The document discusses technological progress in the United States between the Interwar Years and the 1990s. It argues that the period from 1929-1941 saw the most rapid technological change of any time in U.S. history, contrary to conventional views that technological progress peaked during World War 2 or in later decades. This rapid progress prior to full-scale war mobilization was driven by advances across many sectors, as well as increased research and development. The document provides evidence from economic studies and figures on productivity growth to support its claim that the Interwar Years saw unexpectedly high rates of innovation.
How comparative advantage leads to mutually beneficial internati.docxwellesleyterresa
How comparative advantage leads to mutually beneficial international trade
The sources of international comparative advantage
Who gains and who loses from international trade, and why the gains exceed the losses
How tariffs and import quotas cause inefficiency and reduce total surplus
Why governments often engage in trade protection and how international trade agreements counteract this
To First
Active Learning
To Video
What you will learn in this chapter
1
INTERNATIONAL TRADE
International trade improves the welfare of Chinese smart phone producers as well as American consumers.
Back to Table of contents
Image: Imaginechina/Corbis
2
INTERNATIONAL TRADE…
…is more important for the U.S. than it used to be and is more important for some countries than others…
Back to Table of contents
PRODUCTION POSSIBILITIES AND COMPARATIVE ADVANTAGE REVISITED
(Click here to skip this review section based on material found in Chapter 2)
Trade follows the Ricardian model.
(We assume that countries will specialize in goods they can produce more cheaply than other countries.)
Autarky: a situation in which a country does not trade with other countries.
Back to Table of contents
COMPARATIVE ADVANTAGE AND GAINS FROM TRADE
100
0
100,000
100
0
25,000
50,0000
(a) U.S. production possibilities
U.S. production and consumption
without trade
U.S.
PPF
China’s
PPF
Quantity of
trucks
Quantity of
trucks
Quantity of phones
Quantity of phones
(b) China’s production possibilities
China’s production and consumption
without trade
50,000
50
Since each country has a different opportunity cost, it makes sense to specialize and trade.
200
Back to Table of contents
More trucks will be produced than before with the same resources
(from 75,000 (50,000+25,000) to 100,000 trucks and from 150 (50 + 100) to 300 phones).
Since the United States has the comparative advantage in trucks, it will specialize in trucks.
And China has the comparative advantage in phones, so it will specialize in phones.
COMPARATIVE ADVANTAGE AND GAINS FROM TRADE
100
0
100,000
100
0
25,000
50,0000
(a) U.S. production possibilities
U.S. production and consumption
without trade
U.S.
PPF
China’s
PPF
Quantity of
trucks
Quantity of
trucks
Quantity of phones
Quantity of phones
(b) China’s production possibilities
China’s production and consumption
without trade
50,000
50
200
Back to Table of contents
COMPARATIVE ADVANTAGE AND GAINS FROM TRADE
Both countries will be happy to export their goods for any price ABOVE their cost of production and import for any price BELOW their cost of production.
The United States will send trucks to China in return for phones…
…and China will send phones to the United States in return for trucks.
Both are happy with 1 truck trading for 2,000 phones.
100
0
100,000
100
0
25,000
50,0000
(a) U.S. production possibilities
U.S. production and consumption
without trade
U.S.
PPF
China’s
PPF
Quantity of
trucks
Quantity of
tr ...
WWII CLASSShort and constructive response to classmates.docxshericehewat
WWII CLASS
Short and constructive response to classmates
Respond to classmates and add resources if necessary under each response.
Respond to Melissa Karnath
While both sides of this conflict had resources of both manpower and equipment available to them from their own countries and also from other countries the turning point of the conflict seemed to develop when changes were made.
The Soviet side was receiving food resources from Great Britain and the United States along with some other raw resources. Stalin also put a great emphasize on production of weapons. He instituted a mandatory number of work hours in order for citizens to receive food. "Stalin
focused all efforts on military production and extorting maximum labour from a workforce whose only guarantee of food was to turn up at the factory and work the arduous 12-hour shifts." 1 The Soviet side also began to make changes in their tanks, which made them more equivalent to the German tanks. Soviet tanks became more heavily armed and sturdy. The Soviet side also began using radios with their tanks. Radios greatly increased communication with their tank units allowing for an increase in mobilization, organization along with fire and maneuver.
The Soviet side also evaluated and made changes to their intelligence and tactics. "Camouflage, surprise and misinformation were brilliantly exploited to keep the German army in the dark about major Soviet intentions." 1 With these changes the Soviets changed the way they fought during offensive and defensive measures taking the German forces by surprise. This kept the German forces guessing and made the Soviet forces more effective against the Germans.
"Millions of Soviets worked in camp labourers who worked fully for the war effort. They kept up the production of food, weapons and equipment."1
The changes and advancements within the Soviet Army helped to bolster the impact and effectiveness of the Soviet Army during the war with Germany combined with the constant mass production of military equipment by the Soviet civilian population.
1.The Soviet-German War 1941 - 1945 By Overlay, Richard.
http://www.bbc.co.uk/history/worldwars/wwtwo/soviet_german_war_01.shtml
Short and constructive response to classmates
Respond to classmates and add resources if necessary under each response.
Respond
Gabriel
One significant change that World War II brought on pre-existing racial barriers was lived by Japanese-Americans in the United States. Japanese-americans believed they could gain citizenship by the passage of several laws in 1924. But, the attack in Pearl Harbor changed a lot of things for them. Not only in Hawaii but also in the west coast. More than 110,000 Japanese-Americans were forced to leave everything behind and forced to live in one of ten relocation centres. This kind racism had not been seen done to German-Americans or Italian-Americans. Even after the Supreme Court ruled that the detention of Japanese-Americans whose loyalty .
Compute the inflation rate for each year 1993-201 2 and determ.docxmaxinesmith73660
Compute the inflation rate for each year 1993-201 2 and determine
which were years of inflation. ln which years did deflation occuP ln
which years did disinflation occur? Was tirere hyperinflation in any yeaf
* (Sources of tnflation)Usingthe concepts of aggregate supply and ag-
gregate demand, explain why inflation usually increases during wartime.
s. (nftatiln and lnterest Rates) Using a demand-supply diagram
for loanable funds (like the exhibit below), show what happens
to the nominal interest rate and the equilibrium quantity of loans
when both bonowers and lenders increase their estimates of the
expected inflation rate from 5 percent to 1 0 percent.
The Market for Loanable Funds
Loanable funds per period
7-4 Explain how unanticipated inflation harms
some individuals and harms the economy
as a whole
10, (AnticipatedVersus Unanticipated lnflation) lf actual inflation ex-
ceeds anticipated inflation, who will lose purchasing power and who
will gain? How does unanticipated inflation harm the economy?
GHAPTER 8
8-1 Describe how we measure labor
productivity, and explain why is it
important for a nation's standard of living
(Measuring Labor Productivily) How do we measure labor productivitf
How do changes in labor productivity affect the U.S. standard of living?
(Growth and the PPF) Use the production possibilities frontier (PPD
to demonstrate economic growth.
a. With consumption goods on one axis and capital goods on the
other, show how the combination of goods selected this period
affects the PPF in the next period.
b. Extend this comparison by choosing a different point on this
period's PPF and determining whether that combination leads to
more or less growth over the next period.
