings ratio (P/E) 53–56 printing press 223–224 prior conditions to bear markets 121–124 private sector debt 65, 110, 114, 160–161 private sector financial balance 124 privatisation 132 productivity growth 227–230 profit labour share of 185, 238–239 share of GDP, US. 186 profitability banks 214–215 bear markets 107, 115–117 current equity cycle 185–186 property and land bubble, Japan 114, 148–149, 155–156, 158, 160–161, 162, 164 psychology bubbles 144–145 of markets 21–25 policy setting 25–26 public ownership 132 purchasing managers' index (PMI) 59–61, 86–87, 89–90 Q QE see quantitative easing Qualcom 149–150 quality companies 193 quantitative easing (QE) asset returns 70–71, 119, 178–179 bond yields 173–174, 202–205 start of 17, 133–134, 171 United Kingdom 17, 204–205 United States 134, 171, 202–204 R radio, expansion of 154, 225 Radio Corporation of America (RCA) 154 railways bubbles UK 148, 152–153, 157, 163 US 153–154, 160 infrastructure development 224–227 Rau, P. 162 RCA see Radio Corporation of America Reagan, R. 14, 131–132 real assets 68 real estate bubble, US 70, 102, 118, 133, 145, 159 recessions bear markets 101–103 current equity cycle 174–178 forecasting 20–21 recovery bear markets 101 current equity cycle 174–178 reinvestment of dividends 38–40 return on equity (ROE) 43–45 returns bull markets 134–136 current equity cycle 174–179 cycles 53–56 diversification impacts 42, 45–47 dividends 38–41 equities vs. bonds 43–45 factors 41–45 historical trends 29–31 holding periods 31–34 interest rates 69, 74–76 long-term 29–47 market timing 41–43 risks and rewards 35–38 valuations 43–45 volatility 30–31 reverse yield gap 77 risk assets, demand for 217–220 risk-free interest rate 68 risk indicators bear markets 119–125 event-driven bear markets 108 structural bear markets 110–111, 113–114 risk premia equity 35–38, 69 neuroeconomics 25 term premia 204–205 ROE see return on equity Rouwenhorst, G. 151 Russian debt default, 1997 108 S S&P 500 bear markets 103–105 and bond yields 72–73 concentration in 1990s 115 dividends 38–39 historical performance 38–39, 42 industry leadership 232–233, 237–238 and ISM 60 largest companies 237–238 US Treasury yields 206 sales growth 212 savings, current equity cycle 182 Schumpeter, J. 150 search companies 237 ‘search for yield’ 217–220 secondary-market prices 229–230 sectors across the cycle 83–85 dominance 231–233 secular bull market 127–134 disinflation 131–133 Great Moderation 133–134, 187–189 post-war boom 129–131 secular stagnation hypothesis 181 sentiment 5, 21–25 see also bubbles Shanghai composite stock price index 156 Shiller, R.J. 4–5, 23 short-term market forecasts 17–18 skinny and flat markets 139–140 smartphones 226, 229–230 Solow, R. 229 South Sea Company 147, 151, 153 sovereign debt crisis 170, 171–173 Soviet Union 14–15, 133 speed of adjustment 74, 89–90, 122–123 Standard Oil 235 structural bear markets 105, 109–115 1960s 130 bubbles 113 debt levels 110, 114 deflation 113 duration 109–111, 117 financial crisis, 2007 118–119 interest rates 111–113 narrow equity markets 114–115 ‘new eras’ 113–114 risk indicators 110–111, 113–114 triggers 111 volatility 105, 115 structural changes 6 1980s 12–15 current equity cycle 76–79, 93–96, 169–200 sub-prime mortgage bubble 70, 102, 118, 133, 145, 159 Summers, L. 181 Sunstein, C.R. 26 ‘super cycle’ secular bull market 127–134 see also secular bull market T technology 1920s America 154 bubble in 1990s 33, 93–94, 149–150, 156–157, 158–159, 161, 164 current equity cycle 189–190, 221–241 and disruption in 1980s 12–15 dominance 231–233 and growth 227–231 historical parallels 222–227 industrial revolution 224–226 Kondratiev cycle 3 largest companies 234–237 market value 234, 235–238 opportunities 230–231 personal computers 12–13, 155 printing press 223–224 railway bubbles 148, 152–154, 157, 160, 163 railway infrastructure 224–227 and widening gaps 238–240 telecommunications 13, 154, 225, 235–236, 238 telegrams 225 term premium collapse 204–205 TFP see total factor productivity growth Thaler, R.H. 26 Thatcher, M. 14, 132 Tokkin accounts 158 ‘too-big-to-fail’ 133 total factor productivity (TFP) growth 238–240 triggers bear markets 101–105, 106, 108, 111 cyclical bear markets 106 event-driven bear markets 108 structural bear markets 111 tulip mania 146–147 Tversky, A. 22–23 U ultra-low bond yields 201–220 demographics 215–217 and equity valuations 206–208 and growth 208–210 implied growth 210–215 monetary policy 201–205 quantitative easing 202–205 risk asset demand 217–220 UNCTAD see United Nations Conference on Trade and Development unemployment 121–124, 183–185 unexpected shocks 108 United Kingdom (UK) Black Wednesday 16–17 bond yields, historical 202 canal mania 152 deregulation 132 exchange rate mechanism 16–17, 111 privatisation 132 quantitative easing 204–205 railway bubble 148, 152–153, 157, 163 South Sea Company 147, 151, 153 United Nations Conference on Trade and Development (UNCTAD) 129 United States (US) 10 year bond returns 43 Black Monday 16, 102, 148 bull markets 136 credit crunch 78–79, 170, 171 disinflation 132 dividends 38–39 Dow Jones 15–16, 131 equities in current cycle 207–208 housing bubble 70, 102, 118, 133, 145, 159 labour share of GDP 185, 238–239 market narrowing 114 NASDAQ 149–150, 161 ‘Nifty Fifty’ 114, 130–131, 233, 235 post-war boom 129–131 profit share of GDP 186 quantitative easing 133–134, 171, 202–204 radio manufacturing 154, 225 railway bubble 153–154, 160 stock market boom, 1920s 148, 154, 157, 160 vs.

The first is through the spread between wages and profits, or the share of output accounted for by the labour market and the share of the corporate sector. Some academic studies have emphasised the role of capital accumulation and capital-augmenting technical change as determinants of the evolution of the labour share (e.g. Bentolila and Saint-Paul 2003; Hutchinson and Persyn 2012). According to OECD (Multifactor productivity 2012) estimates, total factor productivity (TFP) growth and capital deepening – the key drivers of economic growth – accounted for most of the average within-industry decline in the labour share in OECD countries between 1990 and 2007. This shift is part of a process that has emerged over a long period of time. The labour share of GDP in the US, for example, has been trending downwards since the Second World War, but it has taken a particularly sharp fall since the financial crisis.18 Of course, technology is not the only reason for this.


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What Would the Great Economists Do?: How Twelve Brilliant Minds Would Solve Today's Biggest Problems by Linda Yueh

"Robert Solow", 3D printing, additive manufacturing, Asian financial crisis, augmented reality, bank run, banking crisis, basic income, Ben Bernanke: helicopter money, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bitcoin, Branko Milanovic, Bretton Woods, BRICs, business cycle, Capital in the Twenty-First Century by Thomas Piketty, clean water, collective bargaining, computer age, Corn Laws, creative destruction, credit crunch, Credit Default Swap, cryptocurrency, currency peg, dark matter, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, Deng Xiaoping, Doha Development Round, Donald Trump, endogenous growth, everywhere but in the productivity statistics, Fall of the Berlin Wall, fear of failure, financial deregulation, financial innovation, Financial Instability Hypothesis, fixed income, forward guidance, full employment, Gini coefficient, global supply chain, Gunnar Myrdal, Hyman Minsky, income inequality, index card, indoor plumbing, industrial robot, information asymmetry, intangible asset, invisible hand, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, laissez-faire capitalism, land reform, lateral thinking, life extension, low-wage service sector, manufacturing employment, market bubble, means of production, mittelstand, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, Nelson Mandela, non-tariff barriers, Northern Rock, Occupy movement, oil shale / tar sands, open economy, paradox of thrift, Paul Samuelson, price mechanism, price stability, Productivity paradox, purchasing power parity, quantitative easing, RAND corporation, rent control, rent-seeking, reserve currency, reshoring, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, school vouchers, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, special economic zone, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, total factor productivity, trade liberalization, universal basic income, unorthodox policies, Washington Consensus, We are the 99%, women in the workforce, working-age population

Diminishing returns happen when a worker is given more than, say, two computers; that worker won’t produce as much with the third computer as compared with the first two unless there is better software that allows computing to be done without the person using it all the time. Technological progress allows the existing inputs of workers and capital to be used more efficiently. An increase in output due to technology is referred to as total factor productivity (TFP) in economic growth models. Physical capital as well as human capital – the skills and education of workers – are central to this model. It’s especially pressing for rich countries, where the working-age population is ageing or even shrinking and having better-skilled workers is even more important. How to raise productivity lies at the heart of whether or not we’re doomed to a stagnant future.

The residual captures technological progress, which generates more output from a set of inputs. Of course, it also captures anything else not related to inputs of labour and investment, so temporary rises in government spending and monetary easing also get included. It means that some, but not all, of what is captured in the Solow residual is the productivity advancing technology needed to sustain economic growth over the longer term. This is the TFP (total factor productivity) mentioned earlier. Across countries, there is a clear association between periods of high output growth and significant technological progress. Developed nations all grew well between 1950 and 1973, and then slowed together during 1974–87. There seems to be a connection with the adoption of similar technologies. For instance, the strong period of growth in the 1950s and 60s is associated with post-war technological advances, such as widespread air travel and industrial robots.

joint-stock companies Jones, Homer Journal of Economic Perspectives Journal of Political Economy JPMorgan Juncker Plan Kahn, Richard Kant, Immanuel Keynes, John Maynard and the backlash against globalization and the Bloomsbury Group and Bretton Woods System and budget deficits counter-cyclical policies and crowding out on depression/recession The Economic Consequences of the Peace fiscal activism and Friedman The General Theory of Employment, Interest and Money and government spending on government’s role in economy and Hayek and investors Keynesian revolution legacy life and times of and Marshall and Niemeyer and paradox of thrift at Paris Peace Conference Prices and Production and public investment and Robbins Robinson and Keynes/Keynesian economics and Schumpeter and ‘socializing investment’ A Tract on Monetary Reform and the Treasury A Treatise on Money wealth Keynes, John Neville Khrushchev, Nikita Knight, Frank Kodak Korea North South Krugman, Paul Krupp Kuznets, Simon labour force growth labour productivity and work incentive laissez-faire landowners Lassalle, Ferdinand Latin America currency crisis (1981–82) see also specific countries League of Nations Lehman Brothers Lenin, Vladimir Leontief, Wassily Lewis, Arthur Lewis, Barbara (‘Bobby’) Life Extension Institute Linda for Congress BBC documentary London London School of Economics and Political Science London Stock Exchange Long Depression (1880s) Lopokova, Lydia Louis XIV LSE see London School of Economics and Political Science Lucas, Jr, Robert Ma, Jack (Ma Yun) Maastricht Treaty macroprudential policy see also central banks; financial stability Malaysia Malthus, Thomas Manchester Mandela, Nelson manufacturing additive (3D printing) automation in China and deindustrialization GDP contribution in UK German high-tech and industrialization see also industrialization Japan ‘manu-services’ ‘March of the Makers’ mass-manufactured goods and national statistics reshoring rolling back deindustrialization process and Smith trade patterns changed by advanced manufacturing US Mao Zedong Maoism ‘March of the Makers’ marginal utility analysis marginalism market forces/economy ‘Big Bang’ (1986) competition see competition and economic equilibrium see economic equilibrium emerging economies see emerging economies Hayek and the supremacy of market forces ‘invisible hand’ and laissez-faire and Marx 4 self-righting markets supply and demand see supply and demand Marshall, Alfred on approach to economics and the backlash against globalization and the Cambridge School and decentralization Economics of Industry and education’s role in reducing inequality and inequality and Keynes and laissez-faire legacy life and times of marginal utility analysis and Marx and poverty Principles of Economics and utility theory Marshall, Mary, née Paley Marx, Heinrich Marx, Henriette, née Pressburg Marx, Jenny, née von Westphalen Marx, Karl and agriculture and the backlash against globalization Capital and capitalism and China and class Communist Manifesto (with Engels) communist theories A Contribution to the Critique of Political Economy doctoral thesis The Eighteenth Brumaire of Louis Bonaparte and Engels journalism life and times of and Marshall and rate of profit and Ricardo and Russia on service sector workers surplus value theory and the Young Hegelians Marx, Laura Marx, Louise Marxism and the Austrian School and unemployment see also Marx, Karl Mason, Edward mathematical economics Mauritius May, Theresa Meade, James median income Menger, Carl mercantilist policies see also Corn Laws Merkel, Angela Mexico middle class China and economic growth and economic inequality and European revolutionaries income and industrialization and Keynes and Heinrich Marx as proportion of world population and Schumpeter social resentment US Mill, James Mill, John Stuart On Liberty Principles of Political Economy Minsky, Hyman Mises, Ludwig von Mitchell, Wesley mobile phones/smartphones monetarism see also Friedman, Milton monetary policy and Friedman tools see also quantitative easing (QE) see also central banks monopolies and Marx natural and Robinson and Schumpeter and Smith and Sraffa monopsony Mont Pelerin Society Morgenthau, Henry mortgage-backed securities (MBS) mortgage lending and the 2008 financial crisis sub-prime Myanmar Myrdal, Gunnar Napoleon I Napoleon III Napoleonic Wars national/official statistics China UK US national debt Austria and central banks China and creditors and debt forgiveness and deficits euro area and foreign exchange reserves and investment Japan major economies owed to foreigners and quantitative easing and Ricardian equivalent UK US Vietnam National Health Service (UK) National Infrastructure Commission (UK) Navigation Acts neoclassical economics convergence hypothesis ‘neoclassical synthesis’ New Neoclassical Synthesis see also Fisher, Irving; Marshall, Alfred; Solow, Robert Neoclassical Synthesis see also Samuelson, Paul New Classicists see also Lucas, Jr, Robert New Deal New Institutional Economics see also North, Douglass New Keynesians see also Stiglitz, Joseph New Neoclassical Synthesis New Rhineland News (Cologne) New Rhineland News: Review of Political Economy (London) new trade theory New York Herald New York Times New York Tribune Newcomb, Simon Newsweek Niemeyer, Sir Otto Nissan Nixon, Richard Nokia non-tariff barriers (NTBs) Nordhaus, William North, Douglass and the backlash against globalization and development challenges doctoral thesis The Economic Growth of the United States from 1790 to 1860 and institutions Institutions, Institutional Change and Economic Performance life and times of Nobel Prize path dependence theory and Smith North, Elizabeth, née Case North Korea Northern Rock Oak Ridge National Laboratory Obama, Barack Occupy movement oil industry Organisation for Economic Co-operation and Development (OECD) Osborne, George Overseas Development Institute (ODI) Oxford University Balliol College Paine, Thomas Paley, Mary Paris Peace Conference path dependence theory see also North, Douglass Peel Banking Act Philips, Lion Philips (electronics company) physical capital Physiocrats Pigou, Arthur Cecil Piketty, Thomas pin-making Pinochet, Augusto Ponzi finance populism Portugal poverty aid and development see economic development challenges eradication/reduction frictional and Marshall and Marx and median income people lifted from in South Africa productivity and agriculture ‘benign neglect’ of Britain’s productivity puzzle and computers and economic growth and education and factor reallocation and Germany and Hayek incentives and industry/industrial revolution and innovation and investment Japan and jobs labour see labour productivity and land low and Marshall moving into higher sectors of and pricing raising and Schumpeter and secular stagnation slow economic and productivity growth and the future and specialization and technology total factor productivity and trade and wages Prohibition protectionism agricultural see also Corn Laws Navigation Acts public-private partnerships public investment and Keynes public spending general government spending see government spending public investment see public investment squeeze see also austerity Puerto Rico quantitative easing (QE) Quantity Theory of Money see also Friedman, Milton; monetarism; Equation of Exchange Rand, Ayn RAND Corporation rate of profit rational expectations theory Reagan, Ronald recession/depression debt-deflation theory of depression Great Depression see Great Depression (1930s) Great Recession (2009) Greece ‘hangover theory’ of Hayek on and Keynes Long Depression (1880s) second recession (1937–38: recession within the Depression) in UK 1970s redistribution Regional Comprehensive Economic Partnership (RCEP) Reich, Robert reindustrialization Reisinger, Anna Josefina Remington Rand rent-seeking research and development (R&D) investment China Research in Motion (RIM) retail trade Rhineland News Ricardian equivalence Ricardo, David and the backlash against globalization and class comparative advantage theory and the Corn Laws Essay on the Influence of a Low Price of Corn on the Profits of Stock The High Price of Bullion international trade theory as a landlord life and times of as a loan contractor and Marx On the Principles of Political Economy and Taxation and Schumpeter and Smith wealth Ricardo, Priscilla Robbins, Lionel Robinson, Austin Robinson, James Robinson, Joan The Accumulation of Capital and the AEA and the backlash against globalization and communism Economic Philosophy The Economics of Imperfect Competition Essays in the Theory of Employment and imperfect competition Introduction to the Theory of Employment and Keynes and Keynesian economics life and times of and monopolies monopsony theory and Schumpeter and unemployment wage determination theory robotics Rodrik, Dani Rolls-Royce Roosevelt, Franklin D New Deal Russia 1905 Revolution and Lenin and Marx Samsung Samuelson, Paul and the backlash against globalization Economics factor-price equalization theorem Nobel Prize savings for capital investment and inflation and Keynes and the ‘paradox of thrift’ Say, Jean-Baptiste Schmoller, Gustav von Schumpeter, Anna, née Reisinger Schumpeter, Gladys, née Seaver Schumpeter, Joseph and the backlash against globalization as banker/investor Business Cycles and capitalism Capitalism, Socialism and Democracy ‘creative destruction’, innovation and ‘The Crisis of the Tax State’ and the Econometric Society economics and entrepreneurs on Fisher and Hayek History of Economic Analysis and Keynes legacy life and times of The Nature and Content of Theoretical Economics and perfect competition and Ricardo and Robinson Theory of Economic Development wealth Schumpeter, Romaine Elizabeth, née Boody Schumpeter Group of Seven Wise Men Schwartz, Anna Jacobson Schwarzenegger, Arnold Scottish Enlightenment Seaver, Gladys Ricarde see Schumpeter, Gladys secular stagnation self-interest services sector China and deindustrialization financial services see financial services global trade in services human capital investment invisibility of liberalization ‘manu-services’ and Marx move away from and national statistics output measurement productivity and innovation and Smith Trade in Services Agreement (TiSA) UK US shadow banking Shiller, Robert silver Singapore Skidelsky, Robert skill-biased technical change skills shortage small and medium-sized enterprises (SMEs) smartphones/mobile phones Smith, Adam and the backlash against globalization as Commissioner of Customs for Scotland economic freedom on ‘invisible hand’ of market forces and laissez-faire economics legacy life and times of and manufacturing and Marx and North and Physiocracy on rate of profit and rebalancing the economy and Ricardo and the services sector and state intervention The Theory of Moral Sentiments The Wealth of Nations social capital social networks social services socialism communist see communism vs welfare state capitalism Solow, Barbara (‘Bobby’), née Lewis Solow, Robert and the backlash against globalization with Council of Economic Advisers doctoral thesis economic growth model ‘How Economic Ideas Turn to Mush’ John Bates Clark Medal and Keynesian economics life and times of Nobel Prize Presidential Medal of Freedom and technological progress Sony Sorrell, Sir Martin South Africa South Korea Soviet Union and China Cold War collapse of see also Russia Spain specialization spontaneous order Sraffa, Piero stagflation Stanley Black & Decker state government regulation intervention in the economy laissez-faire STEM (science, technology, engineering and mathematics) workers sterling Stigler, George Stiglitz, Joseph stocks and Fisher and interest rates US railroad Strachey, Lytton Strahan, William Strong, Benjamin Sturzenegger, Federico Summers, Lawrence supply and demand see also market forces/economy: ‘invisible hand’ Sustainable Development Goals (SDGs) Taiwan Tanzania tariffs taxation and austerity devolved powers of flat for government deficit spending before Great Depression and inequality and investment Japan and Marshall negative income tax to pay off national debt Pigouvian tax progressive and Reagan redistribution through Schumpeter on Smith on Taylor, John Taylor, Overton H.


