Economic scarcity (caused by increasing population vs. limited productivity of land) drives progression.
Age of commerce is defined by:
Which leads to:
division of labor
prices set by supply and demand
more leisure time
Stages of growth: hunting/gathering, shepherding, agriculture, commerce
Thomas Robert Malthus: An Essay on the Principle of Population (1798) A rise in living standards causes a rise in the birth rate and/or a fall in the death rate which increases the population which causes living standards and population to fall back down again to the original level Inputs Output Arithmetic rise in population Diminishing returns to production
David Ricardo: On the Principles of Political Economy and Taxation (1817)
As the economy grows, profits are squeezed out by rents and wages. In the limit, a "stationary state" is reached where capitalists are making near-zero profits and no further accumulation occurs.
=Law of diminishing returns
Technical progress: requires the introduction of labor-saving machinery (cost will reduce $ available for wages)
Foreign trade: each nation specializes in the production of the good in which it has a "comparative" cost advantage, then trades with other nations for other goods (theory of comparative advantage)
John Maynard Keynes: The General Theory of Employment, Interest and Money (1936)
Permanently changed the way the world looked at the economy and the role of government in society: macroeconomic theory
Aggregate demand determines aggregate output - and as a consequence, employment (demand-determined equilibrium)
Ineffectiveness of price flexibility to cure unemployment
Marginal efficiency of investment schedule breaking Say's Law
Theory of money based on “liquidity preference”
Introduction of radical uncertainty and expectations
Possibility of using government fiscal and monetary policy to help eliminate recessions and control economic booms
Robert Solow: A Contribution to the Theory of Economic Growth (1956)
Solow model shows how savings, population growth and technological progress affect the growth of output over time.
Dynamic model (as opposed to prior static models).
Identifies some reasons countries differ widely in living standards.
Change in savings ratio leads to change in “steady state”.
Increase in population growth reduces GDP per person.
Sustained growth in per capita GDP can only come from technological progress.
W. W. Rostow: The Stages of Economic Growth (1971)
Nations aren’t the proper unit of macro analysis—cities are.
The world consists of dynamic and poor regions; regions are centered around cities.
All economic progress originates in cities (even agricultural progress).
The engine of economic life is import replacement.
Five forces at work (and in balance) in cities: thirst for supplies , wealth of jobs, productivity improvements, transplants of city work, outflows of capital.
Impediments to growth: national currencies, tariffs, prolonged military production, subsidies to poor regions, advanced-backward trade, restriction of enterprise, overspecialization, focus on big firms.
“ Since the 1980s, major transformations in the composition of the world economy, including the sharp growth of specialized services for firms and finance, have renewed the importance of major cities as sites for producing strategic global inputs.”
“ Global cities are strategic sites for the management of the global economy and the production of the most advanced services and financial operations that have become key inputs for the work of managing global economic operations.”
Key locations and marketplaces for finance and specialized services
Major sites of production, including the production of innovations
High-end shopping, hotel, entertainment sites (“consumer cities” – Ed Glaeser)
“ Thick places”
Sites for the outsourcing of domestic work
Today’s global cities are: Source: Saskia Sassen, Cities in a World Economy
Shared presences among alpha world cities Source: World City Network: A New Metageography?, Beaverstock, Smith and Taylor (2000). Solid lines join city pairs with > 35 firms with offices in both cities. Dotted lines join pairs with between 30 and 35 shared presences.
World city links to London Source: World City Network: A New Metageography?, Beaverstock, Smith and Taylor (2000)
“ The global talent pool and the high-end, high margin creative industries that used to be the sole province of the U.S., and a critical source of its prosperity, have begun to disperse around the globe.
“ A host of countries—Ireland, Finland, Canada, Australia, New Zealand, among them—are investing in higher education, cultivating creative people, and churning out stellar products…
“ To stay innovative, America must continue to attract the world’s sharpest minds. And to do that, it needs to invest in the further development of its creative sector. Because wherever creativity goes—and, by extension, wherever talent goes—innovation and economic growth are sure to follow.”
Source: Richard Florida, “America’s Looming Creativity Crisis”, Harvard Business Review, October 2004
“ The rise of cities on the scale seen in the contemporary world is a phenomenon directly linked to the exploitation of fossil fuels and the emergence of high-energy-use societies with complex commercial and financial linkages.
“ Not only are they responsible for most of the energy consumption within society, they are also a focus for a range of environmental problems.
“ In addition to crowded and often poor living conditions they are characterized by high levels of air pollution and noise, long commuting distances, either on overcrowded public transport systems or by car on congested roads, and a multitude of social problems .”
Clive Ponting, A New Green History of the World, p.313