(Shifts in the PPflferrorist attacks foster instability and may affect
productivity over the short and long term. Do you think the
September 1 l, 2001, terrorist attacks on the World Trade Center
and the Pentagon affected short- and/or longterm productivity in
the United States? Explain your response and show any move-
ments in the PPF.
o
o
o
o
o
.Ei
o
c
c
oz
33O PROBLEMS APPENDIX
8-2 Summarize the history of U.S.labor
productivity changes since World War II
and explain why these changes matter
(Labor Productivity) ldentify at least four definable periods of labor
productivity growth beginning right after World War ll. During which
periods was productivity growth lowest and why? (Refer to Exhibit 6
inthe chapter.)
(Long-Term Productivity Growfhl Suppose that two nations start
out in 201 3 with identical levels of output per work hour-say,
$100 per hour. ln the first nation, labor productivity grows by
1 percent per year. ln the second, it grows by 2 percent per
year. Use a calculator or a spreadsheet to determine how much
output per hour each nation will be producing 20 years later, as-
suming that labor productivity growth rates do not change. Then,
determine how much eacll will be producing per hour 100 years
later. What.
Between Filth and Fortune- Urban Cattle Foraging Realities by Devi S Nair, An...Mansi Shah
This study examines cattle rearing in urban and rural settings, focusing on milk production and consumption. By exploring a case in Ahmedabad, it highlights the challenges and processes in dairy farming across different environments, emphasising the need for sustainable practices and the essential role of milk in daily consumption.
How comparative advantage leads to mutually beneficial internati.docxwellesleyterresa
How comparative advantage leads to mutually beneficial international trade
The sources of international comparative advantage
Who gains and who loses from international trade, and why the gains exceed the losses
How tariffs and import quotas cause inefficiency and reduce total surplus
Why governments often engage in trade protection and how international trade agreements counteract this
To First
Active Learning
To Video
What you will learn in this chapter
1
INTERNATIONAL TRADE
International trade improves the welfare of Chinese smart phone producers as well as American consumers.
Back to Table of contents
Image: Imaginechina/Corbis
2
INTERNATIONAL TRADE…
…is more important for the U.S. than it used to be and is more important for some countries than others…
Back to Table of contents
PRODUCTION POSSIBILITIES AND COMPARATIVE ADVANTAGE REVISITED
(Click here to skip this review section based on material found in Chapter 2)
Trade follows the Ricardian model.
(We assume that countries will specialize in goods they can produce more cheaply than other countries.)
Autarky: a situation in which a country does not trade with other countries.
Back to Table of contents
COMPARATIVE ADVANTAGE AND GAINS FROM TRADE
100
0
100,000
100
0
25,000
50,0000
(a) U.S. production possibilities
U.S. production and consumption
without trade
U.S.
PPF
China’s
PPF
Quantity of
trucks
Quantity of
trucks
Quantity of phones
Quantity of phones
(b) China’s production possibilities
China’s production and consumption
without trade
50,000
50
Since each country has a different opportunity cost, it makes sense to specialize and trade.
200
Back to Table of contents
More trucks will be produced than before with the same resources
(from 75,000 (50,000+25,000) to 100,000 trucks and from 150 (50 + 100) to 300 phones).
Since the United States has the comparative advantage in trucks, it will specialize in trucks.
And China has the comparative advantage in phones, so it will specialize in phones.
COMPARATIVE ADVANTAGE AND GAINS FROM TRADE
100
0
100,000
100
0
25,000
50,0000
(a) U.S. production possibilities
U.S. production and consumption
without trade
U.S.
PPF
China’s
PPF
Quantity of
trucks
Quantity of
trucks
Quantity of phones
Quantity of phones
(b) China’s production possibilities
China’s production and consumption
without trade
50,000
50
200
Back to Table of contents
COMPARATIVE ADVANTAGE AND GAINS FROM TRADE
Both countries will be happy to export their goods for any price ABOVE their cost of production and import for any price BELOW their cost of production.
The United States will send trucks to China in return for phones…
…and China will send phones to the United States in return for trucks.
Both are happy with 1 truck trading for 2,000 phones.
100
0
100,000
100
0
25,000
50,0000
(a) U.S. production possibilities
U.S. production and consumption
without trade
U.S.
PPF
China’s
PPF
Quantity of
trucks
Quantity of
tr ...
WWII CLASSShort and constructive response to classmates.docxshericehewat
WWII CLASS
Short and constructive response to classmates
Respond to classmates and add resources if necessary under each response.
Respond to Melissa Karnath
While both sides of this conflict had resources of both manpower and equipment available to them from their own countries and also from other countries the turning point of the conflict seemed to develop when changes were made.
The Soviet side was receiving food resources from Great Britain and the United States along with some other raw resources. Stalin also put a great emphasize on production of weapons. He instituted a mandatory number of work hours in order for citizens to receive food. "Stalin
focused all efforts on military production and extorting maximum labour from a workforce whose only guarantee of food was to turn up at the factory and work the arduous 12-hour shifts." 1 The Soviet side also began to make changes in their tanks, which made them more equivalent to the German tanks. Soviet tanks became more heavily armed and sturdy. The Soviet side also began using radios with their tanks. Radios greatly increased communication with their tank units allowing for an increase in mobilization, organization along with fire and maneuver.
The Soviet side also evaluated and made changes to their intelligence and tactics. "Camouflage, surprise and misinformation were brilliantly exploited to keep the German army in the dark about major Soviet intentions." 1 With these changes the Soviets changed the way they fought during offensive and defensive measures taking the German forces by surprise. This kept the German forces guessing and made the Soviet forces more effective against the Germans.
"Millions of Soviets worked in camp labourers who worked fully for the war effort. They kept up the production of food, weapons and equipment."1
The changes and advancements within the Soviet Army helped to bolster the impact and effectiveness of the Soviet Army during the war with Germany combined with the constant mass production of military equipment by the Soviet civilian population.
1.The Soviet-German War 1941 - 1945 By Overlay, Richard.
http://www.bbc.co.uk/history/worldwars/wwtwo/soviet_german_war_01.shtml
Short and constructive response to classmates
Respond to classmates and add resources if necessary under each response.
Respond
Gabriel
One significant change that World War II brought on pre-existing racial barriers was lived by Japanese-Americans in the United States. Japanese-americans believed they could gain citizenship by the passage of several laws in 1924. But, the attack in Pearl Harbor changed a lot of things for them. Not only in Hawaii but also in the west coast. More than 110,000 Japanese-Americans were forced to leave everything behind and forced to live in one of ten relocation centres. This kind racism had not been seen done to German-Americans or Italian-Americans. Even after the Supreme Court ruled that the detention of Japanese-Americans whose loyalty .
Compute the inflation rate for each year 1993-201 2 and determ.docxmaxinesmith73660
Compute the inflation rate for each year 1993-201 2 and determine
which were years of inflation. ln which years did deflation occuP ln
which years did disinflation occur? Was tirere hyperinflation in any yeaf
* (Sources of tnflation)Usingthe concepts of aggregate supply and ag-
gregate demand, explain why inflation usually increases during wartime.
s. (nftatiln and lnterest Rates) Using a demand-supply diagram
for loanable funds (like the exhibit below), show what happens
to the nominal interest rate and the equilibrium quantity of loans
when both bonowers and lenders increase their estimates of the
expected inflation rate from 5 percent to 1 0 percent.