Growth: From Microorganisms to Megacities by Vaclav Smil

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, agricultural Revolution, air freight, American Society of Civil Engineers: Report Card, autonomous vehicles, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Bretton Woods, British Empire, business cycle, colonial rule, complexity theory, coronavirus, decarbonisation, deindustrialization, dematerialisation, demographic dividend, demographic transition, Deng Xiaoping, disruptive innovation, Dissolution of the Soviet Union, endogenous growth, energy transition, epigenetics, happiness index / gross national happiness, hydraulic fracturing, hydrogen economy, Hyperloop, illegal immigration, income inequality, income per capita, industrial robot, Intergovernmental Panel on Climate Change (IPCC), invention of movable type, Isaac Newton, James Watt: steam engine, knowledge economy, labor-force participation, Law of Accelerating Returns, longitudinal study, mandelbrot fractal, market bubble, mass immigration, McMansion, megacity, megastructure, meta analysis, meta-analysis, microbiome, moral hazard, Network effects, new economy, New Urbanism, old age dependency ratio, optical character recognition, out of africa, peak oil, Pearl River Delta, phenotype, Pierre-Simon Laplace, planetary scale, Ponzi scheme, Productivity paradox, profit motive, purchasing power parity, random walk, Ray Kurzweil, Report Card for America’s Infrastructure, Republic of Letters, rolodex, Silicon Valley, Simon Kuznets, South China Sea, technoutopianism, the market place, The Rise and Fall of American Growth, total factor productivity, trade liberalization, trade route, urban sprawl, Vilfredo Pareto, yield curve

The contradiction of rapid industrialization but relatively modest growth is explained by the early adoption of capitalist farming and, for decades, the limited impact of steam on productivity growth (Crafts 2005). Reconstruction of annual real GDP growth rates shows a steady acceleration from 0.7% between 1700 and 1760 to 1% between 1760 and 1801, 1.9% during the next 30 years, and 2.4% between 1831 and 1873. More than half of the contribution came from total factor productivity, just over 20% from capital deepening, and nothing from agriculture. The early decades of the British industrial revolution were closely connected with the invention and improvement of steam engines but Crafts (2004) demonstrated that the machine contributed little to the country’s pre-1830 economic growth, and that its potential was realized only with a widespread adoption of high-pressure designs after 1850.

One of the big surprises resulting from the early studies of economic growth accounting that were published during the 1950s was that a high share of output growth could not be explained by the level of inputs used in production, that is by labor (hours worked) and capital used (Abramovitz 1956; Solow 1957; Kendrick 1961). The unexplained residual must reflect advances in production techniques and it has become known as total factor productivity (TFP) or (more accurately, because the studies do not capture all the factors contributing to economic growth, but less frequently) as multifactor productivity growth. In modern economies, gains in TFP—subsuming the effect of innovation and technical advances or, most fundamentally, the level of deployed knowledge—have contributed more to the measured growth of labor productivity than the growth in capital invested per worker, and they have often (but not always) accounted for the single largest share among the trio of key growth factors (Shackleton 2013).

America’s rise from a marginal power in 1800 to the world’s economic leader by 1900 is a perfect illustration of how the quest for higher profits, innovation based not just on empirical improvements but on an unprecedented advanced in new fundamental technical and scientific understandings, and historical peculiarities (the pre-1865 dominance of slavery in the South, an extraordinarily rich energy endowment, and urban-based growth in the North) all combined to determine the country’s unique growth trajectory. The increasing importance of knowledge-based technical advances can be traced by comparing the sources of growth calculated for different periods. During the first half of the 19th century, capital and labor explained about 95% of American annual growth and total factor productivity accounted for just 5%. American TFP remained low during the Civil War decade but Kendrick’s (1961) reconstruction shows that annual TFP growth in manufacturing amounted to 0.86% during the 1870s, 1.94% during the 1880s, and 1.12% during the 1890s. These levels were higher than the means for the last three decades of the 20th century, providing clear proofs of the late 19th century’s knowledge-based progress (Smil 2005; Field 2009).


pages: 607 words: 133,452

Against Intellectual Monopoly by Michele Boldrin, David K. Levine

"Robert Solow", accounting loophole / creative accounting, agricultural Revolution, barriers to entry, business cycle, cognitive bias, creative destruction, David Ricardo: comparative advantage, Dean Kamen, Donald Trump, double entry bookkeeping, en.wikipedia.org, endogenous growth, Ernest Rutherford, experimental economics, financial innovation, informal economy, interchangeable parts, invention of radio, invention of the printing press, invisible hand, James Watt: steam engine, Jean Tirole, John Harrison: Longitude, Joseph Schumpeter, Kenneth Arrow, linear programming, market bubble, market design, mutually assured destruction, Nash equilibrium, new economy, open economy, peer-to-peer, pirate software, placebo effect, price discrimination, profit maximization, rent-seeking, Richard Stallman, Silicon Valley, Skype, slashdot, software patent, the market place, total factor productivity, trade liberalization, transaction costs, Y2K

To summarize, (1) before 1930, only some mechanical and chemical inventions related to agriculture could be patented. (2) In 1930, the Plant Patent Act offered patent protection to asexually reproduced plants. (3) In 1970, the Plant Variety Protection Act extended such protection to plants P1: KNP head margin: 1/2 gutter margin: 7/8 CUUS245-03 cuus245 978 0 521 87928 6 May 8, 2008 13:56 54 Against Intellectual Monopoly that are sexually reproduced. (4) Between 1980 and 1987, patent protection was extended to the products of biotechnology. One would expect this progressive extension of “intellectual property” protection to bring about a dramatic acceleration in useful innovation, at least since the early 1970s. One measure of useful innovation is what economists call total factor productivity (TFP): how much output (of food, for example) can be produced from given inputs (labor and land, for example). So, we might expect that the growth rate of TFP in the agricultural section accelerated in response to all this additional patentability. This is not the case, as the historical data clearly show: in the United States, agricultural TFP has been growing at a remarkably constant pace since the end of the Second World War.11 More precisely, the average growth rate from 1948 to 1970 was essentially the same as from 1970 to 1992 – that is, about 50 percent – and it seems to have marginally slowed down after that.

In just four years, between 1997 and 2001, patent applications exploded by a spectacular 50 percent.2 Part of the radioactive fallout from this explosion in patent applications was the increase in the membership of the “intellectual property” section of the American Bar Association, which went from 5,500 to almost 22,000.3 If patents beget prosperity and innovation, we might expect that this explosion in patenting coincided with a vast technological improvement. Of course, it did not. A common measure of technological improvement is the increase in total factor productivity (TFP) – as mentioned in the previous chapter, this measures how much additional output can be produced from a given combination of inputs by using those inputs better. Higher TFP means, for example, more and better cars from the same labor and using other factors such as metal and plastic. Rough-and-ready aggregate measures of TFP growth do not display a strong trend during the past fifty years.

See also copyright; 10, 158–159 ideas; ideas, copies of; intellectual intellectual monopoly unnecessary for, monopoly; non-compete clauses; 15 patents lack of under monopoly, 43, 151, 187 abolition of, 253–257 limited by patents, 4, 42, 49–50, 83–84 control of after sale, 8 in newspapers, 29 desirable features of world without, patent law as reflection of state of, 191 125–126 patents and reduction of, 83–84 duration of and market size, 175 and patents in software, 197 effect on world history, 263–264 possible under abolition of patents, 186 efforts to expand, 246–248 reasons for, 62–63 elimination of government from, risk in, 144–145, 174 252–253 and sharing of information, 136–137 goal of complete elimination, 264–265 social value of, 57 history of in Europe, 43–47 in software without patent protection, 16 as incentive, 6 in steam engines, See also steam engines levels of and R&D/BDP ratio, 196t studies of patents and, 192, 198t, and monopoly profits, 6 subsidies for, 260–261 vs. ordinary property, 123–124 and Total Factor Productivity (TFP), 54 overuse argument for, 177–179 innovators. See also first-mover advantage; in poor and developing countries, innovation; producers 247–248 and promise of large initial rents, 132–133 and R&D as fraction of GDP, 195–196 rents of compared to imitators, 133 reasons to abolish, 243–244 rewarding of, 6 recent vintage of, 15 insufficient rent, 135 reform of, 244–245, 257–259 intellectual colonization, 38 strengthening of, 192, 194–196, 197–198 intellectual imperialism, 81 suggestions for reform in, 248–262 intellectual monopoly.


EuroTragedy: A Drama in Nine Acts by Ashoka Mody

"Robert Solow", Andrei Shleifer, asset-backed security, availability heuristic, bank run, banking crisis, Basel III, Berlin Wall, book scanning, Bretton Woods, call centre, capital controls, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, credit crunch, Daniel Kahneman / Amos Tversky, debt deflation, Donald Trump, eurozone crisis, Fall of the Berlin Wall, financial intermediation, floating exchange rates, forward guidance, George Akerlof, German hyperinflation, global supply chain, global value chain, hiring and firing, Home mortgage interest deduction, income inequality, inflation targeting, Irish property bubble, Isaac Newton, job automation, Johann Wolfgang von Goethe, Johannes Kepler, Kenneth Rogoff, Kickstarter, liberal capitalism, light touch regulation, liquidity trap, loadsamoney, London Interbank Offered Rate, Long Term Capital Management, low-wage service sector, Mikhail Gorbachev, mittelstand, money market fund, moral hazard, mortgage tax deduction, neoliberal agenda, offshore financial centre, oil shock, open borders, pension reform, premature optimization, price stability, purchasing power parity, quantitative easing, rent-seeking, Republic of Letters, Robert Gordon, Robert Shiller, Robert Shiller, short selling, Silicon Valley, The Great Moderation, The Rise and Fall of American Growth, too big to fail, total factor productivity, trade liberalization, transaction costs, urban renewal, working-age population, Yogi Berra

In addition, European companies made the judgment that buying American companies and thus buying into the exciting American story was a better value than investing at home.20 Capital flowed from Europe to America, in the process causing the euro to depreciate vis-​à-​vis the dollar. The United States was experiencing an economic renaissance. Central to this renaissance was a sustained rise in productivity growth since around 1995. Productivity—​output per worker or the more inclusive “total factor productivity,” which measures output produced by a bundle of capital and labor inputs—​was rising quickly. High-​tech sectors—​computer hardware and software, pharmaceuticals, and biotech—​were booming, and the stock market was buoyant. In contrast, European productivity was growing slowly, well below the pace in the United States.21 This US-​Europe productivity growth difference reflected the fact that although both had been in the economic doldrums for much of the 1970s and 1980s, the American economy had reinvented itself and the European economy had not.

This continued tendency to use banks as an instrument of public policy was prevalent in many parts of what is now the eurozone, but it was especially strong in the French civil law countries (France, Belgium, Italy, Portugal, and Spain), where governments were either the principal owners of banks or had a heavy hand in directing the flow of credit.24 However, unlike in the “golden years,” the latest round of credit expansion often favored specific regions or special interests; credit flows were misdirected and fostered public corruption.25 In France, for example, President Giscard d’Estaing began this latest phase of bank expansion in 1974, and President Mitterrand continued the process in May 1981, soon after taking office, when he nationalized thirty-​six irrational exuberance 163 banks, placing around 60 percent of bank deposits in the hands of the state.26 Harvard University political scientist Peter Hall has concluded that these efforts did more harm than good; the government used its “considerable control over the flow of finance” to channel funds “towards declining sectors.”27 In Italy, government-​owned banks pushed subsidized credit to the politically well connected.28 Although the Italian government claimed it was promoting “industrial restructuring and growth,” as in France, Italian banks were significant funders of declining sectors and low-​productivity projects.29 Even when the lending was well intentioned, European businesses, instead of investing in creative effort or in stepped-​up worker training, focused mainly on replacing workers with more machines. This strategy could generate only limited productivity gains. With the aid of more machines, workers did produce more output per hour, but the gains steadily diminished. Growth in the all-​important “total factor productivity,” which accounts for both labor and capital inputs, decelerated quickly.30 Oddly, slower productivity growth made it easier for banks to expand. When growth slows, households do not typically reduce the share of their incomes that they save. The savings add to household wealth, and, hence, the wealth-​to-​income ratio increases. The slower the rate of economic growth, the faster the increase in the wealth-​to-​income ratio.

European authorities had recognized that the slow pace of productivity growth was a problem soon after the euro was introduced. At the summit in Lisbon on March 23–​24, 2000, Eurozone leaders had ostentatiously pledged to “enhance” innovation and “modernize” education and thus make Europe’s 105 United Kingdom 100 France 95 Germany 90 85 Italy 80 Spain 75 1999 2000 01 02 03 04 05 06 07 08 Figure 4.6. Euro-​area productivity growth falls behind. (Total factor productivity relative to the United States, US = 100.) Source: Antonin Bergeaud, Gilbert Cette, and Remy Lecat. 2016. “Productivity Trends in Advanced Countries between 1890 and 2012.” Review of Income and Wealth 62, no. 3: 420–​444. Data available at www.longtermproductivity.com. irrational exuberance 169 economy “the most competitive and dynamic knowledge-​based economy in the world.”57 They had listed 102 specific targets for national authorities to achieve by 2010, with the goal of raising GDP growth by one percentage point a year.


pages: 339 words: 88,732

The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies by Erik Brynjolfsson, Andrew McAfee

"Robert Solow", 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, access to a mobile phone, additive manufacturing, Airbnb, Albert Einstein, Amazon Mechanical Turk, Amazon Web Services, American Society of Civil Engineers: Report Card, Any sufficiently advanced technology is indistinguishable from magic, autonomous vehicles, barriers to entry, basic income, Baxter: Rethink Robotics, British Empire, business cycle, business intelligence, business process, call centre, Charles Lindbergh, Chuck Templeton: OpenTable:, clean water, combinatorial explosion, computer age, computer vision, congestion charging, corporate governance, creative destruction, crowdsourcing, David Ricardo: comparative advantage, digital map, employer provided health coverage, en.wikipedia.org, Erik Brynjolfsson, factory automation, falling living standards, Filter Bubble, first square of the chessboard / second half of the chessboard, Frank Levy and Richard Murnane: The New Division of Labor, Freestyle chess, full employment, G4S, game design, global village, happiness index / gross national happiness, illegal immigration, immigration reform, income inequality, income per capita, indoor plumbing, industrial robot, informal economy, intangible asset, inventory management, James Watt: steam engine, Jeff Bezos, jimmy wales, job automation, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kevin Kelly, Khan Academy, knowledge worker, Kodak vs Instagram, law of one price, low skilled workers, Lyft, Mahatma Gandhi, manufacturing employment, Marc Andreessen, Mark Zuckerberg, Mars Rover, mass immigration, means of production, Narrative Science, Nate Silver, natural language processing, Network effects, new economy, New Urbanism, Nicholas Carr, Occupy movement, oil shale / tar sands, oil shock, pattern recognition, Paul Samuelson, payday loans, post-work, price stability, Productivity paradox, profit maximization, Ralph Nader, Ray Kurzweil, recommendation engine, Report Card for America’s Infrastructure, Robert Gordon, Rodney Brooks, Ronald Reagan, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Simon Kuznets, six sigma, Skype, software patent, sovereign wealth fund, speech recognition, statistical model, Steve Jobs, Steven Pinker, Stuxnet, supply-chain management, TaskRabbit, technological singularity, telepresence, The Bell Curve by Richard Herrnstein and Charles Murray, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, total factor productivity, transaction costs, Tyler Cowen: Great Stagnation, Vernor Vinge, Watson beat the top human players on Jeopardy!, winner-take-all economy, Y2K

A decade after the computer productivity paradox was popularized, Harvard’s Dale Jorgenson, working with Kevin Stiroh at the New York Federal Reserve Bank did a careful growth accounting and concluded, “A consensus has emerged that a large portion of the acceleration through 2000 can be traced to the sectors of the economy that produce information technology or use IT equipment and software most intensively.”12 But it’s not just the computer-producing sectors that are doing well. Kevin Stiroh of the New York Federal Reserve Bank found that industries that were heavier users of IT tended to be more productive throughout the 1990s. This pattern was even more evident in recent years, according to a careful study by Harvard’s Dale Jorgenson and two coauthors. They found that total factor productivity growth increased more between the 1990s and 2000s in IT-using industries, while it fell slightly in those sectors of the economy that did not use IT extensively.13 It’s important to note that the correlation between computers and productivity is not just evident at the industry level; it occurs at the level of individual firms as well. In work Erik did with Lorin Hitt of the University of Pennsylvania Wharton School, he found that firms that use more IT tend to have higher levels of productivity and faster productivity growth than their industry competitors.14 The first five years of the twenty-first century saw a renewed wave of innovation and investment, this time less focused on computer hardware and more focused on a diversified set of applications and process innovations.

” † That’s a good thing, because there are natural limits to how much we can increase inputs, especially labor. They’re subject to diminishing returns—no one is going to work more than twenty-four hours a day, or employ more than 100 percent of the labor force. In contrast, productivity growth reflects ability to innovate—it’s limited only by our imaginations. * Output divided by labor and physical capital inputs is often more ambitiously called ‘total factor productivity.’ However, that term can be a bit misleading, because there are other inputs to production. For instance, companies can make major investments in intangible organizational capital. The more kinds of inputs we are able to measure, the better we can account for overall output growth. As a result, the residual that we label “productivity” (not explained by growth of inputs) will get smaller.

Stiroh, “Information Technology and the U.S. Productivity Revival: What Do the Industry Data Say?,” American Economic Review 92, no. 5 (2002): 1559–76; and D. W. Jorgenson, M. S. Ho, and J. D. Samuels, “Information Technology and U.S. Productivity Growth: Evidence from a Prototype Industry Production Account,” Journal of Productivity Analysis, 36, no. 2 (2011): 159–75, especially table 5, which shows the total factor productivity growth was about ten times higher in IT-using sectors than in sectors that did not use IT extensively. 14. See E. Brynjolfsson and L. M. Hitt, “Computing Productivity: Firm-level Evidence,” Review of Economics and Statistics 85, no. 4 (2003): 793–808. Similarly, Stanford University’s Nicholas Bloom, Harvard University’s Rafaela Sadun, and the London School of Economics’ John Van Reenen found that American firms were particularly adept at implementing management practices that maximized the value of IT, and this lead to measurable productivity improvements, as documented.


pages: 436 words: 98,538

The Upside of Inequality by Edward Conard

affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, Albert Einstein, assortative mating, bank run, Berlin Wall, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Climatic Research Unit, cloud computing, corporate governance, creative destruction, Credit Default Swap, crony capitalism, disruptive innovation, diversified portfolio, Donald Trump, en.wikipedia.org, Erik Brynjolfsson, Fall of the Berlin Wall, full employment, future of work, Gini coefficient, illegal immigration, immigration reform, income inequality, informal economy, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), invention of the telephone, invisible hand, Isaac Newton, Jeff Bezos, Joseph Schumpeter, Kenneth Rogoff, Kodak vs Instagram, labor-force participation, liquidity trap, longitudinal study, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, mass immigration, means of production, meta analysis, meta-analysis, new economy, offshore financial centre, paradox of thrift, Paul Samuelson, pushing on a string, quantitative easing, randomized controlled trial, risk-adjusted returns, Robert Gordon, Ronald Reagan, Second Machine Age, secular stagnation, selection bias, Silicon Valley, Simon Kuznets, Snapchat, Steve Jobs, survivorship bias, The Rise and Fall of American Growth, total factor productivity, twin studies, Tyler Cowen: Great Stagnation, University of East Anglia, upwardly mobile, War on Poverty, winner-take-all economy, women in the workforce, working poor, working-age population, zero-sum game

According to the study’s estimates, intangible investments rose from about 7 percent of non-farm-business output in the late 1970s to 10 percent in the early 1990s to about 14 percent today. Intangible investments rose dramatically in the 1990s when productivity accelerated (see Figure 1-4, “U.S. Investment in Intangibles as a Percentage of GDP”). Visit bit.ly/2bpMCid for a larger version of this image. Given America’s heavy investment in knowledge-intensive intangible assets, it hardly seems coincidental that total factor productivity—productivity growth from innovation and know-how rather than from greater capital investment or education per worker—surged from a growth rate of 0.5 percent per year from 1974 to 1995 to 1.75 percent a year from 1995 to the economic peak preceding the financial crisis. America’s increased productivity growth relative to other high-wage economies stems from increased investment in intangibles—not magic.

The studies find that “a strong reliance on income taxes seems to be associated with significantly lower levels of GDP per capita than the use of taxes on consumption and property [which spread taxes more broadly to lower income groups]. . . . High top marginal rates of personal income tax reduce productivity growth by reducing entrepreneurial activity. . . . Industry-level evidence covering a subset of OECD countries suggests that there is a negative relationship between top marginal personal income tax rates and the long-run level of total factor productivity.”*43 A recent International Monetary Fund (IMF) study, often cited by advocates of redistribution*—whose headlines insisted that redistribution does not slow growth—admits that “when redistribution is already high (above the 75th percentile*), there is evidence that further redistribution is indeed harmful to growth, as the Okun ‘big trade-off’ hypothesis* would suggest.”44 Guess which country lies at the seventy-fifth percentile?

