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February 25, 2013

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Ralph Musgrave

Perhaps the explanation is that the basic explanation for growth is improved technology, and the latter has come on stream at a fairly regular pace over the last two hundred years or so.

Luke

Does the relative rate of population growth have any effect? I have no idea if there have been significant variations in the rate of population growth. (As I understand the figures you give, they are for the size of the economy as a whole, not GDP per head - sorry if I've misunderstood.)

Peaknik

For easy growth, try cheap energy...

Yet another Chris

Am I right in thinking that government expenditure is included within GDP? If so, does it make a difference to your thesis?

Greg vP

Two points.

The aim, the object, the purpose of economic growth is to improve the welfare of households. Therefore, what matters is not aggregate growth but per capita growth. (Private final consumption is an even better measure, but the time-series are harder to come by in many cases.)

The picture looks a little different when you look at this, but there is still no particular trend for the UK (data from FRED):

http://i.imgur.com/ycSiAvU.png

However when you look at the "advanced industrial countries" as a whole, a trend emerges:

http://i.imgur.com/KD6URjV.png

This does not change your conclusion that policy is irrelevant.

Greg vP

The explanation starts with Maslow's Hierarchy of Needs.

As people get richer, needs at the lower levels of the hierarchy are satisfied, and people start to demand goods and services to satisfy the higher levels.

It so happens that the higher levels are all about highly labour-intensive, highly individualised services and goods : boutique, hand-made clothes, shoes, and artworks, psychotherapy or life coaching, interior design, elaborately prepared meals, etc., etc.

Producing these goods and services does not admit productivity increases because their value resides precisely in the amount of labour time expended on them, and the exclusion of others from making use of that labour time.

What we are seeing is Baumol's cost disease writ large.

Tammly

What would be the result if you tried this with Germany? Perhaps remarkably similar results, with underlying growth roughly the same, and growth spurts only rectifying the enormous self inflicted damage of their notable military adventures.

chris

@ Luke - the chart shows GDP, not GDP per head. Repeating the exercise with GDP per capita (source = http://measuringworth.com/ukgdp/) shows that trend growth fell in the 90 years after 1850,from around 1.5% to perhaps zero by 1915-35, but rose from the 40s on. However, there's not much change since then. Growth of a bit less than 2% seems the norm.

przeprowadzki

How is promising tax cuts and jobs not a bribe from either side? Isn’t any campaign promise a bribe? przeprowadzki http://www.tanie-przeprowadzki.pl

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