The Market for Loanable Funds
Loanable funds per period
7-4 Explain how unanticipated inflation harms
some individuals and harms the economy
as a whole
10, (AnticipatedVersus Unanticipated lnflation) lf actual inflation ex-
ceeds anticipated inflation, who will lose purchasing power and who
will gain? How does unanticipated inflation harm the economy?
GHAPTER 8
8-1 Describe how we measure labor
productivity, and explain why is it
important for a nation's standard of living
(Measuring Labor Productivily) How do we measure labor productivitf
How do changes in labor productivity affect the U.S. standard of living?
(Growth and the PPF) Use the production possibilities frontier (PPD
to demonstrate economic growth.
a. With consumption goods on one axis and capital goods on the
other, show how the combination of goods selected this period
affects the PPF in the next period.
b. Extend this comparison by choosing a different point on this
period's PPF and determining whether that combination leads to
more or less growth over the next period.
(Shifts in the PPflferrorist attacks foster instability and may affect
productivity over the short and long term. Do you think the
September 1 l, 2001, terrorist attacks on the World Trade Center
and the Pentagon affected short- and/or longterm productivity in
the United States? Explain your response and show any move-
ments in the PPF.
o
o
o
o
o
.Ei
o
c
c
oz
33O PROBLEMS APPENDIX
8-2 Summarize the history of U.S.labor
productivity changes since World War II
and explain why these changes matter
(Labor Productivity) ldentify at least four definable periods of labor
productivity growth beginning right after World War ll. During which
periods was productivity growth lowest and why? (Refer to Exhibit 6
inthe chapter.)
(Long-Term Productivity Growfhl Suppose that two nations start
out in 201 3 with identical levels of output per work hour-say,
$100 per hour. ln the first nation, labor productivity grows by
1 percent per year. ln the second, it grows by 2 percent per
year. Use a calculator or a spreadsheet to determine how much
output per hour each nation will be producing 20 years later, as-
suming that labor productivity growth rates do not change. Then,
determine how much eacll will be producing per hour 100 years
later. What.
Between Filth and Fortune- Urban Cattle Foraging Realities by Devi S Nair, An...Mansi Shah
This study examines cattle rearing in urban and rural settings, focusing on milk production and consumption. By exploring a case in Ahmedabad, it highlights the challenges and processes in dairy farming across different environments, emphasising the need for sustainable practices and the essential role of milk in daily consumption.
Hello everyone! I am thrilled to present my latest portfolio on LinkedIn, marking the culmination of my architectural journey thus far. Over the span of five years, I've been fortunate to acquire a wealth of knowledge under the guidance of esteemed professors and industry mentors. From rigorous academic pursuits to practical engagements, each experience has contributed to my growth and refinement as an architecture student. This portfolio not only showcases my projects but also underscores my attention to detail and to innovative architecture as a profession.
Transforming Brand Perception and Boosting Profitabilityaaryangarg12
In today's digital era, the dynamics of brand perception, consumer behavior, and profitability have been profoundly reshaped by the synergy of branding, social media, and website design. This research paper investigates the transformative power of these elements in influencing how individuals perceive brands and products and how this transformation can be harnessed to drive sales and profitability for businesses.
Through an exploration of brand psychology and consumer behavior, this study sheds light on the intricate ways in which effective branding strategies, strategic social media engagement, and user-centric website design contribute to altering consumers' perceptions. We delve into the principles that underlie successful brand transformations, examining how visual identity, messaging, and storytelling can captivate and resonate with target audiences.
Methodologically, this research employs a comprehensive approach, combining qualitative and quantitative analyses. Real-world case studies illustrate the impact of branding, social media campaigns, and website redesigns on consumer perception, sales figures, and profitability. We assess the various metrics, including brand awareness, customer engagement, conversion rates, and revenue growth, to measure the effectiveness of these strategies.
The results underscore the pivotal role of cohesive branding, social media influence, and website usability in shaping positive brand perceptions, influencing consumer decisions, and ultimately bolstering sales and profitability. This paper provides actionable insights and strategic recommendations for businesses seeking to leverage branding, social media, and website design as potent tools to enhance their market position and financial success.
Connect Conference 2022: Passive House - Economic and Environmental Solution...TE Studio
Passive House: The Economic and Environmental Solution for Sustainable Real Estate. Lecture by Tim Eian of TE Studio Passive House Design in November 2022 in Minneapolis.
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Whether you’re looking to create a guest house, a rental unit, or a private retreat, our experienced team will design a space that complements your existing home and maximizes your investment. We provide personalized, comprehensive expert accessory dwelling unit (ADU)drafting solutions tailored to your needs, ensuring a seamless process from concept to completion.
Book Formatting: Quality Control Checks for DesignersConfidence Ago
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Quality control is vital to every industry. This is why every department in a company need create a method they use in ensuring quality. This, perhaps, will not only improve the quality of products and bring errors to the barest minimum, but take it to a near perfect finish.
It is beyond a moot point that a good book will somewhat be judged by its cover, but the content of the book remains king. No matter how beautiful the cover, if the quality of writing or presentation is off, that will be a reason for readers not to come back to the book or recommend it.
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Game Concept Presentation for Ukrainian Mythology Based Game With Designs
Field powerpoint
1. Technological Change andTechnological Change and
Economic Growth: theEconomic Growth: the
Interwar Years and theInterwar Years and the
1990s1990s
Alexander J. FieldAlexander J. Field
afield@scu.eduafield@scu.edu
All Ohio Eocnomic History SeminarAll Ohio Eocnomic History Seminar
Ohio State UniversiytyOhio State Universiyty
April 30, 2004April 30, 2004
2. The Most Technologically ProgressiveThe Most Technologically Progressive
Decade of the CenturyDecade of the Century
Field,Field, American Economic ReviewAmerican Economic Review (2003)(2003)
Hint #1: It’s not what you think …Hint #1: It’s not what you think …
Hint #2: It wasn’t the 1990s...Hint #2: It wasn’t the 1990s...
Hint #3: It wasn’t the 1920s…Hint #3: It wasn’t the 1920s…
3. The Main ArgumentThe Main Argument
The years 1929-1941 were, in the
aggregate, the most technologically
progressive of any comparable
period in U.S. economic history.