* This mismeasurement grew so untenable that in 2013 the U.S. Bureau of Economic Analysis took its first steps to account properly for intangible investment. * As of the time of this writing. * Facebook acquired Instagram. * I’m simplifying here. Read the more carefully reasoned calculation in my book Unintended Consequences, chapter 9, “Redistributing Income.” * Constant 2005 dollars. * Total factor productivity (TFP) is innovative know-how. * Ironically, Nobel Prize winner Joe Stiglitz, in the postscript to his recent book The Great Divide, calls me out by citing the IMF study to oppose my arguments. Joe and I have publicly debated inequality on multiple occasions. * That is, above the 75th percentile of countries in the study’s sample * Refers to Arthur Okun, an influential economist and adviser in the Kennedy and Johnson administrations, who argued income redistribution reduces efficiency and slows growth in his famous book, Equality and Efficiency: The Big Tradeoff


pages: 204 words: 53,261

The Tyranny of Metrics by Jerry Z. Muller

Affordable Care Act / Obamacare, Atul Gawande, Cass Sunstein, Checklist Manifesto, Chelsea Manning, collapse of Lehman Brothers, corporate governance, Credit Default Swap, crowdsourcing, delayed gratification, deskilling, Edward Snowden, Erik Brynjolfsson, Frederick Winslow Taylor, George Akerlof, Hyman Minsky, intangible asset, Jean Tirole, job satisfaction, joint-stock company, joint-stock limited liability company, Moneyball by Michael Lewis explains big data, performance metric, price mechanism, RAND corporation, school choice, Second Machine Age, selection bias, Steven Levy, total factor productivity, transaction costs, WikiLeaks

But surely the large-scale organizations of our society are the poorer for driving out those most likely to innovate and initiate. The more that work becomes a matter of filling in the boxes by which performance is to be measured and rewarded, the more it will repel those who think outside the box. Costs to productivity. Economists who specialize in measuring economic productivity report that in recent years the only increase in total factor productivity in the American economy has been in the information-technology-producing industries.11 A question that ought to be asked is to what extent the culture of metrics—with its costs in employee time, morale, and initiative, and its promotion of short-termism—has itself contributed to economic stagnation? 16 WHEN AND HOW TO USE METRICS A CHECKLIST There is nothing intrinsically pernicious about counting and measuring human performance.

Kranton, Identity Economics: How Our Identities Shape Our Work, Wages, and Well-Being (Princeton, 2010), chap. 5, “Identity and the Economics of Organizations.” 8. Berwick, “The Toxicity of Pay for Performance.” 9. Edmund Phelps, Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge and Change (Princeton, 2013), p. 269. 10. Similarly, Scott, Seeing Like a State, p. 313. 11. According to Dale Jorgenson of Harvard, the only source of growth of total factor productivity was in IT-producing industries. Dale W. Jorgenson, Mun Ho, and Jon D. Samuels, “The Outlook for U.S. Economic Growth,” in Brink Lindsey (ed.), Understanding the Growth Slowdown (Washington, D.C., 2015). On how behavioral metrics in human resources sap initiative, see Lutz, Car Guys vs. Bean Counters, pp. ix–x. CHAPTER 16. WHEN AND HOW TO USE METRICS: A CHECKLIST 1. Young et al., “Financial Incentives, Professional Values and Performance,” Journal of Organizational Behavior 33 (2012), pp. 964–83, esp. p. 969. 2.


pages: 442 words: 39,064

Why Stock Markets Crash: Critical Events in Complex Financial Systems by Didier Sornette

Asian financial crisis, asset allocation, Berlin Wall, Bretton Woods, Brownian motion, business cycle, buy and hold, capital asset pricing model, capital controls, continuous double auction, currency peg, Deng Xiaoping, discrete time, diversified portfolio, Elliott wave, Erdős number, experimental economics, financial innovation, floating exchange rates, frictionless, frictionless market, full employment, global village, implied volatility, index fund, information asymmetry, intangible asset, invisible hand, John von Neumann, joint-stock company, law of one price, Louis Bachelier, mandelbrot fractal, margin call, market bubble, market clearing, market design, market fundamentalism, mental accounting, moral hazard, Network effects, new economy, oil shock, open economy, pattern recognition, Paul Erdős, Paul Samuelson, quantitative trading / quantitative finance, random walk, risk/return, Ronald Reagan, Schrödinger's Cat, selection bias, short selling, Silicon Valley, South Sea Bubble, statistical model, stochastic process, stocks for the long run, Tacoma Narrows Bridge, technological singularity, The Coming Technological Singularity, The Wealth of Nations by Adam Smith, Tobin tax, total factor productivity, transaction costs, tulip mania, VA Linux, Y2K, yield curve

Because its momentum has become so dependent on rising private borrowing and rising capital gains, the real economy of the United States is at the mercy of the stock market to an unusual extent. A crash would probably have a much larger effect on output and employment now than in the past [162]. However, there is one key ingredient that has been left out of this analysis: productivity gains. Recall that labor productivity is defined as real output per hour of work. Similarly, total factor productivity is defined as real output per unit of all inputs. Total factor productivity reflects, in part, the overall efficiency with which inputs are transformed into outputs. It is often associated with technology, but it also reflects the impact of a host of other factors, like economies of scale, any unaccounted inputs, resource reallocations, and so on. When productivity grows, the growth of the economy (GDP) can be larger than the growth of the difference between the amounts pumped in (government spending and exports) and siphoned out (taxes and imports), because more output per input creates internally new wealth at the aggregate level.

As a consequence, it seems that Godley’s arguments do not apply directly. According to the official U.S. productivity statistics prepared by the U.S. Bureau of Labor Statistics, the average annual growth of total factor productivity was 2.7% between 1995 and 1999 (such a large growth rate implies that productivity would be 70% higher after 20 years). Clearly, the rate of productivity growth can have an enormous effect on real output and living standards. Productivity growth is a fundamental measure of economic health, and all of the major measures of aggregate labor and total factor productivity have recently shown improvements after long spells of sluggishness. If this improved performance continues, strong overall performance of real growth and low inflation may be sustained, although the short-run linkage of productivity to real income (and to output, after the very shortest period) is not as tight as some might expect [415].


pages: 397 words: 112,034

What's Next?: Unconventional Wisdom on the Future of the World Economy by David Hale, Lyric Hughes Hale

affirmative action, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Berlin Wall, Black Swan, Bretton Woods, business cycle, capital controls, Cass Sunstein, central bank independence, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, debt deflation, declining real wages, deindustrialization, diversification, energy security, Erik Brynjolfsson, Fall of the Berlin Wall, financial innovation, floating exchange rates, full employment, Gini coefficient, global reserve currency, global village, high net worth, Home mortgage interest deduction, housing crisis, index fund, inflation targeting, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Just-in-time delivery, Kenneth Rogoff, Long Term Capital Management, Mahatma Gandhi, Martin Wolf, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, money market fund, money: store of value / unit of account / medium of exchange, mortgage tax deduction, Network effects, new economy, Nicholas Carr, oil shale / tar sands, oil shock, open economy, passive investing, payday loans, peak oil, Ponzi scheme, post-oil, price stability, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, rent-seeking, reserve currency, Richard Thaler, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, sovereign wealth fund, special drawing rights, technology bubble, The Great Moderation, Thomas Kuhn: the structure of scientific revolutions, Tobin tax, too big to fail, total factor productivity, trade liberalization, Washington Consensus, Westphalian system, WikiLeaks, women in the workforce, yield curve

Businesses will have to pay more for entry-level workers and then work harder to retain them for longer because they will not be so easy to replace. The macroeconomic consequences of the Lewis turning point are large. Before the turning point, the capitalist economy grows mainly through an accumulation of factors—labor and capital. The efficiency with which these factors are used—in economists’ jargon, “total factor productivity,” or TFP—is secondary. After the turning point, sheer factor accumulation slows down, and efficiency or TFP gains must become the main driver of economic growth. The most important question now confronting Asian bulls such as ourselves is: Can Asia evolve from “growth through accumulation of factors” to “growth through productivity”? A Structural Rebalancing Toward Consumption The answer to the above question would require a full book, but regardless of the longer-term trend, one thing now seems obvious: A certain amount of economic rebalancing will occur naturally as households will grab a bigger share of national income, thus increasing their consumption power.

STOP-GO POLICIES: A sequence of alternations in official policy between trying to expand and contract effective demand, which was put in place in the United Kingdom in the 1950s and 1960s. SUBSISTENCE AGRICULTURE: Farming in which the bulk of a farmer’s output is devoted to the feeding of himself and his family, with little excess available to be sold to third parties. TECHNOCRAT: A bureaucrat who is intensively trained in engineering, economics, or a form of technology. TOTAL FACTOR PRODUCTIVITY: The portion of output that is not explained by the amount of input used in production. TRAGEDY OF THE COMMONS: A metaphor that illustrates that it is hard to coordinate and pay for public goods. Individuals have no incentive to limit consumption of a public good, and thus the public good is overwhelmed with demand. TRANCHE: A division or portion of something. TRANSSHIPMENT: The movement of cargo between ships or between two different modes of transport.

See Troubled Asset Relief Program (TARP) tar sands industry, xviii tax cuts, xvii; in Canada, xviii; in US, 5 taxes: Canada, 20; consumption-based taxes, 261–263; corporate taxes, 260; energy taxes, 260; excise taxes, 262; income taxes, 6, 260–262; payroll taxes, 261–262; sales taxes, 262; Tobin tax, xxvii, 250–255; turnover tax, 253–255; value-added tax (VAT), xxviii, 6, 43, 262 tax policy, xxvii–xxviii; Canada, 20, 26; Mexico, xix, 42–43; public debt and, 259–260; South Africa, 136; US, 6, 60, 260–261 technology: climate change and, 227; hydrocarbons and, 181–183 telecoms, 26 television, 298 Term Asset-Backed Securities Loan Facility (TALF), 277 testosterone, 290 Thailand, 7 Thaler, Richard, 291 Tobin, James, 250 Tobin tax, xxvii, 250–255 “too-big-too-fail” bailouts, 266, 267, 268 total factor productivity (TFP), 87 toxic securities, 238–239 transparency, 280–282 Trichet, Jean-Claude, 237–238 Triffin Dilemma, 252–253 Troubled Asset Relief Program (TARP), 3, 277 turnover tax, 253–255 Tversky, Amos, 289 Uganda, xxii, xxv, 126 unemployment rate, xvi, 4 United Kingdom: climate change policy of, xxvi; domestic demand in, 140; as financial capital, 244–245; fiscal deficit in, 257; fiscal policy of, 59, 71; government debt in, 160–161; Tobin tax and, 251–252 United Nations Development Programme (UNDP), 184 United Nations Framework Convention on Climate Change (UNFCCC), 220–222 United States: banking sector in, xxvii, 235–241; Canada and, 13–14, 24; climate change and, xxvi, 224–225; corporate sector in, xvi, 4, 8; economic recovery in, xvi–xvii, 3–11, 13–14, 65–66; as engine of world demand, 96, 140; environmental policies, 5, 27; financial system of, 157; fiscal deficit in, 10–11, 70, 257; fiscal policy of, xvii, 6, 10–11; fiscal stimulus program in, 4; government debt, 160; growth rate in, 5, 13–14; household sector in, 8; housing sector in, 9; industrial production in, 65; monetary policy of, 7–10; partisan politics in, 5–6; politics in, 269–270; productivity gains in, xvi, 4; public policy of, xvi–xvii; stimulus measures in, 4, 13; tax policy of, 6, 63, 260–261 Uribe, Alvaro, 33 Uruguay, 48, 49–50 US consumers, xv US dollar: alternatives to, 158; devaluation of, xvii, 7, 25; gold prices and, 173–174; as reserve currency, xxiv, 153–165; weakening, and commodity prices, 53 US government securities, 160 value-added tax (VAT), xxviii, 6, 43, 262 Van Alstyne, Marshal, 296 Venezuela, 48–49, 50, 51, 183 Volcker Rule, 267, 268 web-based communities, 296 Weber, Alex, 285 welfare expenditures, South Africa, 137–138 Wellink, Nout, 248 West Africa, xxii, 126–127 Westphalian system, 251 World Bank, 119, 154 world economy, 12–14; in 2010–2011, 94–95; recovery of, xv; trends underpinning, 78–80 yen, xxiv, 9, 97, 98, 167 yield curves, 82–83 Yoshida, Shigeru, 105 Zambia, 118, 125 ZANU-PF, 125 Zapatistas, 35 Zedillo, Ernesto, 35 Zimbabwe, xxii, 125 Zoellick, Robert, 169 “zombie” firms, 112 Zuma, Jacob, 125, 128, 134–137


pages: 756 words: 120,818

The Levelling: What’s Next After Globalization by Michael O’sullivan

"Robert Solow", 3D printing, Airbnb, algorithmic trading, bank run, banking crisis, barriers to entry, Bernie Sanders, bitcoin, Black Swan, blockchain, Boris Johnson, Branko Milanovic, Bretton Woods, British Empire, business cycle, business process, capital controls, Celtic Tiger, central bank independence, cloud computing, continuation of politics by other means, corporate governance, credit crunch, cryptocurrency, deglobalization, deindustrialization, disruptive innovation, distributed ledger, Donald Trump, eurozone crisis, financial innovation, first-past-the-post, fixed income, Geoffrey West, Santa Fe Institute, Gini coefficient, global value chain, housing crisis, income inequality, Intergovernmental Panel on Climate Change (IPCC), knowledge economy, liberal world order, Long Term Capital Management, longitudinal study, market bubble, minimum wage unemployment, new economy, Northern Rock, offshore financial centre, open economy, pattern recognition, Peace of Westphalia, performance metric, private military company, quantitative easing, race to the bottom, reserve currency, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, Scramble for Africa, secular stagnation, Silicon Valley, Sinatra Doctrine, South China Sea, South Sea Bubble, special drawing rights, supply-chain management, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, total factor productivity, trade liberalization, tulip mania, Valery Gerasimov, Washington Consensus

In a very broad sense, economies will grow when labor and investment are applied in clever and productive ways to generate more output with existing resources or even new output (innovation). Economists refer to this as “total factor productivity.” Productivity is an essential factor in enabling emerging economies to move from early phases of growth (agriculture and manufacturing, for example) to higher-end ones (such as services and technology). It is also the principal way in which developed economies and societies can sustain high levels of economic growth. In this context it is a concern that in the five years from 2012 to 2017 productivity growth in both the developed and developing countries dropped to historically low levels (one long-run data source puts today’s level of productivity growth in the United States at the lowest since 1880, and much the same is true for Europe).9 In more detail, in the United States, total factor productivity averaged 1 percent from 1996 to 2006, then slipped to 0.5 percent from 2007 to 2012, and has languished at close to zero since then.10 Long-term, or perhaps “structural,” productivity is more important because it speaks to the capability of a country and its people to boost output.

See financial markets strength of countries, 158–159, 162–164, 165 Sufi, Amir, 176 Survey of Consumer Finance, 43 Sweden, 6 Syriza, 110 Taleb, Nassim, 69 technology automation issues, 46 in China, 224, 231, 272–273 economy and economic growth, 142, 214 first globalization, 58, 60, 61–62 as force, 58–59 frameworks and standards, 297–299 and globalization, 213–214 and governments, 272–273 and inequalities, 46 interconnections worldwide, 8–9 Levellers as model, 96, 98, 99–100 pace of change, 26 political parties, 115 and productivity, 145 regulation, 275–276 as solution, 26 transparency, 262 Thatcher, Margaret, 133 Thirty Years’ War, 240 314 Action, 129 “Thucydides’s Trap,” 224 TomTom Traffic Index, 50 top 1 percent of wealthy, 40, 42 “total factor productivity,” 144 trade China, 33, 216, 232 and first globalization, 59–60 and globalization, 30, 31, 32–33 and jobs, 35 Levellers’ demands, 89 policy and agreements, 32–33 and politics, 34, 35–36 problems and disputes, 24, 33–34 protectionism, 34 recess, 30, 31, 32 US vs. China dispute, 33, 34–35 Trans-Atlantic Trade and Investment Partnership (TTIP), 33 transnational governance, 62–64 Trans-Pacific Partnership (TPP), 33 transparency and corruption, 262 transportation, 60 traveling time to work, 50 Treaty of Portsmouth, 293 “trilemma of globalization,” 237–238 Trudeau, Justin, 26 Trump, Donald, and administration economic growth, 14 economic policy, 140–141 parallels with Hoover, 64–65 and political conventions, 80 and trade, 24, 33, 35, 65 Tucker, Paul, 169 Turkey, 153–154 Uber and Uber economy, 142 United Kingdom (UK) governance code, 205 place in the world, 18, 246 in poles of multipolar world, 225–226, 249–251 political parties and splits, 112–113 political types, 127–128 post-Brexit scenarios, 250–256 productivity, 145 stereotypes and exceptionalism, 246–247 See also Brexit; English history United Nations, 263–264, 266 United States aging of population, 148 banking reforms, 300–301 and Big Tech, 272 central bank (see Federal Reserve System) change in civil service, 134 China as threat, 288–289 climate change, 269–270 Constitution, 281 corporate governance, 204–205 currency/dollar, 154, 155, 226, 267 debt, 187, 192 decline in influence, 277 democracy and republic, 3, 279 diplomatic power, 293–294 economic influence, 226, 267 and globalization, 64–65 Greenspan approach, 171 Hamilton’s deeds, 280, 281, 283, 284, 286, 295 Hamilton’s impact, 277–278, 279 immigration, 217 inequalities, 40, 41, 43–47, 299–300 infrastructure overhaul program, 149–150 investment, 146–147 labor reforms and taxes, 301–302 and Latin America, 221 in levelling, 246 long-term unemployment, 299–300 manufacturing, 35 marriage views, 49–50 military power, 295–297 new candidates in politics, 111, 119, 126–127, 128–130 next recession, 76, 185 as pole in multipolar world, 222, 223, 225–226, 279, 295–302 productivity, 144, 147–148, 301 and QE, 175, 176–177, 183 skyscrapers, 211–212 technology frameworks, 297–299 trade and dispute with China, 24, 32–33, 34–35 voter self-identification, 52 wealth inequality, 42, 43 women as candidates, 111 US Treasury, 283, 286 Van Reybrouck, David, 108, 109 Vance, J.


pages: 504 words: 139,137

Efficiently Inefficient: How Smart Money Invests and Market Prices Are Determined by Lasse Heje Pedersen

activist fund / activist shareholder / activist investor, algorithmic trading, Andrei Shleifer, asset allocation, backtesting, bank run, banking crisis, barriers to entry, Black-Scholes formula, Brownian motion, business cycle, buy and hold, buy low sell high, capital asset pricing model, commodity trading advisor, conceptual framework, corporate governance, credit crunch, Credit Default Swap, currency peg, David Ricardo: comparative advantage, declining real wages, discounted cash flows, diversification, diversified portfolio, Emanuel Derman, equity premium, Eugene Fama: efficient market hypothesis, fixed income, Flash crash, floating exchange rates, frictionless, frictionless market, Gordon Gekko, implied volatility, index arbitrage, index fund, interest rate swap, late capitalism, law of one price, Long Term Capital Management, margin call, market clearing, market design, market friction, merger arbitrage, money market fund, mortgage debt, Myron Scholes, New Journalism, paper trading, passive investing, price discovery process, price stability, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, random walk, Renaissance Technologies, Richard Thaler, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, selection bias, shareholder value, Sharpe ratio, short selling, sovereign wealth fund, statistical arbitrage, statistical model, stocks for the long run, stocks for the long term, survivorship bias, systematic trading, technology bubble, time value of money, total factor productivity, transaction costs, value at risk, Vanguard fund, yield curve, zero-coupon bond

., the gross domestic product (GDP), often referred to with the symbol Y. This output is produced by the country’s labor (L) and capital (K). The labor L refers to the number of people who work. A country’s physical capital K refers to its machines, plants, natural resources, computers, trucks, and infrastructure that are put to use. The output supplied can be thought of as using production function F: where TFP is the total factor productivity, which measures how good the technology is, how well educated and skillful the population is, and how efficiently capital and people are allocated to the most productive sectors. In the long run, that is all there is to it: Output is what the country can produce with the people and machines that it has. Prices and wages adjust to ensure that supply equals demand, and long-run GDP simply depends on the labor, capital, and production technology.

