The Economic Development of the Global Main

Economies

US, EU, Japan, and China Together Account for 70% of the Global

Economy

The Importance of Productivity and National Saving

Lecture #1

All Economic Activity is Devoted

to Two Things --

This is in fact what we mean by

standard of living

Government Can Sometimes be Useful in Helping Us Accomplish

These Goals

Government Can Sometimes be Useful in Helping Us Accomplish

These Goals

as well as

Government Can Sometimes be Useful in Helping Us Accomplish

These Goals

Helping to Control Externalities, Provide a System of Justice and Enforcement of Contracts, Supply Goods and Services which the Private Market Fails to Provide, Ensure a Reasonable Distribution of Income and Wealth, and Moderate the Business Cycle

U = utility C = consumption L = leisure

Both C and L ultimately depend on y = output per population

We Must Increase y Steadily Over the Long

Run

How Can We Increase (r1) (r2) and (r3) ?

Suppose we just want to increase (r1) which is

Child Labor – Not Really

Elderly Workers – Limited at Best

Foreign Workers – Maybe, but Problems, Problems

Robot Workers – Not for Many Years

< 1

No Matter What, (r1) has an Upper Limit

Okay …..suppose we try instead to increase (r2) which is

No Sleeping ----

No Eating ---

Just Work, Work, Work ---

< 24 Hours/Day

No Matter What, (r2) has an Upper Limit

In Fact…the Trend is for Less Hours Not More Hours of Work !

US Data

How Can We Increase y?

The Only Reliable, Long Run Way is to Increase

(r3) = Average Labor Productivity

How Do We Get High Long Run Growth in Labor Productivity?

Saving Necessary for Productivity Growth

How Do We Get High Long Run Growth in Labor Productivity?

Saving Necessary for Productivity Growth

1. Creation of Physical Capital – Tools, Machines, Plant, Equipment

2. Creation and Improvement of Human Capital and Skills

3. Creation and Improvement in Technology and Production Advances

4. Creation and Expansion of New Markets for Goods and Services

5. Development of New and Better Industries

6. Development of Financial and Capital Markets

7. Creation of Inventions, New products, and Innovations

We can also Increase Output per person with More Land and

Raw Materials

Terracing Can Give Us More Land – But Ultimately Limited

Parts of the Zuider Zee in the

Netherlands as Reclaimed Land from the Ocean – Really Difficult and Costly

Noordoostpolder, Netherlands

Hong Kong Airport – Land Reclaimed from the Ocean

Not Land, but Space, Coupled with Physical Capital

Recycling Can Help Us Reduce Some Resource Problems

Renewable Energy Can Help a Little in Our Search for Energy

Ultimately, all our efforts will require saving as a temporary sacrifice -- in order to grow the economy. This is what we must prepare for and why the challenges in the future are so daunting to the world economy.

1. How Can We Encourage Capital Formation and Capital Usage?

2. Why Does the US Save Very Little?

3. What Factors Determine the Successful Growth of an Economy?

4. Why is Productivity Growth So Difficult to Understand?

5. How Can We Encourage an Increase in National Saving?

6. Does Sustained Growth in Productivity Need Freedom and Democracy?

Basic Questions to be Discussed in Afternoon

Video of Robert Barro in South Korea Discussing Economic Growth

Does Education Really Matter for Growth…..?