4. Y = real output
N= labor hours
K=capital input
Y/N = Labor Productivity
y – n = Labor Productivity growth
(lower case letters = compound annual average rates of growth)
Y = A Kβ
N1-β
= Production function (Cobb Douglas, crts)
A = Y/(Kβ
N1-β
) = Multifactor Productivity
a = y – βk – (1-β)n = Growth Rate of MFP
y - n = a + β (k - n) = Growth rate of labor productivity
Labor and Multifactor ProductivityLabor and Multifactor Productivity
Growth FormulasGrowth Formulas
5. Disclaimers - 1Disclaimers - 1
What we measure in the residual contains notWhat we measure in the residual contains not
only serendipitous or accidental discovery ofonly serendipitous or accidental discovery of
useful knowledge, but a variety of relateduseful knowledge, but a variety of related
influences, including, but not limited to:influences, including, but not limited to:
• The outcomes of focused research and developmentThe outcomes of focused research and development
activitiesactivities
• The influence of scientific and educationalThe influence of scientific and educational
infrastructuresinfrastructures
• Economies of scale and network effectsEconomies of scale and network effects
• Learning by doingLearning by doing
• Reallocation of economic activity from sectors with lowReallocation of economic activity from sectors with low
to higher value added per workerto higher value added per worker
• New organizational blueprints or managerial practicesNew organizational blueprints or managerial practices
6. Disclaimers - 2Disclaimers - 2
Under certain conditions, the residual willUnder certain conditions, the residual will
underestimate the impact of technological changeunderestimate the impact of technological change
because of linkages between such change and thebecause of linkages between such change and the
rate of saving and capital accumulationrate of saving and capital accumulation
• Biased technical change that increases the return toBiased technical change that increases the return to
capital or to highly educated labor may shift income tocapital or to highly educated labor may shift income to
households with higher saving propensities, increasinghouseholds with higher saving propensities, increasing
the aggregate saving ratethe aggregate saving rate
• Technical change that increases the real after tax returnTechnical change that increases the real after tax return
to capitalto capital maymay elicit larger flows of savingelicit larger flows of saving
• Innovations that reduce the relative price of capitalInnovations that reduce the relative price of capital
goods will, for a given saving rate measured at basegoods will, for a given saving rate measured at base
period prices, be associated with a larger real volume ofperiod prices, be associated with a larger real volume of
investmentinvestment
7. Abramovitz – David (1999)Abramovitz – David (1999)
CAAGR of MFPCAAGR of MFP
1890-19051890-1905
1905-291905-29
1929-481929-48
1948-661948-66
1966-891966-89
1.281.28
1.381.38
1.541.54
1.311.31
.04.04
8. Gordon (2000b)Gordon (2000b)
CAAGR of MFPCAAGR of MFP
1870-18911870-1891
1891-19131891-1913
1913-19281913-1928
1928-19501928-1950
1950-19641950-1964
1964-19721964-1972
1972-19791972-1979
1979-19881979-1988
1988-19961988-1996
.39.39
1.141.14
1.421.42
1.901.90
1.471.47
.89.89
.16.16
.59.59
.79.79
9. Conventional WisdomConventional Wisdom
The measured peak in MFP growthThe measured peak in MFP growth
rates between 1929 and 1948 isrates between 1929 and 1948 is
principally the consequence of theprincipally the consequence of the
production experience of World Warproduction experience of World War
II: a persisting benefit of theII: a persisting benefit of the
enormous cumulated output as wellenormous cumulated output as well
perhaps of spinoffs from war relatedperhaps of spinoffs from war related
R and D.R and D.
10. New ArgumentNew Argument
Peak MFP growth between 1929 and 1948 isPeak MFP growth between 1929 and 1948 is
primarily attributable to an exceptionalprimarily attributable to an exceptional
concatenation of technical and organizationalconcatenation of technical and organizational
advances across a broad frontier of the Americanadvances across a broad frontier of the American
economy prior to full scale war mobilizationeconomy prior to full scale war mobilization
Governmental and university funded research, asGovernmental and university funded research, as
well as the maturing of a privately funded R andwell as the maturing of a privately funded R and
D system that began with Edison at Menlo ParkD system that began with Edison at Menlo Park
played a roleplayed a role
So too in some sectors, such as railroads, did theSo too in some sectors, such as railroads, did the
“kick in the pants” of cut off of easy credit“kick in the pants” of cut off of easy credit
availability and declines in demandavailability and declines in demand
11. Why do we credit World War 2 withWhy do we credit World War 2 with
establishing the foundations forestablishing the foundations for
postwar prosperity?postwar prosperity?
Sheer volume of output between 1942 and 1945 is exceptionalSheer volume of output between 1942 and 1945 is exceptional
Remarkable successes in such sectors as airframes andRemarkable successes in such sectors as airframes and
shipbuildingshipbuilding
• Between 1942:1 and 1944:4 airframe production
increased by a factor of six, and labor productivity grew by 160
percent. This is a compound annual average growth rate of output per
hour of 34.7 percent
In shipbuilding: in one ten-month period alone, the
number of hours required to build a Victory ship
fell by half (U.S. Bureau of Labor Statistics,
1946, pp. 897–98). On an annualized basis, this is a growth in output
per hour of 83 percent a year
12. Why we should be skepticalWhy we should be skeptical
Overall increase in labor productivity in munitions sectorOverall increase in labor productivity in munitions sector
between 1939 and 1945 was 25 percent – far belowbetween 1939 and 1945 was 25 percent – far below
standout sectors (Brackman and Gainsbrugh, 1949). Thisstandout sectors (Brackman and Gainsbrugh, 1949). This
is a growth in output per hour of 3.71 percent per year,is a growth in output per hour of 3.71 percent per year,
respectable, but hardly surprising given the more than $10respectable, but hardly surprising given the more than $10
billion of public sector capital invested in the defense sectorbillion of public sector capital invested in the defense sector
Short period of full scale war production: roughly threeShort period of full scale war production: roughly three
and a half yearsand a half years
Spillovers – which direction?Spillovers – which direction?
War drained skilled labor, managers, and capital fromWar drained skilled labor, managers, and capital from
civilian sector. Output per hour stagnated in 1942-44 incivilian sector. Output per hour stagnated in 1942-44 in
the civilian sectorthe civilian sector
Swollen productivity numbers are partly the result of aSwollen productivity numbers are partly the result of a
temporary shift of output to sectors with traditionally hightemporary shift of output to sectors with traditionally high
ratios of value added per worker – could not persistratios of value added per worker – could not persist
13. Why 1941?Why 1941?
1937 – unemployment 14.3 percent1937 – unemployment 14.3 percent
1940 - unemployment even higher – 14.61940 - unemployment even higher – 14.6
percentpercent
1941 unemployment is 9.9 percent (61941 unemployment is 9.9 percent (6
percent according to Darby)percent according to Darby)
Only 2.5 percent of cumulated warOnly 2.5 percent of cumulated war
spending 1941-1945 had been undertakenspending 1941-1945 had been undertaken
by the end of 1941by the end of 1941
1941 is the closest we come to recovery1941 is the closest we come to recovery
before full scale war mobilizationbefore full scale war mobilization
14. United States, Private Non-Farm EconomyUnited States, Private Non-Farm Economy
CAAGR of MFP, 1919-1948CAAGR of MFP, 1919-1948
1919-19291919-1929
1929-19411929-1941
1941-19481941-1948
SolowSolow
.78%.78%
2.36%2.36%
.89%.89%
KendrickKendrick
2.02%2.02%
2.31%2.31%
1.29%1.29%
15. Solow (1957)Solow (1957)
“there does seem to be a break at
about 1930. There is some evidence
that the average rate of progress in
the years 1909–29 was smaller than
that from 1930–49” (Solow, 1957, p.
316)
16. Kuznets and War PlanningKuznets and War Planning
Simon Kuznets needed to estimate the potentialSimon Kuznets needed to estimate the potential
output of the U.S. economy to determine waroutput of the U.S. economy to determine war
production plans consistent with planned forceproduction plans consistent with planned force
levels and civilian consumption.levels and civilian consumption.
His estimates came in considerably higher thanHis estimates came in considerably higher than
most had expected, leading the military tomost had expected, leading the military to
multiply their production targets and forcingmultiply their production targets and forcing
Kuznets and others to fight a rear guard action toKuznets and others to fight a rear guard action to
bring them down to a realistic levelbring them down to a realistic level
The outward shift of the production possibilityThe outward shift of the production possibility
frontier during the Depression years -- largelyfrontier during the Depression years -- largely
unrecognized until then -- was the principalunrecognized until then -- was the principal
reason potential output in 1942 was so muchreason potential output in 1942 was so much
higher than had been anticipated.higher than had been anticipated.