See also merger arbitrage Taylor principle, 189 Taylor rule, 7t, 189–90, 189n, 191, 194; monetary easing and, 195 tech bubble. See Internet bubble of late 1990s telecom mergers, 318–19 terminal value of a stock, 91 term loan, 118 term premium, 168, 249, 249n terms of trade, 199 term structure of interest rates, 242–43, 243f, 250; trading on the curvature of, 251–55, 252f, 253f, 254f; trading on the level of, 250; trading on the slope of, 250–51. See also yield curve TFP (total factor productivity), 192 thematic global macro traders, 12, 200 theta, 280, 280f Tiger Cub funds, 108 Tiger Management Corporation, 1, 108 time decay, in convertible bond arbitrage, 280, 280f time lags, in backtesting, 47 time series momentum strategies, 209–10; margin requirements for, 225; position sizing in, 213, 213n, 214, 219–20, 225; single-assets example (1985 to 2012), 212–14, 214–17f. See also managed futures investing time series momentum strategies, diversified: example of (1985 to 2012), 214, 218–19, 218t; explanation of returns from, 219–21, 220f; hypothetical fee for, 223, 224; managed futures fund returns and, 221, 222t, 223; versus S&P 500, 219, 219f, 220, 220f time series regression, 51–52, 53 TIPS (Treasury inflation-protected securities), 192 T-Mobile, 319 total factor productivity (TFP), 192 tracking error, 22, 30 tracking error risk, 30 track record of hedge fund, 38 trading rules: broad classes of, 47–48; defined, 47; implementation costs and, 64 trading signals, 47; multivariate regression on, 51, 53 trading strategies.

See also managed futures investing time series momentum strategies, diversified: example of (1985 to 2012), 214, 218–19, 218t; explanation of returns from, 219–21, 220f; hypothetical fee for, 223, 224; managed futures fund returns and, 221, 222t, 223; versus S&P 500, 219, 219f, 220, 220f time series regression, 51–52, 53 TIPS (Treasury inflation-protected securities), 192 T-Mobile, 319 total factor productivity (TFP), 192 tracking error, 22, 30 tracking error risk, 30 track record of hedge fund, 38 trading rules: broad classes of, 47–48; defined, 47; implementation costs and, 64 trading signals, 47; multivariate regression on, 51, 53 trading strategies. See hedge fund strategies transaction costs, 63–64; adjusting backtests for, 50; of arbitrage trades, 235; Asness on, 160, 163; estimating expected values of, 69–70; implementation shortfall and, 70–72; liquidity of securities and, 63; of managed futures strategies, 224–25; market liquidity risk and, 42–45, 63; as market makers’ profit, 154; measuring, 67–69; optimal trading in light of, 64–67, 66f; in portfolio optimization, 57; reduced by short-selling, 123; sources of, 63 “Travolta” collar deal, 302, 302f Treasury bonds: hedging interest-rate risk with, 283; on-the-run versus off-the-run, 13, 241, 257, 258f, 259; swaps and, 259, 260.


pages: 322 words: 84,580

The Economics of Belonging: A Radical Plan to Win Back the Left Behind and Achieve Prosperity for All by Martin Sandbu

"Robert Solow", Airbnb, autonomous vehicles, balance sheet recession, bank run, banking crisis, basic income, Berlin Wall, Bernie Sanders, Boris Johnson, Branko Milanovic, Bretton Woods, business cycle, call centre, capital controls, carbon footprint, Carmen Reinhart, centre right, collective bargaining, debt deflation, deindustrialization, deskilling, Diane Coyle, Donald Trump, Edward Glaeser, eurozone crisis, Fall of the Berlin Wall, financial intermediation, full employment, future of work, gig economy, Gini coefficient, hiring and firing, income inequality, income per capita, industrial robot, intangible asset, job automation, John Maynard Keynes: technological unemployment, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, liquidity trap, longitudinal study, low skilled workers, manufacturing employment, Martin Wolf, meta analysis, meta-analysis, mini-job, mortgage debt, new economy, offshore financial centre, oil shock, open economy, pattern recognition, pink-collar, precariat, quantitative easing, race to the bottom, Richard Florida, Robert Shiller, Robert Shiller, Ronald Reagan, secular stagnation, social intelligence, TaskRabbit, total factor productivity, universal basic income, very high income, winner-take-all economy, working poor

International Monetary Fund, World Bank, and World Trade Organisation, Making Trade an Engine of Growth for All: The Case for Trade and for Policies to Facilitate Adjustment, 10 April 2017, https://www.imf.org/en/Publications/Policy-Papers/Issues/2017/04/08/making-trade-an-engine-of-growth-for-all. 7. Mark Muro and Siddharth Kulkarni, “Voter Anger Explained—in One Chart,” Brookings, 15 March 2016, https://www.brookings.edu/blog/the-avenue/2016/03/15/voter-anger-explained-in-one-chart/. 8. This is the sort of pure ideas-based efficiency (economists call it “total factor productivity”) that Paul Romer received the 2018 economics Nobel Prize for analysing. For the amazing story of how the shipping container transformed trade, see Tim Harford, “50 Things That Made the Modern Economy: The Simple Steel Box That Transformed Global Trade,” BBC World Service, 9 January 2017, https://www.bbc.co.uk/news/business-38305512. 9. Martin Sandbu, “How Blue-Collar Aristocracy Was Laid Low,” Financial Times, 19 November 2018, https://www.ft.com/content/b336e428-e8e5-11e8-a34c-663b3f553b35. 10.

Philippe Aghion, Antonin Bergeaud, Richard Blundell, and Rachel Griffith, “The Innovation Premium to Soft Skills in Low-Skilled Occupations,” VoxEU, 2 January.2020, https://voxeu.org/article/innovation-premium-soft-skills-low-skilled-occupations. 10. Valerie Cerra, Sweta Saxena, and Ugo Panizza, “International Evidence on Recovery from Recessions” (IMF Working Paper 09/183, 2009), https://www.imf.org/en/Publications/WP/Issues/2016/12/31/International-Evidence-on-Recovery-from-Recessions-23234. 11. Narayana Kocherlakota, “Growth Begets Growth: Reflections on Total Factor Productivity,” blog post, 21 February 2016, https://sites.google.com/site/kocherlakota009/policy/thoughts-on-policy/2-21-16; Martin Sandbu, “Economies Can Take a Lot More Stimulus without Overheating,” Financial Times, 23 May 2017, https://www.ft.com/content/7ae0866a-3f04-11e7-9d56-25f963e998b2. 12. Xavier Debrun, “Growth Dividend from Stabilizing Fiscal Policies,” IMFBlog, 8 April 2015, https://blogs.imf.org/2015/04/08/growth-dividend-from-stabilizing-fiscal-policies/. 13.


pages: 554 words: 158,687

Profiting Without Producing: How Finance Exploits Us All by Costas Lapavitsas

"Robert Solow", Andrei Shleifer, asset-backed security, bank run, banking crisis, Basel III, borderless world, Branko Milanovic, Bretton Woods, business cycle, capital controls, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, computer age, conceptual framework, corporate governance, credit crunch, Credit Default Swap, David Graeber, David Ricardo: comparative advantage, disintermediation, diversified portfolio, Erik Brynjolfsson, eurozone crisis, everywhere but in the productivity statistics, financial deregulation, financial independence, financial innovation, financial intermediation, financial repression, Flash crash, full employment, global value chain, global village, High speed trading, Hyman Minsky, income inequality, inflation targeting, informal economy, information asymmetry, intangible asset, job satisfaction, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, liberal capitalism, London Interbank Offered Rate, low skilled workers, M-Pesa, market bubble, means of production, money market fund, moral hazard, mortgage debt, Network effects, new economy, oil shock, open economy, pensions crisis, price stability, Productivity paradox, profit maximization, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, race to the bottom, regulatory arbitrage, reserve currency, Robert Shiller, Robert Shiller, savings glut, Scramble for Africa, secular stagnation, shareholder value, Simon Kuznets, special drawing rights, Thales of Miletus, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, total factor productivity, trade liberalization, transaction costs, union organizing, value at risk, Washington Consensus, zero-sum game

Even more strongly, it was claimed that the services sector had also begun to respond to new technologies by raising productivity substantially, mostly in wholesale, retail and financial trading (though not in banking). Presumably the productivity transformation was broadly based, and a cure had been found for ‘Baumol’s disease’, that is, for the tendency of the service sector to register weak productivity growth.17 Mainstream studies of productivity growth typically comprise macro-level, econometrics papers, engaging in growth-accounting.18 Arguments are usually based on total factor productivity (TFP) – on the econometric residual of growth accounting, which is a vastly different concept to labour productivity. TFP is deeply problematic as an explanation of macro-level movements in productivity not least because it is a residual and therefore by definition ‘unexplained’. However, there have also been micro-level (firm level) studies, mostly in the US, which have broadly argued that productivity growth did indeed assume a rising path in the late 1990s.

Inflation Dynamics and the Distribution of Income’, NBER Working Paper No. 11842, 2005. 17 Jack Triplett and Barry Bosworth, ‘Productivity in the Services Sector’, Brookings Economics Papers, January 2000; Jack Triplett and Barry Bosworth, ‘What’s New About the New Economy? IT, Economic Growth and Productivity’, International Productivity Monitor, vol. 2, 2001, pp. 19–30. 18 See, for instance, John Fernhald and Shanthi Ramnath, ‘The Acceleration in US Total Factor Productivity After 1995: The Role of Information Technology’, Economic Perspectives 28:1, First Quarter 2004, pp. 52–67; or Peter B. Meyer and Michael J. Harper, ‘Preliminary Estimates of Multifactor Productivity Growth’, Monthly Labour Review 125:6, June 2005. 19 Some even claimed that the rising stock market in the US in the late 1990s had somehow captured a mysterious e-capital while producing enormously inflated valuations of the new technology sector (Hall 2001, 2002).

Federal Reserve Bulletin, ‘The Use of Checks and Other Noncash Payment Instruments in the United States’, December 2002, pp. 360–74. Federal Reserve, ‘The Future of Retail Electronic Payments Systems: Industry Interviews and Analysis’, Staff Study 175, Federal Reserve Staff for the Payments System Development Committee, December 2002. Fernhald, John, and Shanthi Ramnath, ‘The Acceleration in US Total Factor Productivity After 1995: The Role of Information Technology’, Economic Perspectives 28:1, First Quarter 2004, pp. 52–67. Fieldhouse, David, The West and the Third World, Oxford: Blackwell, 1999. Financial Services Authority, The Regulation of Electronic Money Issuers, Consultation Paper 117, December 2001. Fine, Ben, ‘Banking Capital and the Theory of Interest’, Science and Society 49:4, 1985–86, pp. 387–413.


pages: 324 words: 92,805

The Impulse Society: America in the Age of Instant Gratification by Paul Roberts

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, American Society of Civil Engineers: Report Card, asset allocation, business cycle, business process, Cass Sunstein, centre right, choice architecture, collateralized debt obligation, collective bargaining, computerized trading, corporate governance, corporate raider, corporate social responsibility, creative destruction, crony capitalism, David Brooks, delayed gratification, disruptive innovation, double helix, factory automation, financial deregulation, financial innovation, fixed income, full employment, game design, greed is good, If something cannot go on forever, it will stop - Herbert Stein's Law, impulse control, income inequality, inflation targeting, invisible hand, job automation, John Markoff, Joseph Schumpeter, knowledge worker, late fees, Long Term Capital Management, loss aversion, low skilled workers, mass immigration, new economy, Nicholas Carr, obamacare, Occupy movement, oil shale / tar sands, performance metric, postindustrial economy, profit maximization, Report Card for America’s Infrastructure, reshoring, Richard Thaler, rising living standards, Robert Shiller, Robert Shiller, Rodney Brooks, Ronald Reagan, shareholder value, Silicon Valley, speech recognition, Steve Jobs, technoutopianism, the built environment, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, total factor productivity, Tyler Cowen: Great Stagnation, Walter Mischel, winner-take-all economy

Doi: http://www.theatlantic.com/past/docs/issues/83may/eastrbrk.htm. Edsall, Thomas B. “The Obamacare Crisis.” New York Times, Nov. 19, 2013. Doi: http://www.nytimes.com/2013/11/20/opinion/edsall-the-obamacare-crisis.html?pagewanted=1&_r=2&smid=tw-share&&pagewanted=all. Field, Alexander J. “The Impact of the Second World War on U.S. Productivity Growth.” Economic History Review 61, no. 3 (2008): 677. ———. “The Origins of U.S. Total Factor Productivity Growth in the Golden Age.” Cleometrica 1, no. 1 (April 2007): 19, 20. Fisher, Richard. “Ending ‘Too Big to Fail’: A Proposal for Reform before It’s Too Late (with Reference to Patrick Henry, Complexity and Reality).” Remarks by the president of the Federal Reserve Bank of Dallas to the Committee for the Republic. Washington, DC, January 16, 2013. Accessed December 1, 2013, Doi: http://www.dallasfed.org/news/speeches/fisher/2013/fs130116.cfm.

Recent Social Trends in the United States: Report on the President’s Research Committee on Social Trends, with a Foreword by Herbert Hoover (New York: McGraw-Hill, 1933), pp. 866–67, at http://archive.org/stream/recentsocialtren02presrich#page/867/mode/1up. 10. Franklin D. Roosevelt Inaugural Address, March 4, 1933, available at History Matters: The U.S. Survey Course on the Web, http://historymatters.gmu.edu/d/5057/. 11. Alexander J. Field, “The Origins of U.S. Total Factor Productivity Growth in the Golden Age,” Cleometrica 1, no. 1 (April 2007): 19, 20. 12. Alexander J. Field, “The Impact of the Second World War on U.S. Productivity Growth,” Economic History Review 61, no. 3 (2008): 677. 13. Gary Nash, “A Resilient People, 1945–2005,” in Voices of the American People, Volume 1 (New York: Pearson, 2005), p. 865. 14. “US Real GDP by Year,” http://www.multpl.com/us-gdp-inflation-adjusted/table. 15.


pages: 382 words: 92,138

The Entrepreneurial State: Debunking Public vs. Private Sector Myths by Mariana Mazzucato

"Robert Solow", Apple II, banking crisis, barriers to entry, Bretton Woods, business cycle, California gold rush, call centre, carbon footprint, Carmen Reinhart, cleantech, computer age, creative destruction, credit crunch, David Ricardo: comparative advantage, demand response, deskilling, endogenous growth, energy security, energy transition, eurozone crisis, everywhere but in the productivity statistics, Financial Instability Hypothesis, full employment, G4S, Growth in a Time of Debt, Hyman Minsky, incomplete markets, information retrieval, intangible asset, invisible hand, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, knowledge economy, knowledge worker, natural language processing, new economy, offshore financial centre, Philip Mirowski, popular electronics, profit maximization, Ralph Nader, renewable energy credits, rent-seeking, ride hailing / ride sharing, risk tolerance, shareholder value, Silicon Valley, Silicon Valley ideology, smart grid, Steve Jobs, Steve Wozniak, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, total factor productivity, trickle-down economics, Washington Consensus, William Shockley: the traitorous eight

Figure 13 Origins of popular Apple products Figure 14 Global new investment in renewable energy (US$, billions) Figure 15 Government energy R&D spend as % GDP in 13 countries, 2007 Figure 16 Subsectors of venture capital within clean energy Figure 17 The global market for solar and wind power (US$, billions), 2000–2011 LIST OF ACRONYMS AEIC American Energy Innovation Council ARPA-E Advanced Research Projects Agency – Energy (US Department of Energy) ARRA American Recovery and Reinvestment Act ATP Advanced Technology Program BIS Department of Business, Innovation and Skills (UK) BNDES Banco Nacional de Desenvolvimento Econômico e Social (Brazilian Development Bank) CBI Confederation of British Industries CBO Congressional Budget Office (UK) CERN European Organization for Nuclear Research, Geneva DARPA Defense Advanced Research Projects Agency (USA) DECC Department of Energy and Climate Change (UK) DEMOS UK think tank DoD US Department of Defense DoE US Department of Energy DRAM Dynamic random-access memory EC European Commission, Brussels EPA Environmental Protection Agency (USA) EPRI Electric Power Research Institute FDA Food and Drug Administration (USA) FINNOV FINNOV EC FP7 project (www.finnov-fp7.eu) FIT Feed-in tariff GDP Gross domestic product GE General Electric GMR Giant magnetoresistance GPS Global positioning system GPT General purpose technology GW Gigawatt GWEC Global Wind Energy Council HM Treasury Her Majesty’s Treasury (UK) IP Intellectual property IPO Initial public offering on stock market IPR Intellectual property rights MIT Massachusetts Institute of Technology MITI Ministry of International Trade and Industry (Japan) MRC Medical Research Council (UK) MW Megawatt NAS National Academy of Sciences (USA) NBER National Bureau of Economic Research (USA, non-profit) NESTA National Endowment for Science, Technology and the Arts (UK) NIH National Institutes of Health (USA) NIST National Institute of Standards and Technology (USA) NME New molecular entity NNI National Nanotechnology Initiative (USA) NSF National Science Foundation (USA) NYT New York Times (USA) OECD Organisation for Economic Co-operation and Development OSTP Office of Science and Technology Policy (USA) OTA Office of Technology Assessment (USA) OTP Office of Tax Policy (USA) PhRMA Pharmaceutical Research and Manufacturers of America (trade association) PIRC Public Interest Research Centre (USA, non-profit) PV Photovoltaic R&D Research and development S&P 500 Standard & Poor’s (S&P) stock market index, based on the market capitalizations of 500 leading companies publicly traded in the US SBIC Small Business Investment Company (USA) SBIR Small Business Innovation Research (USA) SITRA Suomen itsenäisyyden juhlarahasto (Finnish Innovation Fund) SMEs Small and medium enterprises SRI Stanford Research Institute (USA, non-profit) SST (American) Supersonic Transport project TFT Thin-film transistor TFP Total factor productivity TW Terawatt VC Venture capital WIPO World Intellectual Property Organization ACKNOWLEDGEMENTS The book could not have been written without the intellectual stimulus and hard work of many colleagues and friends. First and foremost were inspirational exchanges with two of the world’s best economic historians: Carlota Perez and Bill Lazonick. Carlota’s work, and our constant discussions, on the role of the State in different phases of technological revolutions, has challenged me to think hard about the changing role of different types of ‘capital’ – finance and production – over time.

Most of the effect is from age: young firms (and business start-ups) contribute substantially to both gross and net job creation. Productivity should be the focus, and small firms are often less productive than large firms. Indeed recent evidence has suggested that some economies that have favoured small firms, such as India, have in fact performed worse. Hsieh and Klenow (2009), for example, suggest that 40–60 per cent of the total factor productivity (TFP) difference between India and the United States is due to misallocation of output to too many small and low-productivity SMEs in India. As most small start-up firms fail, or are incapable of growing beyond the stage of having a sole owner-operator, targeting assistance to them through grants, soft loans or tax breaks will necessarily involve a high degree of waste. While this waste is a necessary gamble in the innovation process (Janeway 2012), it is important to at least guide the funding process with what we know about ‘high growth’ innovative firms rather than some folkloristic notion of the value of SMEs as an aggregate category – which actually means very little.


pages: 336 words: 95,773

The Theft of a Decade: How the Baby Boomers Stole the Millennials' Economic Future by Joseph C. Sternberg

Affordable Care Act / Obamacare, Airbnb, American Legislative Exchange Council, Asian financial crisis, banking crisis, Basel III, Bernie Sanders, blue-collar work, centre right, corporate raider, Detroit bankruptcy, Donald Trump, Edward Glaeser, employer provided health coverage, Erik Brynjolfsson, eurozone crisis, future of work, gig economy, Gordon Gekko, hiring and firing, Home mortgage interest deduction, housing crisis, job satisfaction, job-hopping, labor-force participation, low skilled workers, Lyft, Marc Andreessen, Mark Zuckerberg, minimum wage unemployment, mortgage debt, mortgage tax deduction, Nate Silver, new economy, obamacare, oil shock, payday loans, pension reform, quantitative easing, Richard Florida, Ronald Reagan, Saturday Night Live, Second Machine Age, sharing economy, Silicon Valley, sovereign wealth fund, TaskRabbit, total factor productivity, Tyler Cowen: Great Stagnation, uber lyft, unpaid internship, women in the workforce

* “Productivity” is a concept that’s easy to explain but devilishly hard for economists to measure. I’m using here one productivity measure—output per hour worked—that is cruder than some others. Economists also often consider measures of labor and capital productivity separately (how much more output does one additional hour of labor produce, versus one additional dollar’s worth of machinery?), and then can also estimate “total-factor productivity,” which includes non–capital and labor factors such as the quality of roads around a factory that might influence how efficiently the owners can ship the factory’s products to customers. Those measures can be useful in some contexts, but for purposes of this discussion I think they tend to provide a false sense of precision regarding what economists do and don’t know about what drives changes in productivity

., 77 pension plans and, 79–80 retirement finances and, 79, 80–81 Social Security benefits and, 82–83 statistics on, 78–79, 80–83, 83n Wall Street payback and, 83 worries about, 81–82 Say, Jean-Baptiste, 50n Say’s Law, 50n Schock, Aaron, 211–212 Second Machine Age, The (Brynjolfsson and McAfee), 41 self-employment trends (since 2000), 71 See also gig economy September 11 terror attacks/consequences, 57, 152 Shapiro, Ben, 215, 224–225 “sheepskin effect,” 90 Sixteenth Amendment, 148 Smith, Brad, 71–72 SNAP (Supplement Nutrition Assistance Program), 164 social capital, 22 social programs/benefits consequences/Mulligan and, 165–166 financial crisis and, 163–165 Social Security beginnings, 149 financial problems/Millennials and, 153–161 housing and, 114n insurance comparisons, 154, 157–158 Millennial expectations, 82–83 Millennial resources and, 142 taxes and, 150n, 196 See also entitlements for elderly solar panels installation, 28 Spain and financial crisis, 180 steel industry (1970s to 1990s), 50–51 stock market crash (1929), 10 financial crisis, 10 Strauss, William, 6–7 “structural deficits,” 150–151, 151n Supplement Nutrition Assistance Program (SNAP), 164 supply-side economics, 52, 54–55, 58 TANF, 164 TARP (Troubled-Asset Relief Program), 59, 130, 130n taxes on capital/consequences, 53 Clinton and, 55, 152 cuts with Great Recession, 163 inflation as, 207 myth on, 195 national consumption tax and, 173–174 politicians in Germany/US and, 197 Reagan and, 52 Republicans and, 174 Sixteenth Amendment, 148 tax wedge, 183 Trump and, 227–228 Tea Party movement, 130, 231 technology labor and (mid-twentieth century), 49 role in economic problems, 234–235 See also computer/information technology Thatcher, Margaret, 189 “total-factor productivity,” 48n total number of hours worked in 1970s, 47 as measure of labor market, 47 trade policy and Millennials, 217–218 training investing less, 17, 69, 88 investing more, 228 Millennials wanting, 29, 72 See also internships/Millennials Troubled-Asset Relief Program (TARP), 59, 130, 130n Trump, Donald Affordable Care Act and, 68 description, 19 entitlements and, 231 immigration and, 225–226 interest rates/Federal Reserve and, 19, 231–232 Japan/foreign competition and, 202, 217–218, 225 Millennials and, 214, 215, 217, 224, 225–232 real estate background and, 232n regulations and, 229–230, 234 taxes, 227–228, 234 traits/character, 224 unemployment rate and, 226 Uber, 70, 70n unemployment Britain/Millennials and, 189 NEETs, 181 unemployment-assistance programs (US) creation, 149 financial crisis and, 164 unemployment rate (US) in 1950s and 1960s, 47 in 1970s, 47 in 1980s, 54 changes post-2008 decade, 30, 33 description, 30 global financial crisis/recovery and, 11, 12, 13 Millennials and, 42 Trump and, 226 See also labor-force participation rate union power other countries and, 186 in US, 49, 49n United Kingdom minimum wage, 184 Urban Institute, 139 US Bureau of Labor Statistics, 28, 30, 37, 47 Vance, J.


pages: 374 words: 113,126

The Great Economists: How Their Ideas Can Help Us Today by Linda Yueh

"Robert Solow", 3D printing, additive manufacturing, Asian financial crisis, augmented reality, bank run, banking crisis, basic income, Ben Bernanke: helicopter money, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bitcoin, Branko Milanovic, Bretton Woods, BRICs, business cycle, Capital in the Twenty-First Century by Thomas Piketty, clean water, collective bargaining, computer age, Corn Laws, creative destruction, credit crunch, Credit Default Swap, cryptocurrency, currency peg, dark matter, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, Deng Xiaoping, Doha Development Round, Donald Trump, endogenous growth, everywhere but in the productivity statistics, Fall of the Berlin Wall, fear of failure, financial deregulation, financial innovation, Financial Instability Hypothesis, fixed income, forward guidance, full employment, Gini coefficient, global supply chain, Gunnar Myrdal, Hyman Minsky, income inequality, index card, indoor plumbing, industrial robot, information asymmetry, intangible asset, invisible hand, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, laissez-faire capitalism, land reform, lateral thinking, life extension, manufacturing employment, market bubble, means of production, mittelstand, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, Nelson Mandela, non-tariff barriers, Northern Rock, Occupy movement, oil shale / tar sands, open economy, paradox of thrift, Paul Samuelson, price mechanism, price stability, Productivity paradox, purchasing power parity, quantitative easing, RAND corporation, rent control, rent-seeking, reserve currency, reshoring, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, school vouchers, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, special economic zone, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, total factor productivity, trade liberalization, universal basic income, unorthodox policies, Washington Consensus, We are the 99%, women in the workforce, working-age population

Diminishing returns happen when a worker is given more than, say, two computers; that worker won’t produce as much with the third computer as compared with the first two unless there is better software that allows computing to be done without the person using it all the time. Technological progress allows the existing inputs of workers and capital to be used more efficiently. An increase in output due to technology is referred to as total factor productivity (TFP) in economic growth models. Physical capital as well as human capital – the skills and education of workers – are central to this model. It’s especially pressing for rich countries, where the working-age population is ageing or even shrinking and having better-skilled workers is even more important. How to raise productivity lies at the heart of whether or not we’re doomed to a stagnant future.

The residual captures technological progress, which generates more output from a set of inputs. Of course, it also captures anything else not related to inputs of labour and investment, so temporary rises in government spending and monetary easing also get included. It means that some, but not all, of what is captured in the Solow residual is the productivity advancing technology needed to sustain economic growth over the longer term. This is the TFP (total factor productivity) mentioned earlier. Across countries, there is a clear association between periods of high output growth and significant technological progress. Developed nations all grew well between 1950 and 1973, and then slowed together during 1974–87. There seems to be a connection with the adoption of similar technologies. For instance, the strong period of growth in the 1950s and 60s is associated with post-war technological advances, such as widespread air travel and industrial robots.


pages: 179 words: 43,441

The Fourth Industrial Revolution by Klaus Schwab

3D printing, additive manufacturing, Airbnb, Amazon Mechanical Turk, Amazon Web Services, augmented reality, autonomous vehicles, barriers to entry, Baxter: Rethink Robotics, bitcoin, blockchain, Buckminster Fuller, call centre, clean water, collaborative consumption, commoditize, conceptual framework, continuous integration, crowdsourcing, digital twin, disintermediation, disruptive innovation, distributed ledger, Edward Snowden, Elon Musk, epigenetics, Erik Brynjolfsson, future of work, global value chain, Google Glasses, income inequality, Internet Archive, Internet of things, invention of the steam engine, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, life extension, Lyft, mass immigration, megacity, meta analysis, meta-analysis, more computing power than Apollo, mutually assured destruction, Narrative Science, Network effects, Nicholas Carr, personalized medicine, precariat, precision agriculture, Productivity paradox, race to the bottom, randomized controlled trial, reshoring, RFID, rising living standards, Sam Altman, Second Machine Age, secular stagnation, self-driving car, sharing economy, Silicon Valley, smart cities, smart contracts, software as a service, Stephen Hawking, Steve Jobs, Steven Levy, Stuxnet, supercomputer in your pocket, TaskRabbit, The Future of Employment, The Spirit Level, total factor productivity, transaction costs, Uber and Lyft, uber lyft, Watson beat the top human players on Jeopardy!, WikiLeaks, winner-take-all economy, women in the workforce, working-age population, Y Combinator, Zipcar

As we live in a society where more than a quarter of the children born today in advanced economies are expected to live to 100, we will have to rethink issues such the working age population, retirement and individual life-planning.16 The difficulty that many countries are showing in attempting to discuss these issues is just a further sign of how we are not prepared to adequately and proactively recognize the forces of change. Productivity Over the past decade, productivity around the world (whether measured as labour productivity or total-factor productivity (TFP)) has remained sluggish, despite the exponential growth in technological progress and investments in innovation.17 This most recent incarnation of the productivity paradox – the perceived failure of technological innovation to result in higher levels of productivity – is one of today’s great economic enigmas that predates the onset of the Great Recession, and for which there is no satisfactory explanation.


Tyler Cowen - Stubborn Attachments A Vision for a Society of Free, Prosperous, and Responsible Individuals by Meg Patrick

"Robert Solow", agricultural Revolution, Berlin Wall, conceptual framework, Fall of the Berlin Wall, framing effect, hedonic treadmill, impulse control, Peter Singer: altruism, rent-seeking, The Wealth of Nations by Adam Smith, total factor productivity, trade route, transaction costs, trickle-down economics, Tyler Cowen: Great Stagnation, zero-sum game

Foreign contacts, training, and periods of residency all help promote domestic development. The global poor also benefit from new medicines, new global technologies, and research and development efforts, all of which are the product of wealth. Elhanan Helpman (2004, p.84) summarizes: “the main finding -- that R&D capital stocks of trade partners have a noticeable impact on a country's total factor productivity -- appears to be robust... [consider] a coordinated permanent expansion of R&D investment by 1/2 of GDP in each of twenty-one industrial countries. The U.S. output grows by 15 percent, while Canada's and Italy's output expands by more than 25 percent. On average the output of all the industrial countries rises by 17.5 percent. And importantly, the output of all the less-developed countries rises by 10.6 percent on average.


pages: 790 words: 150,875

Civilization: The West and the Rest by Niall Ferguson

Admiral Zheng, agricultural Revolution, Albert Einstein, Andrei Shleifer, Atahualpa, Ayatollah Khomeini, Berlin Wall, BRICs, British Empire, business cycle, clean water, collective bargaining, colonial rule, conceptual framework, Copley Medal, corporate governance, creative destruction, credit crunch, David Ricardo: comparative advantage, Dean Kamen, delayed gratification, Deng Xiaoping, discovery of the americas, Dissolution of the Soviet Union, European colonialism, Fall of the Berlin Wall, Francisco Pizarro, full employment, Hans Lippershey, haute couture, Hernando de Soto, income inequality, invention of movable type, invisible hand, Isaac Newton, James Hargreaves, James Watt: steam engine, John Harrison: Longitude, joint-stock company, Joseph Schumpeter, Kickstarter, Kitchen Debate, land reform, land tenure, liberal capitalism, Louis Pasteur, Mahatma Gandhi, market bubble, Martin Wolf, mass immigration, means of production, megacity, Mikhail Gorbachev, new economy, Pearl River Delta, Pierre-Simon Laplace, probability theory / Blaise Pascal / Pierre de Fermat, profit maximization, purchasing power parity, quantitative easing, rent-seeking, reserve currency, road to serfdom, Ronald Reagan, savings glut, Scramble for Africa, Silicon Valley, South China Sea, sovereign wealth fund, special economic zone, spice trade, spinning jenny, Steve Jobs, Steven Pinker, The Great Moderation, the market place, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, Thorstein Veblen, total factor productivity, trade route, transaction costs, transatlantic slave trade, undersea cable, upwardly mobile, uranium enrichment, wage slave, Washington Consensus, women in the workforce, World Values Survey

We also tried to dye them but it was also very difficult to get your hands on dye … They were so popular that people snatched them from our hands.106 The critical point was that the success of Western consumer industries was now matched, mirror-like, by the miserable underperformance of their Soviet counterparts. Not only was growth now vanishingly low after 1973 (below 1 per cent); total factor productivity was declining. Some state enterprises were actually subtracting value from the raw materials they processed. Just as Hayek had warned, in the absence of meaningful prices, resources were misallocated; corrupt officials restricted output to maximize their own illicit gains; workers pretended to work and, in return, managers pretended to pay them. Not only the industrial capital stock but also the human capital stock was not being maintained; nuclear power stations crumbled; alcoholism soared.

., ‘Wages, Prices, and Living Standards’. 37. Mazzini, ‘To the Italians’. 38. Bismarck, Reminiscences, Vol. I, ch. 13. 39. Schorske, Fin-de-Siècle Vienna. 40. H. C. Martin, ‘Singer Memories’: http://www.singermemories.com/index.html. 41. Maddison, World Economy, tables B-10, B-21. 42. Kennedy, Rise and Fall, p. 190. 43. Bairoch, ‘International Industrialization Levels’. 44. Broadberry, ‘Total Factor Productivity’. 45. Fordham, ‘ “Revisionism” Reconsidered’. 46. Clark and Feenstra, ‘Technology in the Great Divergence’, table 8. 47. Dyos and Aldcroft, British Transport, table 4. 48. Maurer and Yu, Big Ditch, p. 145. 49. Clark and Feenstra, ‘Technology in the Great Divergence’. 50. Clark, Farewell to Alms, table 15.3. 51. McKeown, ‘Global Migration’, p. 156. 52. Carter et al.


pages: 626 words: 167,836

The Technology Trap: Capital, Labor, and Power in the Age of Automation by Carl Benedikt Frey

"Robert Solow", 3D printing, autonomous vehicles, basic income, Bernie Sanders, Branko Milanovic, British Empire, business cycle, business process, call centre, Capital in the Twenty-First Century by Thomas Piketty, Clayton Christensen, collective bargaining, computer age, computer vision, Corn Laws, creative destruction, David Graeber, David Ricardo: comparative advantage, deindustrialization, demographic transition, desegregation, deskilling, Donald Trump, easy for humans, difficult for computers, Edward Glaeser, Elon Musk, Erik Brynjolfsson, everywhere but in the productivity statistics, factory automation, falling living standards, first square of the chessboard / second half of the chessboard, Ford paid five dollars a day, Frank Levy and Richard Murnane: The New Division of Labor, full employment, future of work, game design, Gini coefficient, Hyperloop, income inequality, income per capita, industrial cluster, industrial robot, intangible asset, interchangeable parts, Internet of things, invention of agriculture, invention of movable type, invention of the steam engine, invention of the wheel, Isaac Newton, James Hargreaves, James Watt: steam engine, job automation, job satisfaction, job-hopping, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kickstarter, knowledge economy, knowledge worker, labor-force participation, labour mobility, Loebner Prize, low skilled workers, Malcom McLean invented shipping containers, manufacturing employment, mass immigration, means of production, Menlo Park, minimum wage unemployment, natural language processing, new economy, New Urbanism, Norbert Wiener, oil shock, On the Economy of Machinery and Manufactures, Pareto efficiency, pattern recognition, pink-collar, Productivity paradox, profit maximization, Renaissance Technologies, rent-seeking, rising living standards, Robert Gordon, robot derives from the Czech word robota Czech, meaning slave, Second Machine Age, secular stagnation, self-driving car, Silicon Valley, Simon Kuznets, social intelligence, speech recognition, spinning jenny, Stephen Hawking, The Future of Employment, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas Malthus, total factor productivity, trade route, Triangle Shirtwaist Factory, Turing test, union organizing, universal basic income, washing machines reduced drudgery, wealth creators, women in the workforce, working poor, zero-sum game

Gordon, 2016, The Rise and Fall of American Growth, 227. 41. Greenwood, Seshadri, and Yorukoglu, 2005, “Engines of Liberation.” 42. V. E. Giuliano, 1982, “The Mechanization of Office Work,” Scientific American 247 (3): 148–65. 43. On the term “pink collar,” see A. J. Cherlin, 2013, Labor’s Love Lost: The Rise and Fall of the Working-Class Family in America (New York: Russell Sage Foundation), 119. 44. A. J. Field, 2007, “The Origins of US Total Factor Productivity Growth in the Golden Age,” Cliometrica 1 (1): 89. See also A. J. Field, 2011, A Great Leap Forward: 1930s Depression and U.S. Economic Growth (New Haven, CT: Yale University Press). 45. G. P. Mom and D. A. Kirsch, 2001, “Technologies in Tension: Horses, Electric Trucks, and the Motorization of American Cities, 1900–1925,” Technology and Culture 42 (3): 489–518. 46. Gordon, 2016, The Rise and Fall of American Growth, 227. 47.

“Pessimism Perpetuated: Real Wages and the Standard of Living in Britain during and after the Industrial Revolution.” Journal of Economic History 58 (3): 625–58. Ferguson, N. 2012. Civilization: The West and the Rest. New York: Penguin. Ferrer-i-Carbonell, A. 2005. “Income and Well-Being: An Empirical Analysis of the Comparison Income Effect.” Journal of Public Economics 89 (5–6): 997–1019. Field, A. J. 2007. “The Origins of US Total Factor Productivity Growth in the Golden Age.” Cliometrica 1 (1): 63–90. Field, A. J. 2011. A Great Leap Forward: 1930s Depression and U.S. Economic Growth. New Haven, CT: Yale University Press. Fielden, J. 2013. Curse of the Factory System. London: Routledge. Finley, M. I. 1965. “Technical Innovation and Economic Progress in the Ancient World.” Economic History Review 18 (1): 29–45. Finley, M. I. 1973.


pages: 272 words: 71,487

Getting Better: Why Global Development Is Succeeding--And How We Can Improve the World Even More by Charles Kenny

"Robert Solow", agricultural Revolution, Berlin Wall, British Empire, Charles Lindbergh, clean water, demographic transition, double entry bookkeeping, experimental subject, Fall of the Berlin Wall, germ theory of disease, Gunnar Myrdal, income inequality, income per capita, Indoor air pollution, inventory management, Kickstarter, Milgram experiment, off grid, open borders, purchasing power parity, randomized controlled trial, structural adjustment programs, The Wealth of Nations by Adam Smith, total factor productivity, Toyota Production System, trade liberalization, transaction costs, very high income, Washington Consensus, X Prize

., D. Lederman, and N. Loayaza. 1998. Determinants of Crime Rates in Latin America and the World. Washington, DC: World Bank. Fay, M. 1993. “Illegal Activities and Income Distribution: A Model with Envy.” Mimeo, Columbia University. Fay, M., and C. Opal. 2000. “Urbanization Without Growth: A Not So Uncommon Phenomenon.” World Bank Policy Research Working Paper 2412. Felipe, J. 1999. “Total Factor Productivity in East Asia: A Critical Survey.” The Journal of Development Studies 35, no. 4. Ferguson, N. 2001. The Cash Nexus: Money and Power in the Modern World 1700–2000. London: Allen Lane. ———. 2005. “Africa Doesn’t Need Handouts: It Needs Honest Governments.” The Telegraph, March 2, 2005. Field, E., O. Robles, and M. Torero. 2008. “The Cognitive Link Between Geography and Development: Iodine Deficiency and Schooling Attainment in Tanzania.”


pages: 306 words: 78,893

After the New Economy: The Binge . . . And the Hangover That Won't Go Away by Doug Henwood

"Robert Solow", accounting loophole / creative accounting, affirmative action, Asian financial crisis, barriers to entry, borderless world, Branko Milanovic, Bretton Woods, business cycle, capital controls, corporate governance, corporate raider, correlation coefficient, credit crunch, deindustrialization, dematerialisation, deskilling, ending welfare as we know it, feminist movement, full employment, gender pay gap, George Gilder, glass ceiling, Gordon Gekko, greed is good, half of the world's population has never made a phone call, income inequality, indoor plumbing, intangible asset, Internet Archive, job satisfaction, joint-stock company, Kevin Kelly, labor-force participation, liquidationism / Banker’s doctrine / the Treasury view, manufacturing employment, means of production, minimum wage unemployment, Naomi Klein, new economy, occupational segregation, pets.com, post-work, profit maximization, purchasing power parity, race to the bottom, Ralph Nader, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, statistical model, structural adjustment programs, Telecommunications Act of 1996, telemarketer, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, total factor productivity, union organizing, War on Poverty, women in the workforce, working poor, zero-sum game

Clothaire, 146 Reagan, Ronald, 8 recessions, political purpose, 182 regionahzation, 159 Reich, Robert, 71,74 retail trade, 64-66 Riflcin, Jeremy, 68 Robinson, Joan, 235 Robinson, William, 175-176 Rockefeller, David, 232 Rubin, Robert, 218 ruling class, global, 174—178 Russell, Marta, 100 sad militants, 185 Sakakibara, Eisuke, 228 Index Sale, Kirkpatrick, 168 Salomon Smith Barney, 197 scale, economic, 167-168 Scandinavia, very wired, 6 Schama, Simon, 23 Schrager, Ian, 233 Schwab, Klaus, 175-178 Seattle, anti-WTO protests, 32,160 sex, Gilder on, 11—13 sexual preference and pay, 100 sex discrimination, 94—101 international comparisons, 101—102 Shakespeare, 188 shareholder activism, 214 Shiller, Robert, 6-8,25-27,194 Shiva, Vandana, 162,168-169 Shorrock.Tim, 171 Sichel, Daniel, 57 Silicon Valley, income distribution, 105 Silicon Valley Toxics CoaUtion, 232 Sinai, Allen, 4 Singhne, Peter, 18 Skilhng, Jeffirey, 33 skills, job, 73-77 returns to, 86—87 skin shade and pay, 99 Smith, Adam, 109-110, 163,173 Smith, Patti, 183 Smith, Paul, 6 social democracy, 139-143,182 social movements, new, 179 Social Security, 227 Solow, Robert, 3 sovereignty, 170 space, shrinkage of, 146 speedup, 215, 229 Spencer, Herbert, 37 state, retreat of, 150-152 Stigbtz, Joseph, 193 Stiroh,Kevin,51,57 stock market 1990s bubble, history, 188-189 analysts' role, 194—200 anomalies, 194 book value, defined, 233 brokers' fees and salaries, 201-202 and corporate profitability, 203—204 and corporate restructuring, 214-215 economics of, 187-188,192-195 and evolution of the corporation, 212-217 excess volatiHty, 194 happiness of investors, 212 and managers' pay, 216—217 and pop culture, 187 psychology of, 25—26 trading frequency and returns, 190—191, 234,239 wisdom of, 35 see also finance stock options, 216—217 and wealth distribution, 126—127 stock ownership, distribution of, 24, 122-124 stress, management by, 25 stylish shoes, 165 Summers, Lawrence, 5,231 surveillance, 68,77—78 Survey of Consumer Finances, 118—119 Survey of Income and Program Participation, 118 symbolic analysts, 71,72 synergy vs. conflict, 197-200 Taylorism, 78 technology not evil, 2 and social movements, 179 telecommunications industry, 196—198 telegraph, 7 telemarketers, 68 TheGlobe.com, 189 269 TheStreet.com, 31 dme, acceleration of, 146 Tocqueville, Alexis de, 82,139 Tompkins, Doug, 161-162 total factor productivity. See Productivity transnational capitalist class, 175—176 transnational corporations. See multinational corporations transparency, 223 Triplett, Jack, 51,55 tulip-bulb mania, 23 unemployment, political uses of, 206—207 U.S. Agency for International Development, 163 U.S. Census Bureau, 88-89 utopianism. New Economy, 37-38, 229-230 venture capitalists, 201—202 Verizon, 38 Vietnam war, 182,205 Volcker, Paul, 208-209 voting turnout by income level, 81 wages.