17. Sectoral EvidenceSectoral Evidence
R and D employment in manufacturingR and D employment in manufacturing
Time path of key innovationsTime path of key innovations
• KleinknechtKleinknecht
• SchmooklerSchmookler
• MenschMensch
MFP growth in telephone, railroads,MFP growth in telephone, railroads,
electric utilitieselectric utilities
Build out of surface road system: networkBuild out of surface road system: network
effects – impact on productivity growth ineffects – impact on productivity growth in
trucking and warehousingtrucking and warehousing
18. R and D employment in USR and D employment in US
ManufacturingManufacturing
1927: 6,2741927: 6,274
1933: 10,9181933: 10,918
1940: 27,7771940: 27,777
Source: National Research Council data;Source: National Research Council data;
Mowery and Rosenberg, 2000Mowery and Rosenberg, 2000
21. The Irony of Secular StagnationThe Irony of Secular Stagnation
At precisely the moment when Alvin Hansen andAt precisely the moment when Alvin Hansen and
others were developing theories of secularothers were developing theories of secular
stagnation, the U.S. economy was experiencingstagnation, the U.S. economy was experiencing
its greatest technological efflorescence, a periodits greatest technological efflorescence, a period
of creativity which, in the aggregate, remainsof creativity which, in the aggregate, remains
unmatched to this day.unmatched to this day.
His Harvard colleague, Joseph Schumpeter had aHis Harvard colleague, Joseph Schumpeter had a
better fix on what was going on, although hebetter fix on what was going on, although he
misjudged the terrain on the road to socialism.misjudged the terrain on the road to socialism.
Schumpeter’s homage to “creative destruction”Schumpeter’s homage to “creative destruction”
was developed against the backdrop of what inwas developed against the backdrop of what in
fact has turned out to be the most technologicallyfact has turned out to be the most technologically
dynamic epoch of the twentieth century.dynamic epoch of the twentieth century.
23. Table 4: Compound Annual Average Growth Rates of Net Stock of Street
and Highway Capital, United States, 1925-2000
1925-1929 6.00%
1929-1941 4.32%
1941-1948 0.08%
1948-1973 4.15%
1973-2000 1.63%
24. Street/Highway Capital as % ofStreet/Highway Capital as % of
Private Fixed CapitalPrivate Fixed Capital
Street/Hway K Private Fixed K
1929 $16,415 $253,987 6.46%
1941 $30,861 $289,487 10.66%
1948 $47,892 $582,248 8.22%
1973 $290,389 $2,698,194 10.76%
2000 $1,423,833 $21,464,786 6.63%
25. Two Waves of GovernmentTwo Waves of Government
Investment: the 1930 and theInvestment: the 1930 and the
1940s1940s
Both decades experienced substantialBoth decades experienced substantial
government investment in physical capitalgovernment investment in physical capital
1930s: Infrastructure1930s: Infrastructure
1940s: Over $10 billion of GOPO capital in1940s: Over $10 billion of GOPO capital in
manufacturing, much of it equipment, especiallymanufacturing, much of it equipment, especially
machine toolsmachine tools
The 1930s investment generated spillovers thatThe 1930s investment generated spillovers that
augmented PNE MFP growth, particularly inaugmented PNE MFP growth, particularly in
trucking and warehousing, and, throughtrucking and warehousing, and, through
complementarities, in railroads.complementarities, in railroads.
The 1940s investment was associated withThe 1940s investment was associated with
decliningdeclining MFP growth in manufacturing and forMFP growth in manufacturing and for
the economy as a whole.the economy as a whole.
What does this imply for the generality of theWhat does this imply for the generality of the
equipment hypothesis?equipment hypothesis?
26. Summary – Field (2003)Summary – Field (2003)
The 1930s were characterized by productivity
advance across a broad frontier of the U.S.
economy. The expansion of potential output
between 1919 and 1941 laid the foundation for
postwar prosperity, at the same time that it
enabled successful prosecution of the war.
In the light of this finding we need to rethink ourIn the light of this finding we need to rethink our
understanding of the defining contours andunderstanding of the defining contours and
determinants of U.S. economic growth in thedeterminants of U.S. economic growth in the
twentieth century.twentieth century.
27. Field (2004)Field (2004)
Compares 1929-41 with 1919-29 on theCompares 1929-41 with 1919-29 on the
one hand, and 1995-2000 on the otherone hand, and 1995-2000 on the other
Disaggregates, by broad sector,Disaggregates, by broad sector,
contributions to MFP growth in thesecontributions to MFP growth in these
different periodsdifferent periods
Reassesses IT’s impact on economicReassesses IT’s impact on economic
growth in the 1990s, as well as thegrowth in the 1990s, as well as the
broader utility of the GPT concept withbroader utility of the GPT concept with
which it is closely associated.which it is closely associated.
28. Main ArgumentsMain Arguments
MFP Growth in the 1920s was almost entirely aMFP Growth in the 1920s was almost entirely a
story about manufacturingstory about manufacturing
In the 1930s, manufacturing’s contributionIn the 1930s, manufacturing’s contribution
declined, although remaining high in absolutedeclined, although remaining high in absolute
terms. Transport and Public Utilities played aterms. Transport and Public Utilities played a
much more important role. The same was true tomuch more important role. The same was true to
a lesser extent of distribution.a lesser extent of distribution.
Although MFP growth between 1995 and 2000Although MFP growth between 1995 and 2000
was triple what it had been during 1973-95, itwas triple what it had been during 1973-95, it
was less than half what it was between 1929 andwas less than half what it was between 1929 and
1941.1941.
The IT revolution was responsible for about twoThe IT revolution was responsible for about two
thirds of MFP growth, and about a third of laborthirds of MFP growth, and about a third of labor
productivity growth between 1995 and 2000productivity growth between 1995 and 2000
29. CAAGR of MFP, PNE,CAAGR of MFP, PNE,
United States, 1919-2000United States, 1919-2000
1919-19291919-1929 2.022.02
1929-19411929-1941 2.312.31
1941-19481941-1948 1.291.29
1948-19731948-1973 1.901.90
1973-19891973-1989 .34.34
1989-20001989-2000 .78.78
1973-19951973-1995 .38.38
1995-20001995-2000 1.141.14
Sources: 1919-48: Field (2003); Kendrick (1961)Sources: 1919-48: Field (2003); Kendrick (1961)
1948-2000: Bureau of Labor Statistics: www.bls.gov1948-2000: Bureau of Labor Statistics: www.bls.gov
30. CAAGR of Labor Productivity,CAAGR of Labor Productivity,
United States, 1919-2000United States, 1919-2000
1919-19291919-1929 2.272.27
1929-19411929-1941 2.352.35
1941-19481941-1948 1.711.71
1948-19731948-1973 2.882.88
1973-19891973-1989 1.331.33
1989-20001989-2000 1.971.97
1973-19951973-1995 1.401.40
1995-20001995-2000 2.432.43
Sources: 1919-48: Kendrick (1961), Table A-23.Sources: 1919-48: Kendrick (1961), Table A-23.
1948-2000: Bureau of Labor Statistics: www.bls.gov1948-2000: Bureau of Labor Statistics: www.bls.gov
31. Labor Productivity GrowthLabor Productivity Growth
Roughly comparable over 1919-29, 1929-Roughly comparable over 1919-29, 1929-
41, and 1995-2000.41, and 1995-2000.
The 1930s were exceptional becauseThe 1930s were exceptional because
advance took place in the virtual absenceadvance took place in the virtual absence
of capital deepeningof capital deepening
The 1948-73 period remains the goldenThe 1948-73 period remains the golden
age of living standard improvement,age of living standard improvement,
because of the combined effects ofbecause of the combined effects of
respectable MFP growth and robust ratesrespectable MFP growth and robust rates
of capital deepening.of capital deepening.
32. Labor Quality - 1Labor Quality - 1
How much of the growth in output per hour between 1929-How much of the growth in output per hour between 1929-
41 is attributable to labor quality improvement?41 is attributable to labor quality improvement?
Margo (1991, 1993) has emphasized selective retention ofMargo (1991, 1993) has emphasized selective retention of
higher quality workers as employment drops in a recessionhigher quality workers as employment drops in a recession
Not relevant for peak to peak comparisons; theseNot relevant for peak to peak comparisons; these
composition effects would have been unwound as economycomposition effects would have been unwound as economy
returned to full employmentreturned to full employment
1941 is much closer to full employment than 1940 or 1937,1941 is much closer to full employment than 1940 or 1937,
but still had 9.9 percent unemployment, vs. less than 4but still had 9.9 percent unemployment, vs. less than 4
percent in 1929percent in 1929
In retrospect it would have been helpful for my researchIn retrospect it would have been helpful for my research
had Japan delayed attack on Pearl Harbor for another 8 tohad Japan delayed attack on Pearl Harbor for another 8 to
12 months, so the U.S. economy could have continued its12 months, so the U.S. economy could have continued its
then rapid movement toward full employment before fullthen rapid movement toward full employment before full
scale war mobilization took placescale war mobilization took place
33. Labor Quality 2Labor Quality 2
Goldin (1998) has emphasized rapid rise in highGoldin (1998) has emphasized rapid rise in high
school graduation rates in the 1930s.school graduation rates in the 1930s.
R and D employment data for manufacturing andR and D employment data for manufacturing and
Margo’s analyses reflect strong demand forMargo’s analyses reflect strong demand for
managerial, scientific, and technical personnelmanagerial, scientific, and technical personnel
during this periodduring this period
Opportunity cost of high school attendanceOpportunity cost of high school attendance
dropped as probability of a non high school graddropped as probability of a non high school grad
being unemployed rosebeing unemployed rose
Build out of surface road network facilitated highBuild out of surface road network facilitated high
school attendanceschool attendance
Influx of human capital fleeing Hitler’s EuropeInflux of human capital fleeing Hitler’s Europe
34. Labor Quality 3Labor Quality 3
Labor Quality did rise between 1929 and 1941, but changesLabor Quality did rise between 1929 and 1941, but changes
in labor supply were probably not a major or dominantin labor supply were probably not a major or dominant
influence on growth in output per hourinfluence on growth in output per hour
If we calculate rate of growth of output per hour betweenIf we calculate rate of growth of output per hour between
1929-41 using adjusted hours, where adjusted hours take1929-41 using adjusted hours, where adjusted hours take
into account labor quality improvement, increase in outputinto account labor quality improvement, increase in output
per hour is 6 percent lessper hour is 6 percent less
If selective retention were the dominant influence onIf selective retention were the dominant influence on
growth as we came out of recession, we should have had agrowth as we came out of recession, we should have had a
larger increment to output per hour moving from 19.1 tolarger increment to output per hour moving from 19.1 to
14.6 percent unemployment between 1938 and 1940 than14.6 percent unemployment between 1938 and 1940 than
we did moving from 14.6 to 9.9 percent unemploymentwe did moving from 14.6 to 9.9 percent unemployment
1940 to 1941. But the reverse was true.1940 to 1941. But the reverse was true.
35. 1929-41 Manufacturing MFP1929-41 Manufacturing MFP
CalculationCalculation
Output: 3.81 percent/yearOutput: 3.81 percent/year
Hours: 1.35 percent/yearHours: 1.35 percent/year
Capital: .85 percent/yearCapital: .85 percent/year
MFP: 2.60 percent/yearMFP: 2.60 percent/year
Hours and output data from Kendrick; capital input dataHours and output data from Kendrick; capital input data
from BEA Fixed Asset Table 4.2from BEA Fixed Asset Table 4.2
36. 1941-48 Manufacturing MFP1941-48 Manufacturing MFP
CalculationCalculation
Output: 2.20 percent/yearOutput: 2.20 percent/year
Hours: 2.17 percent/yearHours: 2.17 percent/year
Capital: 4.02 percent/yearCapital: 4.02 percent/year
MFP: -.52 percent/yearMFP: -.52 percent/year
Hours and output data from Kendrick; capital input dataHours and output data from Kendrick; capital input data
from BEA Fixed Asset Table 4.2from BEA Fixed Asset Table 4.2
37. CAAGR of MFP, Manufacturing,CAAGR of MFP, Manufacturing,
United States, 1919-2000United States, 1919-2000
1919-19291919-1929 5.125.12
1929-19411929-1941 2.602.60
1941-19481941-1948 - .87- .87
1948-19731948-1973 1.521.52
1973-19951973-1995 .66.66
1995-20001995-2000 2.092.09
Sources: Field (2004), Kendrick, (1961); Bureau of Economic Analysis FixedSources: Field (2004), Kendrick, (1961); Bureau of Economic Analysis Fixed
Asset Table 4.2; Bureau of Labor Statistics, Series MPU300003 (B).Asset Table 4.2; Bureau of Labor Statistics, Series MPU300003 (B).