pages: 268 words: 75,490

The Knowledge Economy by Roberto Mangabeira Unger

additive manufacturing, balance sheet recession, business cycle, collective bargaining, commoditize, deindustrialization, disruptive innovation, first-past-the-post, full employment, global value chain, information asymmetry, knowledge economy, market fundamentalism, means of production, Paul Samuelson, savings glut, secular stagnation, side project, total factor productivity, transaction costs, union organizing, wealth creators

A widespread and developed form of the knowledge economy offers the most promising way to promote socially inclusive economic growth and to diminish economic inequality. Under Alvin Hansen’s old label of “secular stagnation,” many economists have proposed to explain in recent years the persistent slowdown of economic growth. The figures measuring the growth of productivity chart the dimension of this slowdown. Consider the well-studied example of the US economy. From 1947 to 1972, labor productivity, which roughly tracks total factor productivity, rose in the United States by an average of 2.8 percent a year; from 1972 to 1994 by 1.5 percent a year; from 1994 to 2005 by 2.8 percent a year; and from 2005 to the present by 1.4 percent a year. After a period of slow growth, productivity spiked in 1994–2005 and then fell back again. The slowdown in the growth of productivity since 1972, interrupted only by the turn-of-the-century spike, has been attributed to many of the factors emphasized by Hansen in the 1930s: the decline of population growth, the inadequacy of aggregate demand, and a “savings glut”—an excess of savings over consumption.


pages: 242 words: 73,728

Give People Money by Annie Lowrey

"Robert Solow", affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, Airbnb, airport security, autonomous vehicles, barriers to entry, basic income, Bernie Sanders, bitcoin, clean water, collective bargaining, computer age, crowdsourcing, cryptocurrency, deindustrialization, desegregation, Donald Trump, Edward Glaeser, Elon Musk, ending welfare as we know it, everywhere but in the productivity statistics, full employment, gender pay gap, gig economy, Google Earth, Home mortgage interest deduction, income inequality, indoor plumbing, information asymmetry, Jaron Lanier, jitney, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Kickstarter, Kodak vs Instagram, labor-force participation, late capitalism, Lyft, M-Pesa, Mahatma Gandhi, Mark Zuckerberg, mass incarceration, McMansion, Menlo Park, mobile money, mortgage tax deduction, new economy, obamacare, Peter Thiel, post scarcity, post-work, Potemkin village, precariat, randomized controlled trial, ride hailing / ride sharing, Robert Bork, Ronald Reagan, Sam Altman, self-driving car, Silicon Valley, single-payer health, Steve Jobs, TaskRabbit, The Future of Employment, theory of mind, total factor productivity, Turing test, two tier labour market, Uber and Lyft, uber lyft, universal basic income, uranium enrichment, War on Poverty, Watson beat the top human players on Jeopardy!, We wanted flying cars, instead we got 140 characters, women in the workforce, working poor, World Values Survey, Y Combinator

” * * * Still, despite the creation of AI and the concern about the future of human labor, the arguments for implementing a UBI to ward off technological unemployment felt hyperbolic—or at least premature—to me. If technology were rapidly improving and putting workers out of their jobs, there would be an easy way to see it in our national statistics. It would be evident in something called “total factor productivity,” sometimes referred to as the “Solow residual.” We would expect a factory to produce more widgets if its owner bought a new widget-pressing machine. We would expect a factory to produce more widgets if it hired more workers, and had them toil for more hours. TFP growth occurs when factory workers figure out how to get more widgets out of their widget presses without buying new machinery or increasing their hours.


pages: 264 words: 76,643

The Growth Delusion: Wealth, Poverty, and the Well-Being of Nations by David Pilling

Airbnb, banking crisis, Bernie Sanders, Big bang: deregulation of the City of London, Branko Milanovic, call centre, centre right, clean water, collapse of Lehman Brothers, collateralized debt obligation, commoditize, Credit Default Swap, credit default swaps / collateralized debt obligations, dark matter, Deng Xiaoping, Diane Coyle, Donald Trump, double entry bookkeeping, Erik Brynjolfsson, falling living standards, financial deregulation, financial intermediation, financial repression, Gini coefficient, Goldman Sachs: Vampire Squid, Google Hangouts, Hans Rosling, happiness index / gross national happiness, income inequality, income per capita, informal economy, invisible hand, job satisfaction, Mahatma Gandhi, market fundamentalism, Martin Wolf, means of production, Monkeys Reject Unequal Pay, mortgage debt, off grid, old-boy network, Panopticon Jeremy Bentham, peak oil, performance metric, pez dispenser, profit motive, purchasing power parity, race to the bottom, rent-seeking, Robert Gordon, Ronald Reagan, Rory Sutherland, science of happiness, shareholder value, sharing economy, Simon Kuznets, sovereign wealth fund, The Great Moderation, The Wealth of Nations by Adam Smith, Thomas Malthus, total factor productivity, transaction costs, transfer pricing, trickle-down economics, urban sprawl, women in the workforce, World Values Survey

Criticisms of Japanese inefficiency stem from the fact that economists are not comparing like with like, since very few countries can match—and none exactly replicate—the service available in Japan. Kyoji Fukao, a professor at Hitotsubashi University’s Economic Research Institute, helped provide much of the Japanese data that went into the international comparisons used by McKinsey and others. He agreed that the usual measures of service-sector efficiency—value added per man hour and total factor productivity, which incorporates capital and labor inputs—were crude and difficult to apply across borders. Fukao gave the example of Japan’s retail sector, lambasted for its inefficiency in the McKinsey report. The basic measure of retail-sector productivity is how much of a product an employee can shift in an hour. On this measure, Germany does well. That turns out to be because of restricted opening hours, which oblige customers to make hefty purchases in concentrated bursts.


pages: 843 words: 223,858

The Rise of the Network Society by Manuel Castells

"Robert Solow", Apple II, Asian financial crisis, barriers to entry, Big bang: deregulation of the City of London, Bob Noyce, borderless world, British Empire, business cycle, capital controls, complexity theory, computer age, computerized trading, creative destruction, Credit Default Swap, declining real wages, deindustrialization, delayed gratification, dematerialisation, deskilling, disintermediation, double helix, Douglas Engelbart, Douglas Engelbart, edge city, experimental subject, financial deregulation, financial independence, floating exchange rates, future of work, global village, Gunnar Myrdal, Hacker Ethic, hiring and firing, Howard Rheingold, illegal immigration, income inequality, Induced demand, industrial robot, informal economy, information retrieval, intermodal, invention of the steam engine, invention of the telephone, inventory management, James Watt: steam engine, job automation, job-hopping, John Markoff, knowledge economy, knowledge worker, labor-force participation, laissez-faire capitalism, Leonard Kleinrock, longitudinal study, low skilled workers, manufacturing employment, Marc Andreessen, Marshall McLuhan, means of production, megacity, Menlo Park, moral panic, new economy, New Urbanism, offshore financial centre, oil shock, open economy, packet switching, Pearl River Delta, peer-to-peer, planetary scale, popular capitalism, popular electronics, post-industrial society, postindustrial economy, prediction markets, Productivity paradox, profit maximization, purchasing power parity, RAND corporation, Robert Gordon, Robert Metcalfe, Shoshana Zuboff, Silicon Valley, Silicon Valley startup, social software, South China Sea, South of Market, San Francisco, special economic zone, spinning jenny, statistical model, Steve Jobs, Steve Wozniak, Ted Nelson, the built environment, the medium is the message, the new new thing, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, total factor productivity, trade liberalization, transaction costs, urban renewal, urban sprawl, zero-sum game

g Mainland business sector (i.e. excluding shipping as well as crude petroleum and gas extraction). Overall, there was a moderate rate of growth of productivity for the 1870–1950 period (never surpassing 2 percent for any country or subperiod, except for Canada), a high rate of growth during the 1950–73 period (always over 2 percent, except for the UK) with Japan leading the charge; and a low growth rate in 1973–93 (very low for the US and Canada), always below 2 percent in total factor productivity, except for Italy in the 1970s. Even if we account for the specificity of some countries, what appears clearly is that we observe a downward trend of productivity growth starting roughly around the same time that the information technology revolution took shape in the early 1970s. Highest growth rates of productivity took place during the 1950–73 period when industrial technological innovations which came together as a system during the Second World War were woven into a dynamic model of economic growth.

But by the early 1970s, the productivity potential of these technologies seemed to be exhausted, and new information technologies did not appear to reverse the productivity slowdown for the next two decades.15 Indeed, in the United States, the famous “residual”, after accounting for about 1.5 points of annual productivity growth during the 1960s, made no contribution at all in 1972–92.16 In a comparative perspective, calculations by the reliable Centre d’Etudes Prospectives et d’Informations Internationales17 show a general reduction of total factor productivity growth for the main market economies during the 1970s and 1980s. Even for Japan, the role of capital in productivity growth was more important than that of multifactor productivity for the 1973–90 period. This decline was particularly marked in all countries for service activities, where new information-processing devices could be thought to have increased productivity, if the relationship between technology and productivity were simple and direct.


pages: 372 words: 92,477

The Fourth Revolution: The Global Race to Reinvent the State by John Micklethwait, Adrian Wooldridge

Admiral Zheng, affirmative action, Affordable Care Act / Obamacare, Asian financial crisis, assortative mating, banking crisis, barriers to entry, battle of ideas, Berlin Wall, Bernie Madoff, Boris Johnson, Bretton Woods, British Empire, cashless society, central bank independence, Chelsea Manning, circulation of elites, Clayton Christensen, Corn Laws, corporate governance, credit crunch, crony capitalism, Deng Xiaoping, Detroit bankruptcy, disintermediation, Edward Snowden, Etonian, failed state, Francis Fukuyama: the end of history, full employment, Gunnar Myrdal, income inequality, Khan Academy, Kickstarter, knowledge economy, Kodak vs Instagram, labor-force participation, laissez-faire capitalism, land reform, liberal capitalism, Martin Wolf, means of production, minimum wage unemployment, mittelstand, mobile money, Mont Pelerin Society, Nelson Mandela, night-watchman state, Norman Macrae, obamacare, oil shale / tar sands, old age dependency ratio, open economy, Parag Khanna, Peace of Westphalia, pension reform, pensions crisis, personalized medicine, Peter Thiel, plutocrats, Plutocrats, popular capitalism, profit maximization, rent control, rent-seeking, ride hailing / ride sharing, road to serfdom, Ronald Coase, Ronald Reagan, school choice, school vouchers, Silicon Valley, Skype, special economic zone, too big to fail, total factor productivity, War on Poverty, Washington Consensus, Winter of Discontent, working-age population, zero-sum game

Shambaugh, China Goes Global, p. 69. 36. Kurlantzik, Democracy in Retreat, p. 128. 37. “Leviathan as a Minority Shareholder: A Study of Equity Purchases” by the Brazilian National Development Bank (BNDES) 1995–2003, Harvard Business School, working paper. 38. Adrian Wooldridge, “The Visible Hand: A Special Report on State Capital­ism,” The Economist, January 21, 2012. An OECD paper in 2005 noted that the total-factor productivity of private companies is twice that of state companies. A study by the McKinsey Global Institute in the same year found that companies in which the state holds a minority stake are 70 percent more ­productive than wholly state-owned ones. 39. Shambaugh, China Goes Global, p. 254. 40. Beardson, Stumbling Giant, p. 99. 41. Jagdish Bhagwati and Arvind Panagariya, Why Growth Matters: How Economic Growth in India Reduced Poverty and the Lessons for Other Developing Countries (New York: Public Affairs, 2013), p. xvii. 42.


pages: 327 words: 90,542

The Age of Stagnation: Why Perpetual Growth Is Unattainable and the Global Economy Is in Peril by Satyajit Das

"Robert Solow", 9 dash line, accounting loophole / creative accounting, additive manufacturing, Airbnb, Albert Einstein, Alfred Russel Wallace, Anton Chekhov, Asian financial crisis, banking crisis, Berlin Wall, bitcoin, Bretton Woods, BRICs, British Empire, business cycle, business process, business process outsourcing, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Clayton Christensen, cloud computing, collaborative economy, colonial exploitation, computer age, creative destruction, cryptocurrency, currency manipulation / currency intervention, David Ricardo: comparative advantage, declining real wages, Deng Xiaoping, deskilling, disintermediation, disruptive innovation, Downton Abbey, Emanuel Derman, energy security, energy transition, eurozone crisis, financial innovation, financial repression, forward guidance, Francis Fukuyama: the end of history, full employment, gig economy, Gini coefficient, global reserve currency, global supply chain, Goldman Sachs: Vampire Squid, happiness index / gross national happiness, Honoré de Balzac, hydraulic fracturing, Hyman Minsky, illegal immigration, income inequality, income per capita, indoor plumbing, informal economy, Innovator's Dilemma, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, John Maynard Keynes: technological unemployment, Kenneth Rogoff, knowledge economy, knowledge worker, light touch regulation, liquidity trap, Long Term Capital Management, low skilled workers, Lyft, Mahatma Gandhi, margin call, market design, Marshall McLuhan, Martin Wolf, Mikhail Gorbachev, mortgage debt, mortgage tax deduction, new economy, New Urbanism, offshore financial centre, oil shale / tar sands, oil shock, old age dependency ratio, open economy, passive income, peak oil, peer-to-peer lending, pension reform, plutocrats, Plutocrats, Ponzi scheme, Potemkin village, precariat, price stability, profit maximization, pushing on a string, quantitative easing, race to the bottom, Ralph Nader, Rana Plaza, rent control, rent-seeking, reserve currency, ride hailing / ride sharing, rising living standards, risk/return, Robert Gordon, Ronald Reagan, Satyajit Das, savings glut, secular stagnation, seigniorage, sharing economy, Silicon Valley, Simon Kuznets, Slavoj Žižek, South China Sea, sovereign wealth fund, TaskRabbit, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the market place, the payments system, The Spirit Level, Thorstein Veblen, Tim Cook: Apple, too big to fail, total factor productivity, trade route, transaction costs, uber lyft, unpaid internship, Unsafe at Any Speed, Upton Sinclair, Washington Consensus, We are the 99%, WikiLeaks, Y2K, Yom Kippur War, zero-coupon bond, zero-sum game

In the US, despite considerable volatility, productivity increases between the late nineteenth and late twentieth century averaged around 2–2.5 percent per annum. Productivity rises were high, 3–4 percent, in the first three decades after World War II. In recent years it has slowed to around 1 percent. The decline in other developed countries, especially Europe, has been greater. Emerging nations have higher but declining rates of productivity increases. Improvements in labor productivity, which measures output produced per unit of labor, and total factor productivity, which takes into account the combined input of labor and capital, have both declined, with the latter declining more sharply. Even recent modest gains in productivity may be overstated. Increased output in sectors like financial services, education, hospitality, healthcare, aged care, or government may not equate to real improvements. In mid-2014, economists rationalized a fall in the US GDP of 2.9 percent, the worst performance in five years, on the grounds that it resulted from a fall in healthcare spending.


pages: 322 words: 87,181

Straight Talk on Trade: Ideas for a Sane World Economy by Dani Rodrik

3D printing, airline deregulation, Asian financial crisis, bank run, barriers to entry, Berlin Wall, Bernie Sanders, blue-collar work, Bretton Woods, BRICs, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, central bank independence, centre right, collective bargaining, conceptual framework, continuous integration, corporate governance, corporate social responsibility, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Donald Trump, endogenous growth, Eugene Fama: efficient market hypothesis, eurozone crisis, failed state, financial deregulation, financial innovation, financial intermediation, financial repression, floating exchange rates, full employment, future of work, George Akerlof, global value chain, income inequality, inflation targeting, information asymmetry, investor state dispute settlement, invisible hand, Jean Tirole, Kenneth Rogoff, low skilled workers, manufacturing employment, market clearing, market fundamentalism, meta analysis, meta-analysis, moral hazard, Nelson Mandela, new economy, offshore financial centre, open borders, open economy, Pareto efficiency, postindustrial economy, price stability, pushing on a string, race to the bottom, randomized controlled trial, regulatory arbitrage, rent control, rent-seeking, Richard Thaler, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, Sam Peltzman, Silicon Valley, special economic zone, spectrum auction, Steven Pinker, The Rise and Fall of American Growth, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, total factor productivity, trade liberalization, transaction costs, unorthodox policies, Washington Consensus, World Values Survey, zero-sum game, éminence grise

In India, rapid growth is also underpinned by a substantial increase in overall investment, which now stands at around one-third of GDP. Much of this increase has come from private sources, as the shackles on the business sector were gradually relaxed since the early 1980s. But the public sector continues to play an important role. The government has had to step in as both private investment and total factor productivity growth have faltered in recent years. These days it is public investment on infrastructure that helps maintain India’s growth momentum. “I think two sectors holding back the economy are private investments and exports,” says the government’s chief economic adviser Arvind Subramanian. “That is why … public investment is going to fill in the gap.”5 Turning to Latin America, Bolivia is one of the rare mineral exporters that has managed to avoid the fate of others in the current downturn of the commodity cycle.


pages: 372 words: 94,153

More From Less: The Surprising Story of How We Learned to Prosper Using Fewer Resources – and What Happens Next by Andrew McAfee

back-to-the-land, Bartolomé de las Casas, Berlin Wall, bitcoin, Branko Milanovic, British Empire, Buckminster Fuller, call centre, carbon footprint, clean water, cleantech, cloud computing, Corn Laws, creative destruction, crony capitalism, David Ricardo: comparative advantage, decarbonisation, dematerialisation, Deng Xiaoping, Donald Trump, Edward Glaeser, en.wikipedia.org, energy transition, Erik Brynjolfsson, failed state, Fall of the Berlin Wall, Haber-Bosch Process, Hans Rosling, humanitarian revolution, hydraulic fracturing, income inequality, indoor plumbing, intangible asset, James Watt: steam engine, Jeff Bezos, job automation, John Snow's cholera map, joint-stock company, Joseph Schumpeter, Khan Academy, Landlord’s Game, Louis Pasteur, Lyft, Marc Andreessen, market fundamentalism, means of production, Mikhail Gorbachev, oil shale / tar sands, Paul Samuelson, peak oil, precision agriculture, profit maximization, profit motive, risk tolerance, road to serfdom, Ronald Coase, Ronald Reagan, Scramble for Africa, Second Machine Age, Silicon Valley, Steve Jobs, Steven Pinker, Stewart Brand, telepresence, The Wealth of Nations by Adam Smith, Thomas Davenport, Thomas Malthus, Thorstein Veblen, total factor productivity, Uber and Lyft, uber lyft, Veblen good, War on Poverty, Whole Earth Catalog, World Values Survey

First, small-scale farming is less efficient in its use of resources than massive, industrialized, mechanized agriculture. To get the same harvest, homesteaders use more land, water, and fertilizer than do “factory farmers.” Farms of less than one hundred acres, for example, grow 15 percent less corn per acre than farms with more than a thousand acres. And bigger farms get better faster. Between 1982 and 2012 farms under one hundred acres grew their total factor productivity by 15 percent, whereas farms over a thousand acres grew theirs by 51 percent. So more homesteaders would have meant more land under cultivation, more water and fertilizer used, and so on. Second, rural life is less environmentally friendly than urban or suburban dwelling. City folk live in high-density, energy-efficient apartments and condos, travel only short distances for work and errands, and frequently use public transportation.


pages: 976 words: 235,576

The Meritocracy Trap: How America's Foundational Myth Feeds Inequality, Dismantles the Middle Class, and Devours the Elite by Daniel Markovits