43. Transport and Public Utilities 1919-Transport and Public Utilities 1919-
19291929
Share of PNE (1929): .14Share of PNE (1929): .14
CAAGR, MFP(1919-29): 1.86%CAAGR, MFP(1919-29): 1.86%
Cont to PNE MFP Growth: .27%Cont to PNE MFP Growth: .27%
PNE MFP Growth (1919-29): 2.01%PNE MFP Growth (1919-29): 2.01%
Sector’s Share:Sector’s Share: 13%13%
44. Transport and Public Utilities 1929-Transport and Public Utilities 1929-
19411941
Share of PNE (1941): .123Share of PNE (1941): .123
CAAGR, MFP(1929-41): 4.67%CAAGR, MFP(1929-41): 4.67%
Cont to PNE MFP Growth: .58%Cont to PNE MFP Growth: .58%
PNE MFP Growth (1929-41): 2.31%PNE MFP Growth (1929-41): 2.31%
Sector’s Share:Sector’s Share: 25%25%
45. Transport and Public Utilities 1929-Transport and Public Utilities 1929-
19411941
26 percent of sector MFP growth26 percent of sector MFP growth
comes from railroadscomes from railroads
40 percent of sector MFP growth40 percent of sector MFP growth
comes from trucking & warehousingcomes from trucking & warehousing
10 percent of total private non farm10 percent of total private non farm
MFP growth comes from trucking &MFP growth comes from trucking &
warehousingwarehousing
46. Table 7
MFP Growth, Transportation and Public Utilities, 1929-1941
Share of Share Share of Subsector Subsector
NI*100 of Covered MFP Contribution
1941(1948) T & PU Subsectors Growth MFP Growth
1929-41
Railroad transportation...................... 3.27 0.372 0.420 2.91 1.22
Local and interurban passenger transit.. 0.66 0.075 0.084 3.02 0.25
Trucking and warehousing..................... 1.03 0.117 0.132 13.57 1.80
Water transportation......................... 0.42 0.048 0.054 1.47 0.08
Transportation by air........................ 0.18 0.021 0.023 14.69 0.34
Pipelines, except natural gas................ 0.10 0.012 0.013 4.48 0.06
Transportation services...................... 0.13 0.014
Telephone and telegraph..................... 1.30 0.148 0.167 2.02 0.34
Radio and television......................... 0.10 0.011
Electric, gas, and sanitary services... 1.61 0.183 0.104 5.55 0.57
8.81
TOTAL 4.67
47. Wholesale and Retail TradeWholesale and Retail Trade
1919-19291919-1929
Share of PNE (1929): .201Share of PNE (1929): .201
CAAGR, MFP(1919-29): .80%CAAGR, MFP(1919-29): .80%
Cont to PNE MFP Growth: .17%Cont to PNE MFP Growth: .17%
PNE MFP Growth (1919-29): 2.01%PNE MFP Growth (1919-29): 2.01%
Trade’s Share MFP Growth:Trade’s Share MFP Growth: 8%8%
48. Wholesale and Retail TradeWholesale and Retail Trade
1929-19411929-1941
Share of PNE (1941): .223Share of PNE (1941): .223
CAAGR, MFP(1929-41): 1.81%CAAGR, MFP(1929-41): 1.81%
Cont to PNE MFP Growth: .40%Cont to PNE MFP Growth: .40%
PNE MFP Growth (1929-41): 2.31%PNE MFP Growth (1929-41): 2.31%
Trade’s Share MFP Growth:Trade’s Share MFP Growth: 18%18%
49. Wholesale and Retail TradeWholesale and Retail Trade
1995-20001995-2000
Share of PNE (2000): .223Share of PNE (2000): .223
CAAGR, MFP(1995-00): .70 %CAAGR, MFP(1995-00): .70 %
Cont to PNE MFP Growth: .16%Cont to PNE MFP Growth: .16%
PNE MFP Growth (1995-00): 1.14%PNE MFP Growth (1995-00): 1.14%
Trade’s Share MFP Growth:Trade’s Share MFP Growth: 14 %14 %
50. Let’s Remove Religion from theLet’s Remove Religion from the
Analysis of Productivity TrendsAnalysis of Productivity Trends
Late 1990s: New economy skeptics and true believersLate 1990s: New economy skeptics and true believers
The move from skeptic to believer as a matter of “GettingThe move from skeptic to believer as a matter of “Getting
Religion”; akin to a process of spiritual conversionReligion”; akin to a process of spiritual conversion
Use of vignettes and anecdotesUse of vignettes and anecdotes
Is this really the way to discipline our conclusions withIs this really the way to discipline our conclusions with
data?data?
Focus on what the data actually reveal, rather than whatFocus on what the data actually reveal, rather than what
they might reveal in the future, or we hope they will revealthey might reveal in the future, or we hope they will reveal
in the futurein the future
With the marked acceleration in both MFP and laborWith the marked acceleration in both MFP and labor
productivity growth 1995-2000, one can no longer claimproductivity growth 1995-2000, one can no longer claim
the statistical apparatus is incapable of picking up effects ofthe statistical apparatus is incapable of picking up effects of
IT.IT.
51. Reckoning The Impact of IT onReckoning The Impact of IT on
Labor Productivity GrowthLabor Productivity Growth
Conventional Framework: 3 partsConventional Framework: 3 parts
1.1. MFP growth within IT producing sectorMFP growth within IT producing sector
2.2. MFP growth within IT using sectorsMFP growth within IT using sectors
(spillovers)(spillovers)
3.3. That portion of the impact of capitalThat portion of the impact of capital
deepening on labor productivity growthdeepening on labor productivity growth
associated with the accumulation of ITassociated with the accumulation of IT
capital goodscapital goods
52. Why Include the Third Component?Why Include the Third Component?
In the absence of IT, saving flows would have beenIn the absence of IT, saving flows would have been
congealed in a slightly inferior range of capital goods.congealed in a slightly inferior range of capital goods.
Social Savings Analogy. Debate between Rostow on theSocial Savings Analogy. Debate between Rostow on the
one hand and Fishlow and Fogel on the other. Fogel andone hand and Fishlow and Fogel on the other. Fogel and
Fishlow imagined worlds in all respects similar save theFishlow imagined worlds in all respects similar save the
availability of railway technology.availability of railway technology.
Fogel: Because of the railroad, GDP was higher in 1890.Fogel: Because of the railroad, GDP was higher in 1890.
But not that much higherBut not that much higher: the availability of the technology: the availability of the technology
made a difference of 4 percentmade a difference of 4 percent
Over a 25 year period, what kind of an annual increment toOver a 25 year period, what kind of an annual increment to
MFP growth does one need to produce a 4 percent increaseMFP growth does one need to produce a 4 percent increase
in GDP?in GDP?
.15 percentage points.15 percentage points
In MFP terms, that’s the railroad’s contributionIn MFP terms, that’s the railroad’s contribution
53. Rostow ReduxRostow Redux
Would it be reasonable for supporters ofWould it be reasonable for supporters of
the “indispensability” thesis to object thatthe “indispensability” thesis to object that
Fogel’s estimate vastly underestimated theFogel’s estimate vastly underestimated the
contribution of the railroad to laborcontribution of the railroad to labor
productivity growth and US standards ofproductivity growth and US standards of
living because it failed to take into accountliving because it failed to take into account
that portion of labor productivity growththat portion of labor productivity growth
attributable to the (substantial) fraction ofattributable to the (substantial) fraction of
capital deepening associated with thecapital deepening associated with the
accumulation of railway permanent way,accumulation of railway permanent way,
bridges, tunnels, roundtables, stations,bridges, tunnels, roundtables, stations,
locomotives, and rolling stock?locomotives, and rolling stock?
54. Solow AgainSolow Again
It remains worthwhile distinguishingIt remains worthwhile distinguishing
between the effects on laborbetween the effects on labor
productivity of thrift and innovationproductivity of thrift and innovation
There is little evidence that savingThere is little evidence that saving
rates accelerated in the presence ofrates accelerated in the presence of
the IT revolutionthe IT revolution
55. Sources and Uses of SavingSources and Uses of Saving
S = I + (G-T) + (X-M)S = I + (G-T) + (X-M)
Private Domestic Saving funds Private Domestic Capital Accumulation, thePrivate Domestic Saving funds Private Domestic Capital Accumulation, the
Government Deficit, and capital accumulation outside of the CountryGovernment Deficit, and capital accumulation outside of the Country
I = S + (T-G) + (M-X)I = S + (T-G) + (M-X)
Private Domestic Capital Accumulation must be funded by the sum ofPrivate Domestic Capital Accumulation must be funded by the sum of
private domestic saving, government saving, and the capital accountprivate domestic saving, government saving, and the capital account
surplus (inflows of foreign saving).surplus (inflows of foreign saving).