"Robert Solow", 8-hour work day, activist fund / activist shareholder / activist investor, affirmative action, Anton Chekhov, asset-backed security, assortative mating, basic income, Bernie Sanders, big-box store, business cycle, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, carried interest, collateralized debt obligation, collective bargaining, computer age, corporate governance, corporate raider, crony capitalism, David Brooks, deskilling, Detroit bankruptcy, disruptive innovation, Donald Trump, Edward Glaeser, Emanuel Derman, equity premium, European colonialism, everywhere but in the productivity statistics, fear of failure, financial innovation, financial intermediation, fixed income, Ford paid five dollars a day, Frederick Winslow Taylor, full employment, future of work, gender pay gap, George Akerlof, Gini coefficient, glass ceiling, helicopter parent, high net worth, hiring and firing, income inequality, industrial robot, interchangeable parts, invention of agriculture, Jaron Lanier, Jeff Bezos, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, knowledge economy, knowledge worker, Kodak vs Instagram, labor-force participation, longitudinal study, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, mass incarceration, medical residency, minimum wage unemployment, Myron Scholes, Nate Silver, New Economic Geography, new economy, offshore financial centre, Paul Samuelson, payday loans, plutocrats, Plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, precariat, purchasing power parity, rent-seeking, Richard Florida, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, school choice, shareholder value, Silicon Valley, Simon Kuznets, six sigma, Skype, stakhanovite, stem cell, Steve Jobs, supply-chain management, telemarketer, The Bell Curve by Richard Herrnstein and Charles Murray, Thomas Davenport, Thorstein Veblen, too big to fail, total factor productivity, transaction costs, traveling salesman, universal basic income, unpaid internship, Vanguard fund, War on Poverty, Winter of Discontent, women in the workforce, working poor, young professional, zero-sum game

The productivity of labor grew by nearly 30 percent in the 1960s, and then by just 19 percent, 16 percent, 20 percent, and 25 percent in the 1970s, 1980s, 1990s, and 2000s respectively (growth rates calculated using data form the Bureau of Labor Statistics, Major Sector Productivity and Costs, Nonfarm Business Labor Productivity (output per hour) series PRS85006092). Most significantly, total factor productivity—the portion of output not accounted for by conventional inputs (of capital and labor)—has again grown more slowly during the recent decades of rising economic inequality than it did during the relatively more egalitarian decades at midcentury: growing by just 0.9 percent annually between 1980 and 2009, compared to 1.0 percent between 1950 and 1969. (The dividing decade between the two eras, the 1970s, showed truly anemic growth.) See “Total Factor Productivity at Constant National Prices for the United States,” St. Louis Fed FRED, accessed September 28, 2018, https://fred.stlouisfed.org/series/RTFPNAUSA632NRUG. This observation borrows from Acemoglu, “Technical Change.”


pages: 370 words: 102,823

Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth by Michael Jacobs, Mariana Mazzucato

balance sheet recession, banking crisis, basic income, Bernie Sanders, Bretton Woods, business climate, business cycle, Carmen Reinhart, central bank independence, collaborative economy, complexity theory, conceptual framework, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, decarbonisation, deindustrialization, dematerialisation, Detroit bankruptcy, double entry bookkeeping, Elon Musk, endogenous growth, energy security, eurozone crisis, factory automation, facts on the ground, fiat currency, Financial Instability Hypothesis, financial intermediation, forward guidance, full employment, G4S, Gini coefficient, Growth in a Time of Debt, Hyman Minsky, income inequality, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Internet of things, investor state dispute settlement, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, knowledge economy, labour market flexibility, low skilled workers, Martin Wolf, mass incarceration, Mont Pelerin Society, neoliberal agenda, Network effects, new economy, non-tariff barriers, paradox of thrift, Paul Samuelson, price stability, private sector deleveraging, quantitative easing, QWERTY keyboard, railway mania, rent-seeking, road to serfdom, savings glut, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Steve Jobs, the built environment, The Great Moderation, The Spirit Level, Thorstein Veblen, too big to fail, total factor productivity, transaction costs, trickle-down economics, universal basic income, very high income

Similar problems with measurement and analysis have led many economists and policy-makers to see a conflict between growth potential and environmental concerns. Orthodox economics has long struggled to deal appropriately with the role of natural resources in the economy. Decades of low and decreasing costs of energy and raw materials made it seem reasonable to ignore their impact, and thus both the concepts of output per hour and of the ambitiously named ‘total factor productivity’ fail to measure the productivity of resources. Nor have many attempts been made to incorporate the role of innovation in resource use. In 1956, Solow proposed that the nature of technology should be recognised as being wider than just the contributions of capital and labour, measuring its total contribution as the unexplained ‘residual’ after those had been taken into account.4 Half a century later, with environmental and energy issues becoming pressing concerns, Ayers and colleagues suggested introducing the efficiency of energy into the models.5 But such approaches do not go very far in analysing the role of concrete innovations in productivity and growth, much less in guiding growth and employment policy.


The New Harvest: Agricultural Innovation in Africa by Calestous Juma

agricultural Revolution, Albert Einstein, barriers to entry, bioinformatics, business climate, carbon footprint, clean water, colonial rule, conceptual framework, creative destruction, double helix, energy security, energy transition, global value chain, income per capita, industrial cluster, informal economy, Intergovernmental Panel on Climate Change (IPCC), Joseph Schumpeter, knowledge economy, land tenure, M-Pesa, microcredit, mobile money, non-tariff barriers, off grid, out of africa, precision agriculture, Second Machine Age, self-driving car, Silicon Valley, sovereign wealth fund, structural adjustment programs, supply-chain management, total factor productivity, undersea cable

Between 1985 and 2006, total agricultural production grew by 77%, largely due to effective public investments in science and technology, combined with an environment of economic liberalization and stability.36 In particular, the rapid modernization of agriculture observed in the 1970s and early 1980s was largely a result of “coordinated policies that led to increased R&D capacity and increased volumes of credit, tied to support policies of stock management, improved distribution and commercialization of food and agro industrial products.”37 During the agricultural reforms of the last few decades, the Brazilian Agricultural Research Corporation (EMBRAPA), an 114 THE NEW HARVEST agricultural research agency funded by the Ministry of Agriculture and Food Supply, was instrumental in boosting Brazilian total factor productivity growth. The agency was initially responsible for providing extension services for the distribution of technological packages, such as new seeds, soil correction techniques, and improved production practices, but later expanded to also develop high-yielding and disease-resistant crops. EMBRAPA was an institutional innovation designed to respond to a diversity of agricultural needs over a vast geographical area.


pages: 330 words: 99,044

Reimagining Capitalism in a World on Fire by Rebecca Henderson

Airbnb, asset allocation, Berlin Wall, Bernie Sanders, business climate, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, collaborative economy, collective bargaining, commoditize, corporate governance, corporate social responsibility, crony capitalism, dark matter, decarbonisation, disruptive innovation, double entry bookkeeping, Elon Musk, Erik Brynjolfsson, Exxon Valdez, Fall of the Berlin Wall, family office, fixed income, George Akerlof, Gini coefficient, global supply chain, greed is good, Hans Rosling, Howard Zinn, Hyman Minsky, income inequality, index fund, Intergovernmental Panel on Climate Change (IPCC), joint-stock company, Kickstarter, Lyft, Mark Zuckerberg, means of production, meta analysis, meta-analysis, microcredit, mittelstand, Mont Pelerin Society, Nelson Mandela, passive investing, Paul Samuelson, Philip Mirowski, profit maximization, race to the bottom, ride hailing / ride sharing, Ronald Reagan, Rosa Parks, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Snapchat, sovereign wealth fund, Steven Pinker, stocks for the long run, Tim Cook: Apple, total factor productivity, Toyota Production System, uber lyft, urban planning, Washington Consensus, working-age population, Zipcar

License: Creative Commons Attribution CC BY 3.0 IGO. Children who don’t receive an adequate supply of basic nutrients in their first few days of life suffer cognitive and emotional damage that cannot later be repaired. World Bank, World Development Report 2018. 7. F. Alvaredo, L. Chancel, T. Piketty, E. Saez, and G. Zucman, World Inequality Report 2018 (Cambridge, MA: The Belknap Press of Harvard University Press, 2018). 8. “Total Factor Productivity at Constant National Prices for United States,” FRED, June 11, 2019, https://fred.stlouisfed.org/series/RTFPNAUSA632NRUG. 9. Lawrence Mishel and Jessica Schieder, “CEO Compensation Surged in 2017,” Economic Policy Institute 16 (2018). 10. Lyndsey Layton, “Majority of U.S. Public School Students Are in Poverty,” Washington Post, Jan. 16, 2015, www.washingtonpost.com/local/education/majority-of-us-public-school-students-are-in-poverty/2015/01/15/df7171d0-9ce9-11e4-a7ee-526210d665b4_story.html. 11.


pages: 355 words: 63

The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics by William R. Easterly

"Robert Solow", Andrei Shleifer, business climate, business cycle, Carmen Reinhart, central bank independence, clean water, colonial rule, correlation does not imply causation, creative destruction, endogenous growth, financial repression, Gini coefficient, Gunnar Myrdal, income inequality, income per capita, inflation targeting, interchangeable parts, inventory management, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, large denomination, manufacturing employment, Network effects, New Urbanism, open economy, Productivity paradox, purchasing power parity, rent-seeking, Ronald Reagan, selection bias, Silicon Valley, Simon Kuznets, The Wealth of Nations by Adam Smith, Thomas Malthus, total factor productivity, trade liberalization, urban sprawl, Watson beat the top human players on Jeopardy!, Yogi Berra, Yom Kippur War

Belser 2000. 13. United Nations Development Programs Human Development Report 1996. 14. Lucas 1990. I use a capital share of0.4 as Lucas did. The ratio of capital stocks would have to be (15)"(1/.4), which is 871. 15. Pritchett 199%. 16. Baumol1986. 17. De Long 1988. 18. See also the study by Pack and Page 1994, which also gave an important role to capital accumulation and showed a fairly low total factor productivity growth estimate for Singapore. 19. Klenow and Rodriguez-Clare 1997 20. Easterly and Levine 2000. 21. Data from King and Levine 1994. 22. Devarajan, Easterly, and Pack 1999. 23. Hsieh 1999 24. World Bank, 1995a, p. 35. Notes 298 Intermezzo: Dry Cornstalks 1. Tremblay. and Capon 1988, pp. 197-198. Chapter 4 1. From Bulletin: The MajovProject Caribbean 1990, p. 9. in the Field of Education in Latin Arnevica and the 2.


Hopes and Prospects by Noam Chomsky

"Robert Solow", Albert Einstein, banking crisis, Berlin Wall, Bretton Woods, British Empire, capital controls, colonial rule, corporate personhood, Credit Default Swap, cuban missile crisis, David Ricardo: comparative advantage, deskilling, en.wikipedia.org, energy security, failed state, Fall of the Berlin Wall, financial deregulation, Firefox, Howard Zinn, Hyman Minsky, invisible hand, liberation theology, market fundamentalism, Martin Wolf, Mikhail Gorbachev, Monroe Doctrine, moral hazard, Nelson Mandela, new economy, nuremberg principles, one-state solution, open borders, Plutonomy: Buying Luxury, Explaining Global Imbalances, Ralph Waldo Emerson, RAND corporation, Ronald Reagan, structural adjustment programs, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, trade liberalization, uranium enrichment, Washington Consensus

To mention one, international economist David Felix shows that trade growth slowed in the neoliberal period in the rich (G-7) societies (with the sole exception of the United States, which had been well below the G-7 average). The same is true of growth of gross fixed investment. Capital flow of course sharply increased, but “the flows have been transferring ownership but little real resources on balance.” Furthermore, “the growth of labor, capital, and total factor productivity have all fallen precipitously since the 1960s in the OECD [Organisation for Economic Co-operation and Development] countries.”11 In brief, the twenty-five years of economic sovereignty, state-coordinated economic growth, and capital controls under the Bretton Woods system led to better social and economic results than the following twenty-five years of neoliberalism, by just about every relevant measure, and by significant margins.


Falling Behind: Explaining the Development Gap Between Latin America and the United States by Francis Fukuyama

Andrei Shleifer, Atahualpa, barriers to entry, Berlin Wall, British Empire, business climate, Cass Sunstein, central bank independence, collective bargaining, colonial rule, conceptual framework, creative destruction, crony capitalism, European colonialism, Fall of the Berlin Wall, first-past-the-post, Francis Fukuyama: the end of history, Francisco Pizarro, Hernando de Soto, income inequality, income per capita, land reform, land tenure, Monroe Doctrine, moral hazard, New Urbanism, oil shock, open economy, purchasing power parity, rent-seeking, Ronald Reagan, The Wealth of Nations by Adam Smith, total factor productivity, trade liberalization, transaction costs, upwardly mobile, Washington Consensus, zero-sum game

Burgeoning fiscal deficits, attempts to monetize deficits through growth in money supplies, hyperinflation, and overvalued exchange rates in Mexico, Brazil, Argentina, Peru, and other countries set the stage for the debt crisis of the 1980s and the subsequent drop in real growth rates throughout Latin America. The United States, on the other hand, controlled the inflationary spiral set off by the oil crisis relatively quickly in the early 1980s and put into place a series of liberalizing economic policies that laid the groundwork for two decades of almost uninterrupted growth in per capita income. Indeed, growth in total factor productivity, which had been declining through much of the postwar period, began an upward trend in the late 1990s as a series of innovations in information and communications technology began to take root. The 1990s and early years of the twenty-first century brought to most Latin American countries a return to economic orthodoxy and stable macroeconomic indicators. This set the stage in a number of countries for a return to growth, though not to an appreciable closing of the gap with the United States, due in part to the latter’s relatively good economic performance.


pages: 436 words: 76

Culture and Prosperity: The Truth About Markets - Why Some Nations Are Rich but Most Remain Poor by John Kay

"Robert Solow", Albert Einstein, Asian financial crisis, Barry Marshall: ulcers, Berlin Wall, Big bang: deregulation of the City of London, business cycle, California gold rush, complexity theory, computer age, constrained optimization, corporate governance, corporate social responsibility, correlation does not imply causation, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, Donald Trump, double entry bookkeeping, double helix, Edward Lloyd's coffeehouse, equity premium, Ernest Rutherford, European colonialism, experimental economics, Exxon Valdez, failed state, financial innovation, Francis Fukuyama: the end of history, George Akerlof, George Gilder, greed is good, Gunnar Myrdal, haute couture, illegal immigration, income inequality, industrial cluster, information asymmetry, intangible asset, invention of the telephone, invention of the wheel, invisible hand, John Meriwether, John Nash: game theory, John von Neumann, Kenneth Arrow, Kevin Kelly, knowledge economy, light touch regulation, Long Term Capital Management, loss aversion, Mahatma Gandhi, market bubble, market clearing, market fundamentalism, means of production, Menlo Park, Mikhail Gorbachev, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, Naomi Klein, Nash equilibrium, new economy, oil shale / tar sands, oil shock, Pareto efficiency, Paul Samuelson, pets.com, popular electronics, price discrimination, price mechanism, prisoner's dilemma, profit maximization, purchasing power parity, QWERTY keyboard, Ralph Nader, RAND corporation, random walk, rent-seeking, Right to Buy, risk tolerance, road to serfdom, Ronald Coase, Ronald Reagan, second-price auction, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, Steve Jobs, telemarketer, The Chicago School, The Market for Lemons, The Nature of the Firm, the new new thing, The Predators' Ball, The Wealth of Nations by Adam Smith, Thorstein Veblen, total factor productivity, transaction costs, tulip mania, urban decay, Vilfredo Pareto, Washington Consensus, women in the workforce, yield curve, yield management

The property of an allocation of resources in which no one can be made better off without making someone else worse off A change that makes some people better off and no one worse off A dynamic process in which behavior is affected indefinitely by initial conditions. The initial sale of a good or service (especially of a security). Labor productivity in output per unit oflabor (per head, per hour worked). Total factor productivity is output per unit of all inputs (including, in particular, capital inputs). Productivity without qualification usually (but not always) refers to labor productivity. The rate of exchange between different currencies at which a representative bundle of goods would cost the same in each country or currency zone. The right to sell a security at a fixed price at a future date, even if its market price has subsequently fallen.


pages: 497 words: 150,205

European Spring: Why Our Economies and Politics Are in a Mess - and How to Put Them Right by Philippe Legrain

3D printing, Airbnb, Asian financial crisis, bank run, banking crisis, barriers to entry, Basel III, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Boris Johnson, Bretton Woods, BRICs, British Empire, business cycle, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, cleantech, collaborative consumption, collapse of Lehman Brothers, collective bargaining, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, debt deflation, Diane Coyle, disruptive innovation, Downton Abbey, Edward Glaeser, Elon Musk, en.wikipedia.org, energy transition, eurozone crisis, fear of failure, financial deregulation, first-past-the-post, forward guidance, full employment, Gini coefficient, global supply chain, Growth in a Time of Debt, hiring and firing, hydraulic fracturing, Hyman Minsky, Hyperloop, immigration reform, income inequality, interest rate derivative, Intergovernmental Panel on Climate Change (IPCC), Irish property bubble, James Dyson, Jane Jacobs, job satisfaction, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, labour market flexibility, labour mobility, liquidity trap, margin call, Martin Wolf, mittelstand, moral hazard, mortgage debt, mortgage tax deduction, North Sea oil, Northern Rock, offshore financial centre, oil shale / tar sands, oil shock, open economy, peer-to-peer rental, price stability, private sector deleveraging, pushing on a string, quantitative easing, Richard Florida, rising living standards, risk-adjusted returns, Robert Gordon, savings glut, school vouchers, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Skype, smart grid, smart meter, software patent, sovereign wealth fund, Steve Jobs, The Death and Life of Great American Cities, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, Tyler Cowen: Great Stagnation, working-age population, Zipcar

Their modest agenda: to revolutionise the economy and society, everything from education, entertainment and e-commerce to design, drones and big data. Where do new ideas come from – and how do they generate economic growth? These are perhaps the most important questions in economics, yet orthodox theory has very little to say about them. Statistically, most growth in advanced economies is accounted for by “total factor productivity growth” – generating more output for a given input of capital and labour – but that is just a black box. In effect, new technologies are assumed to fall like manna from heaven. A slightly more sophisticated analysis emphasises the importance of investment in both skills and research and development (R&D). That view is reflected in European policymaking. In the EU’s ten-year plan for delivering “smart, sustainable and inclusive growth”, the Europe 2020 programme, the two targets for delivering smart growth are raising the proportion of Europeans who graduate from university to 40 per cent and boosting investment in R&D to 3 per cent of GDP.589 But while investment in skills and research can be important, they are merely inputs to innovation.


Crisis and Leviathan: Critical Episodes in the Growth of American Government by Robert Higgs, Arthur A. Ekirch, Jr.

Alistair Cooke, American ideology, business cycle, clean water, collective bargaining, creative destruction, credit crunch, declining real wages, endowment effect, fiat currency, fixed income, full employment, hiring and firing, income per capita, Jones Act, Joseph Schumpeter, laissez-faire capitalism, manufacturing employment, means of production, minimum wage unemployment, plutocrats, Plutocrats, post-industrial society, price discrimination, profit motive, rent control, rent-seeking, Richard Thaler, road to serfdom, Ronald Reagan, Sam Peltzman, Simon Kuznets, strikebreaker, The Wealth of Nations by Adam Smith, total factor productivity, transaction costs, transcontinental railway, union organizing, Upton Sinclair, War on Poverty, Works Progress Administration

Edwin Mansfield, The Economics of Technological Change (New York: Norton, 1968); Nathan Rosenberg, ed., The Economics of Technological Change: Selected Readings (Harmondsworth, Middlesex: Penguin, 1971); idem, Perspectives on Technology (New York: Cambridge University Press, 1976). 33. On technological change as a residual, see M. Ishaq Nadiri, "Some Approaches to the Theory and Measurement of Total Factor Productivity: A Survey," Journal of Economic Literature 8 (Dec. 1970): 1137-1177. On ideological change as a residual, see Douglass C. North, "Structure and Performance: The Task of Economic History," ibid. 16 (Sept. 1978): 973; Joseph P. Kalt and M. A. Zupan, "Capture and Ideology in the Economic Theory of Politics," American Economic Review 74 (June 1984): 291-295. 34. Karl R. Popper, The Poverty of Historicism (New York: Harper Torchbooks, 1964); Ronald A.


pages: 585 words: 151,239

Capitalism in America: A History by Adrian Wooldridge, Alan Greenspan

"Robert Solow", 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, agricultural Revolution, air freight, Airbnb, airline deregulation, American Society of Civil Engineers: Report Card, Asian financial crisis, bank run, barriers to entry, Berlin Wall, Bonfire of the Vanities, Bretton Woods, British Empire, business climate, business cycle, business process, California gold rush, Charles Lindbergh, cloud computing, collateralized debt obligation, collective bargaining, Corn Laws, corporate governance, corporate raider, creative destruction, credit crunch, debt deflation, Deng Xiaoping, disruptive innovation, Donald Trump, edge city, Elon Musk, equal pay for equal work, Everybody Ought to Be Rich, Fall of the Berlin Wall, fiat currency, financial deregulation, financial innovation, fixed income, full employment, George Gilder, germ theory of disease, global supply chain, hiring and firing, income per capita, indoor plumbing, informal economy, interchangeable parts, invention of the telegraph, invention of the telephone, Isaac Newton, Jeff Bezos, jimmy wales, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Rogoff, Kitchen Debate, knowledge economy, knowledge worker, labor-force participation, Louis Pasteur, low skilled workers, manufacturing employment, market bubble, Mason jar, mass immigration, means of production, Menlo Park, Mexican peso crisis / tequila crisis, minimum wage unemployment, mortgage debt, Myron Scholes, Network effects, new economy, New Urbanism, Northern Rock, oil rush, oil shale / tar sands, oil shock, Peter Thiel, plutocrats, Plutocrats, popular capitalism, post-industrial society, postindustrial economy, price stability, Productivity paradox, purchasing power parity, Ralph Nader, Ralph Waldo Emerson, RAND corporation, refrigerator car, reserve currency, rising living standards, road to serfdom, Robert Gordon, Ronald Reagan, Sand Hill Road, savings glut, secular stagnation, Silicon Valley, Silicon Valley startup, Simon Kuznets, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, stem cell, Steve Jobs, Steve Wozniak, strikebreaker, supply-chain management, The Great Moderation, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, total factor productivity, trade route, transcontinental railway, tulip mania, Tyler Cowen: Great Stagnation, union organizing, Unsafe at Any Speed, Upton Sinclair, urban sprawl, Vannevar Bush, War on Poverty, washing machines reduced drudgery, Washington Consensus, white flight, wikimedia commons, William Shockley: the traitorous eight, women in the workforce, Works Progress Administration, Yom Kippur War, young professional

Two big determinants of the level of labor productivity are the amount of capital (plant and equipment) employed in making things and the number of hours people work, adjusted for their level of education and skills. In the 1950s, “growth economists,” led by Moses Abramovitz and Robert Solow, discovered that the inputs of capital and labor do not fully account for all the growth in GDP. They dubbed the unexplained leftover multifactor productivity (MFP) or, sometimes, total factor productivity. The heart of MFP is innovation. MFP arises mainly from innovations applied to the inputs of capital and labor. The problem with calculating GDP and MFP over a long period is that the further back you go in time, the more difficult it is to find solid statistics. The U.S. government only began collecting systematic data on national income and product accounts in the 1930s, when it called on the expertise of Simon Kuznets of Stanford University and the National Bureau of Economic Research.


pages: 540 words: 168,921

The Relentless Revolution: A History of Capitalism by Joyce Appleby

1919 Motor Transport Corps convoy, agricultural Revolution, anti-communist, Asian financial crisis, asset-backed security, Bartolomé de las Casas, Bernie Madoff, Bretton Woods, BRICs, British Empire, call centre, Charles Lindbergh, collateralized debt obligation, collective bargaining, Columbian Exchange, commoditize, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, deskilling, Doha Development Round, double entry bookkeeping, epigenetics, equal pay for equal work, European colonialism, facts on the ground, failed state, Firefox, fixed income, Ford paid five dollars a day, Francisco Pizarro, Frederick Winslow Taylor, full employment, Gordon Gekko, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, Hernando de Soto, hiring and firing, illegal immigration, informal economy, interchangeable parts, interest rate swap, invention of movable type, invention of the printing press, invention of the steam engine, invisible hand, Isaac Newton, James Hargreaves, James Watt: steam engine, Jeff Bezos, joint-stock company, Joseph Schumpeter, knowledge economy, land reform, Livingstone, I presume, Long Term Capital Management, Mahatma Gandhi, Martin Wolf, moral hazard, Parag Khanna, Ponzi scheme, profit maximization, profit motive, race to the bottom, Ralph Nader, refrigerator car, Ronald Reagan, Scramble for Africa, Silicon Valley, Silicon Valley startup, South China Sea, South Sea Bubble, special economic zone, spice trade, spinning jenny, strikebreaker, the built environment, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thorstein Veblen, total factor productivity, trade route, transatlantic slave trade, transcontinental railway, union organizing, Unsafe at Any Speed, Upton Sinclair, urban renewal, War on Poverty, working poor, Works Progress Administration, Yogi Berra, Yom Kippur War

David Khoudour-Casteras, “The Impact of Bismarck’s Social Legislation on German Emigration before World War I,” eScholarship Repository, University of California; http://repositories.edlib.org/berkely.econ211/spring2005/, 4–45; Trebilcock, Industrialization of Continental Powers, 65–77; Hubert Kiesewetter, Industrielle Revolution in Deutschland, 1815–1914, Neue Historische Bibliothek (Frankfurt, 1989), 90. 14. Thomas Weiss, “U.S. Labor Force Estimates and Economic Growth, 1800 to 1860,” in R. Gallman and J. Wallis, eds., The Standard of Living in Early Nineteenth Century America (Chicago, 1992), 8–10; Lee A. Craig and Thomas Weiss, “Hours at Work and Total Factor Productivity Growth in 19th-Century U.S. Agriculture,” Advances in Agricultural Economic History, 1 (2000): 1–30; Weiss, “American Economic Miracle”: 20. 15. Nelson Lichtenstein, State of the Union: A Century of American Labor (Princeton, 2002), 4; Karen Orren, Belated Feudalism: Labor, The Law, And Liberal Developments In The United States (Cambridge, 1992); Irwin Unger, The Greenback Era: A Social and Political History of American Finance, 1865–1879 (Princeton, 1964), 22. 16.


pages: 566 words: 163,322

The Rise and Fall of Nations: Forces of Change in the Post-Crisis World by Ruchir Sharma

Asian financial crisis, backtesting, bank run, banking crisis, Berlin Wall, Bernie Sanders, BRICs, business climate, business cycle, business process, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, colonial rule, Commodity Super-Cycle, corporate governance, creative destruction, crony capitalism, currency peg, dark matter, debt deflation, deglobalization, deindustrialization, demographic dividend, demographic transition, Deng Xiaoping, Doha Development Round, Donald Trump, Edward Glaeser, Elon Musk, eurozone crisis, failed state, Fall of the Berlin Wall, falling living standards, Francis Fukuyama: the end of history, Freestyle chess, Gini coefficient, hiring and firing, income inequality, indoor plumbing, industrial robot, inflation targeting, Internet of things, Jeff Bezos, job automation, John Markoff, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, knowledge economy, labor-force participation, lateral thinking, liberal capitalism, Malacca Straits, Mark Zuckerberg, market bubble, mass immigration, megacity, Mexican peso crisis / tequila crisis, mittelstand, moral hazard, New Economic Geography, North Sea oil, oil rush, oil shale / tar sands, oil shock, pattern recognition, Paul Samuelson, Peter Thiel, pets.com, plutocrats, Plutocrats, Ponzi scheme, price stability, Productivity paradox, purchasing power parity, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, Ronald Coase, Ronald Reagan, savings glut, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Simon Kuznets, smart cities, Snapchat, South China Sea, sovereign wealth fund, special economic zone, spectrum auction, Steve Jobs, The Future of Employment, The Wisdom of Crowds, Thomas Malthus, total factor productivity, trade liberalization, trade route, tulip mania, Tyler Cowen: Great Stagnation, unorthodox policies, Washington Consensus, WikiLeaks, women in the workforce, working-age population

The aim: a practical person’s guide for spotting the rise and fall of nations, in real time. * Global GDP growth is measured here in market-determined exchange-rate terms. † This figure refers to potential growth, which we calculate by taking the sum of productivity growth and employment growth from the Conference Board Total Economy Database. ‡ Technically, productivity growth is the sum of increases in labor quality, capital deepening, and total factor productivity. 1 PEOPLE MATTER Is the talent pool growing? AT FIRST I DIDN’T THINK THERE WAS MUCH MYSTERY TO the lackluster global recovery. After 2008, when the United States fell into a deep recession and the world soon followed, economists argued that the recovery would be painfully slow because this was a “systemic crisis,” not an ordinary recession, and I was persuaded. Their research showed that following a crisis that devastates the financial system, an economy typically experiences weak growth for four to five years even after the end of the recession.


Economic Origins of Dictatorship and Democracy by Daron Acemoğlu, James A. Robinson

Andrei Shleifer, British Empire, business cycle, colonial rule, conceptual framework, constrained optimization, Corn Laws, declining real wages, Edward Glaeser, European colonialism, Gunnar Myrdal, income inequality, income per capita, invisible hand, Jean Tirole, John Markoff, Kenneth Rogoff, land reform, minimum wage unemployment, Nash equilibrium, Nelson Mandela, oil shock, open economy, Pareto efficiency, rent-seeking, strikebreaker, total factor productivity, transaction costs, Washington Consensus, William of Occam, women in the workforce

In addition, the distinction between the high and low state emphasizes that regime changes happen during unusual periods, perhaps economic crises or recessions. This is also in line with the evidence discussed in Chapter 3 (see also Acemoglu, Johnson, Robinson, and Yared 2004). Although in this book we capture these ideas using the reduced-form parameter µ so that the costs of revolution fluctuate directly, in Acemoglu and Robinson (2001) we showed how the same results follow from a model in which the cost of revolution is constant but total factor productivity fluctuates, as in standard models of the business cycle. In that model, changes in productivity change the opportunity costs of revolutions (and coups) and this has the same effects. 8. Subgame Perfect Equilibria In the previous section, we characterized a subset of the subgame perfect equilibria of G ∞ (β). In this section, we analyze our basic dynamic model of democratization without the restriction to Markovian strategies.


pages: 823 words: 220,581

Debunking Economics - Revised, Expanded and Integrated Edition: The Naked Emperor Dethroned? by Steve Keen

"Robert Solow", accounting loophole / creative accounting, banking crisis, banks create money, barriers to entry, Benoit Mandelbrot, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, business cycle, butterfly effect, capital asset pricing model, cellular automata, central bank independence, citizen journalism, clockwork universe, collective bargaining, complexity theory, correlation coefficient, creative destruction, credit crunch, David Ricardo: comparative advantage, debt deflation, diversification, double entry bookkeeping, en.wikipedia.org, Eugene Fama: efficient market hypothesis, experimental subject, Financial Instability Hypothesis, fixed income, Fractional reserve banking, full employment, Henri Poincaré, housing crisis, Hyman Minsky, income inequality, information asymmetry, invisible hand, iterative process, John von Neumann, Kickstarter, laissez-faire capitalism, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, market clearing, market microstructure, means of production, minimum wage unemployment, money market fund, open economy, Pareto efficiency, Paul Samuelson, place-making, Ponzi scheme, profit maximization, quantitative easing, RAND corporation, random walk, risk tolerance, risk/return, Robert Shiller, Robert Shiller, Ronald Coase, Schrödinger's Cat, scientific mainstream, seigniorage, six sigma, South Sea Bubble, stochastic process, The Great Moderation, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, total factor productivity, tulip mania, wage slave, zero-sum game

The Keynesians had it all wrong. In the Great Depression, employment was not low because investment was low. Employment and investment were low because labor market institutions and industrial policies changed in a way that lowered normal employment. (Prescott 1999: 1–3; emphases added) Prescott’s culprit for these changes, predictably, is the government: ‘government policies that affect TFP [total factor productivity] and hours per working-age person are the crucial determinants of the great depressions of the 20th century […]’ (Kehoe and Prescott 2002: 1). The reason that Prescott and his fellow freshwater economists were led to such a frankly crazy interpretation of the Great Depression is that their model allowed no other alternative. As a reminder, their model, in a nutshell, is the following.


The Age of Turbulence: Adventures in a New World (Hardback) - Common by Alan Greenspan

"Robert Solow", addicted to oil, air freight, airline deregulation, Albert Einstein, asset-backed security, bank run, Berlin Wall, Bretton Woods, business cycle, business process, buy and hold, call centre, capital controls, central bank independence, collateralized debt obligation, collective bargaining, conceptual framework, Corn Laws, corporate governance, corporate raider, correlation coefficient, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cuban missile crisis, currency peg, Deng Xiaoping, Dissolution of the Soviet Union, Doha Development Round, double entry bookkeeping, equity premium, everywhere but in the productivity statistics, Fall of the Berlin Wall, fiat currency, financial innovation, financial intermediation, full employment, Gini coefficient, Hernando de Soto, income inequality, income per capita, invisible hand, Joseph Schumpeter, labor-force participation, laissez-faire capitalism, land reform, Long Term Capital Management, Mahatma Gandhi, manufacturing employment, market bubble, means of production, Mikhail Gorbachev, moral hazard, mortgage debt, Myron Scholes, Nelson Mandela, new economy, North Sea oil, oil shock, open economy, Pearl River Delta, pets.com, Potemkin village, price mechanism, price stability, Productivity paradox, profit maximization, purchasing power parity, random walk, reserve currency, Right to Buy, risk tolerance, Ronald Reagan, shareholder value, short selling, Silicon Valley, special economic zone, stocks for the long run, the payments system, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, total factor productivity, trade liberalization, trade route, transaction costs, transcontinental railway, urban renewal, working-age population, Y2K, zero-sum game

At some point, globalization's vast economic migration—the epochmaking shift of fully half of the world's three-billion-person labor force from behind the walls of economies that were centrally planned, in part or in whole, to competitive world markets—will be complete, or as complete as it can possibly get. *Low inflation reflected flat nonfarm business unit labor cost, t h e result of solid growth in p r o ductivity, which in t u r n was t h e result of increased investment in, b u t especially t h e delayed application of, t h e earlier technologies. Professor David demonstrated t h e extraordinary lag from technological advance to its consequence in rapidly rising total factor productivity, a measure of applied technology and other insights. T h a t disinflationary episode lasted only a few years, coming to an end with t h e Vietnam military buildup. A m u c h larger continuing disinflation was to c o m e as a consequence of t h e end of t h e cold war. t R e c e n t decades' productivity growth derives largely from t h e continuous i m p r o v e m e n t and filling o u t of networks of interrelated technologies.


pages: 1,034 words: 241,773

Enlightenment Now: The Case for Reason, Science, Humanism, and Progress by Steven Pinker

3D printing, access to a mobile phone, affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, Albert Einstein, Alfred Russel Wallace, anti-communist, Anton Chekhov, Arthur Eddington, artificial general intelligence, availability heuristic, Ayatollah Khomeini, basic income, Berlin Wall, Bernie Sanders, Black Swan, Bonfire of the Vanities, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, clean water, clockwork universe, cognitive bias, cognitive dissonance, Columbine, conceptual framework, correlation does not imply causation, creative destruction, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, dark matter, decarbonisation, deindustrialization, dematerialisation, demographic transition, Deng Xiaoping, distributed generation, diversified portfolio, Donald Trump, Doomsday Clock, double helix, effective altruism, Elon Musk, en.wikipedia.org, end world poverty, endogenous growth, energy transition, European colonialism, experimental subject, Exxon Valdez, facts on the ground, Fall of the Berlin Wall, first-past-the-post, Flynn Effect, food miles, Francis Fukuyama: the end of history, frictionless, frictionless market, germ theory of disease, Gini coefficient, Hans Rosling, hedonic treadmill, helicopter parent, Hobbesian trap, humanitarian revolution, Ignaz Semmelweis: hand washing, income inequality, income per capita, Indoor air pollution, Intergovernmental Panel on Climate Change (IPCC), invention of writing, Jaron Lanier, Joan Didion, job automation, Johannes Kepler, John Snow's cholera map, Kevin Kelly, Khan Academy, knowledge economy, l'esprit de l'escalier, Laplace demon, life extension, long peace, longitudinal study, Louis Pasteur, Martin Wolf, mass incarceration, meta analysis, meta-analysis, Mikhail Gorbachev, minimum wage unemployment, moral hazard, mutually assured destruction, Naomi Klein, Nate Silver, Nathan Meyer Rothschild: antibiotics, Nelson Mandela, New Journalism, Norman Mailer, nuclear winter, obamacare, open economy, Paul Graham, peak oil, Peter Singer: altruism, Peter Thiel, precision agriculture, prediction markets, purchasing power parity, Ralph Nader, randomized controlled trial, Ray Kurzweil, rent control, Republic of Letters, Richard Feynman, road to serfdom, Robert Gordon, Rodney Brooks, rolodex, Ronald Reagan, Rory Sutherland, Saturday Night Live, science of happiness, Scientific racism, Second Machine Age, secular stagnation, self-driving car, sharing economy, Silicon Valley, Silicon Valley ideology, Simon Kuznets, Skype, smart grid, sovereign wealth fund, stem cell, Stephen Hawking, Steven Pinker, Stewart Brand, Stuxnet, supervolcano, technological singularity, Ted Kaczynski, The Rise and Fall of American Growth, the scientific method, The Signal and the Noise by Nate Silver, The Spirit Level, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, total factor productivity, union organizing, universal basic income, University of East Anglia, Unsafe at Any Speed, Upton Sinclair, uranium enrichment, urban renewal, War on Poverty, We wanted flying cars, instead we got 140 characters, women in the workforce, working poor, World Values Survey, Y2K

See the references at the end of chapters 8 and 16; here and here of chapter 10; here of chapter 15; and the discussion of the Easterlin paradox in chapter 18. 6. Average of the years 1961 through 1973; World Bank 2016c. 7. Average of the years 1974 through 2015; World Bank 2016c. Rates for the United States for these two periods are 3.3 percent and 1.7 percent, respectively. 8. Estimates are of Total Factor Productivity, taken from Gordon 2014, fig. 1. 9. Secular stagnation: Summers 2014b, 2016. For analysis and commentaries, see Teulings & Baldwin 2014. 10. No one knows: M. Levinson, “Every US President Promises to Boost Economic Growth. The Catch: No One Knows How,” Vox, Dec. 22, 2016; G. Ip, “The Economy’s Hidden Problem: We’re Out of Big Ideas,” Wall Street Journal, Dec. 20, 2016; Teulings & Baldwin 2014. 11.


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Bourgeois Dignity: Why Economics Can't Explain the Modern World by Deirdre N. McCloskey

Airbnb, Akira Okazaki, big-box store, Black Swan, book scanning, British Empire, business cycle, buy low sell high, Capital in the Twenty-First Century by Thomas Piketty, clean water, Columbian Exchange, conceptual framework, correlation does not imply causation, Costa Concordia, creative destruction, crony capitalism, dark matter, Dava Sobel, David Graeber, David Ricardo: comparative advantage, deindustrialization, demographic transition, Deng Xiaoping, Donald Trump, double entry bookkeeping, en.wikipedia.org, epigenetics, Erik Brynjolfsson, experimental economics, Ferguson, Missouri, fundamental attribution error, Georg Cantor, George Akerlof, George Gilder, germ theory of disease, Gini coefficient, God and Mammon, greed is good, Gunnar Myrdal, Hans Rosling, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, Hernando de Soto, immigration reform, income inequality, interchangeable parts, invention of agriculture, invention of writing, invisible hand, Isaac Newton, Islamic Golden Age, James Watt: steam engine, Jane Jacobs, John Harrison: Longitude, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Arrow, knowledge economy, labor-force participation, lake wobegon effect, land reform, liberation theology, lone genius, Lyft, Mahatma Gandhi, Mark Zuckerberg, market fundamentalism, means of production, Naomi Klein, new economy, North Sea oil, Occupy movement, open economy, out of africa, Pareto efficiency, Paul Samuelson, Pax Mongolica, Peace of Westphalia, peak oil, Peter Singer: altruism, Philip Mirowski, pink-collar, plutocrats, Plutocrats, positional goods, profit maximization, profit motive, purchasing power parity, race to the bottom, refrigerator car, rent control, rent-seeking, Republic of Letters, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Coase, Scientific racism, Scramble for Africa, Second Machine Age, secular stagnation, Simon Kuznets, Social Responsibility of Business Is to Increase Its Profits, spinning jenny, stakhanovite, Steve Jobs, The Chicago School, The Market for Lemons, the rule of 72, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, total factor productivity, Toyota Production System, transaction costs, transatlantic slave trade, Tyler Cowen: Great Stagnation, uber lyft, union organizing, very high income, wage slave, Washington Consensus, working poor, Yogi Berra

If so, the hunt is then on for either bad institutions or bad ideas, with no presumption that hunting for the bad-idea possibility is somehow less of a scientific priority. I recognize the impulse to stick with a Max U version of institutions as first on the agenda, since in the 1960s I used to say the same thing to conventional, nonquantitative, noneconomic economic historians such as David Landes: “First, let’s use measures of total factor productivity; then, if there’s anything left over, we can look at the letter archives of British ironmasters.” To my shame, I never intended to look at the letter archives, and did not. Samuelsonian economics, I thought, sufficed. So there. To the claim that Northian institutionalism steps beyond Samuelsonian economics, I say again, as I have in fact been saying to dear Doug North now for thirty years, I think not: neo-institutionalism is Samuelsonian economics in drag.