56. End of Century Tangible CapitalEnd of Century Tangible Capital
AccumulationAccumulation
Whatever one can say about the rising importance ofWhatever one can say about the rising importance of
human capital formation in the twentieth century, ahuman capital formation in the twentieth century, a
distinguishing feature of the 1995-2000 was a rise indistinguishing feature of the 1995-2000 was a rise in
tangible capital accumulation, with a heavy emphasis ontangible capital accumulation, with a heavy emphasis on
short lived equipment.short lived equipment.
Capital services growth accelerated from 3.94 percent perCapital services growth accelerated from 3.94 percent per
year (1973-95) to 5.38 percent per year (1995-2000).year (1973-95) to 5.38 percent per year (1995-2000).
The capital deepening that made this possible requiredThe capital deepening that made this possible required
capital accumulation that had to be financed.capital accumulation that had to be financed.
As growth of IT capital services accelerated from .41 toAs growth of IT capital services accelerated from .41 to
1.03 percent per year, growth of non IT capital services1.03 percent per year, growth of non IT capital services
essentially halted, dropping from .30 to .06 percent peressentially halted, dropping from .30 to .06 percent per
year.year.
Inflow of foreign saving represented a slowing of capitalInflow of foreign saving represented a slowing of capital
services growth outside of the country.services growth outside of the country.
57. 1995 2000 Change Change
in uses insources
Gross Private Domestic Investment 1,143.8 1,755.4 611.6
Gross Government Investment 238.2 319.8 81.6
Personal Saving 302.4 201.5 -100.9
Retained Business Earnings 203.6 152.6
Depreciation Allowances 743.6 1,017.9
Gross Business Saving* 963.6 1,170.5 206.9
Gross Government Saving -8.5 435.8 444.3
Capital Account Surplus 98.0 395.8 297.8
Statistical Discrepancy 26.5 -128.5 -155.0
TOTALS 693.2 693.1
Sources and Uses of Saving, US, 1995-2000
58. Table 13
MFP Contribution to Labor Productivity Growth and Acceleration,
1995-2000
Labor Productivity Growth, 1995-2000a
2.46
MFPa
1.14
Capital deepening a
1.05
Labor Composition a
.26
Labor Productivity Growth Acceleration, 1995-2000 vs. 1973-95b
1.09
MFP b
.76
Capital Deepening b
.32
Labor Composition b
-.01
a
percent per year
b
percentage points
Note: Components do not sum exactly to aggregates due to rounding
errors.
59. Table 16
Sectoral Contributions to MFP growth, 1995-2000
Share of PNE Sectoral MFP
Growth
Contribution
to PNE MFP
Growth
Share of PNE
MFP Growth
Manufacturing .214 2.08 .45 .39
Trade .223 .70 .16 .14
Other .563 .94 .53 .47
TOTAL 1.00 1.14
Sources: Sectoral Shares: see Table 3
Note: Private Nonfarm economy excludes nonfarm housing, health, agriculture, and government, which leaves 72.4 percent of value added.
MFP growth Manufacturing: see Table 5
MFP growth Trade: see text
60. IT’s ContributionIT’s Contribution
Credit IT with all MFP growth inCredit IT with all MFP growth in
ManufacturingManufacturing
Credit IT with one third of MFP growth inCredit IT with one third of MFP growth in
the rest of the economythe rest of the economy
.68 of 1.14 percent per year (about 60.68 of 1.14 percent per year (about 60
percent) of MFP growth between 1995 andpercent) of MFP growth between 1995 and
2000 attributable to IT2000 attributable to IT
28 percent of labor productivity growth28 percent of labor productivity growth
1995-2000 is attributable to the IT1995-2000 is attributable to the IT
revolution (.68/2.46 percent per year)revolution (.68/2.46 percent per year)
61. The Equipment HypothesisThe Equipment Hypothesis
De Long and Summers (1991)De Long and Summers (1991)
• Cross country regressions using 1960-85 data show aCross country regressions using 1960-85 data show a
relationship between share of equipment investment inrelationship between share of equipment investment in
GDP and the growth of output per workerGDP and the growth of output per worker
Auerbach, Hasset, and Oliner (1994)Auerbach, Hasset, and Oliner (1994)
• Criticize econometrics, question whether conclusion isCriticize econometrics, question whether conclusion is
applicable to USapplicable to US
Field (2004)Field (2004)
• The drop in relative prices of equipment, and increase inThe drop in relative prices of equipment, and increase in
equipment’s share of capital formation in the USequipment’s share of capital formation in the US
coincides with a long term decline in the rate of MFPcoincides with a long term decline in the rate of MFP
advance from its high rates in the interwar period to itsadvance from its high rates in the interwar period to its
virtual disappearance in the last quarter of the centuryvirtual disappearance in the last quarter of the century
• Is 1995-2000 an aberration, or a fundamental turningIs 1995-2000 an aberration, or a fundamental turning
point in US. productivity history?point in US. productivity history?
63. GPT’sGPT’s
Distinguish between the proposition that it sometimesDistinguish between the proposition that it sometimes
takes a long time for the productivity benefits of newtakes a long time for the productivity benefits of new
technological complexes to be reaped, and the usefulnesstechnological complexes to be reaped, and the usefulness
of the concept of a GPTof the concept of a GPT
Potential multiplicity of candidates: Steam, electricity, ITPotential multiplicity of candidates: Steam, electricity, IT
are most frequently identified, but chemical engineering,are most frequently identified, but chemical engineering,
the internal combustion engine, radio transmission and thethe internal combustion engine, radio transmission and the
assembly line have also been mentioned.assembly line have also been mentioned.
Identification of one or several GPT’s often offers anIdentification of one or several GPT’s often offers an
appealing narrative hook, but the criteria for designatingappealing narrative hook, but the criteria for designating
them are not universally agreed upon, in spite of continuingthem are not universally agreed upon, in spite of continuing
efforts to nail them down.efforts to nail them down.
Why isn’t the railroad also a GPT?Why isn’t the railroad also a GPT?
Gordon (2004) suggests that use by both households andGordon (2004) suggests that use by both households and
industry is a criterion. This works for electricity and theindustry is a criterion. This works for electricity and the
internal combustion engine. But steam?internal combustion engine. But steam?
64. GPTsGPTs
Bessemer and Siemens Martin processes wereBessemer and Siemens Martin processes were
industry specific, and would clearly not passindustry specific, and would clearly not pass
muster as GPTs. They offered, to use David’smuster as GPTs. They offered, to use David’s
words, “complete, self-contained andwords, “complete, self-contained and
immediately applicable solutions.” This was notimmediately applicable solutions.” This was not
the case for the product whose production theythe case for the product whose production they
enabled. Does that make steel a GPT? It tookenabled. Does that make steel a GPT? It took
Carnegie and others time to persuade users theyCarnegie and others time to persuade users they
should make skyscrapers, plate ships, andshould make skyscrapers, plate ships, and
replace rails with it. Cheap steel in turnreplace rails with it. Cheap steel in turn
encouraged complementary innovations such as,encouraged complementary innovations such as,
in the case of taller buildings, elevators.in the case of taller buildings, elevators.
65. GPTsGPTs
If one follows the impact of product and processIf one follows the impact of product and process
innovations far enough through the input-output table, oneinnovations far enough through the input-output table, one
will eventually find products or technological complexeswill eventually find products or technological complexes
used as inputs in many other sectors, with the potential toused as inputs in many other sectors, with the potential to
generate spillover effects in using sectors. Thesegenerate spillover effects in using sectors. These
processes, products, or complexes are the consequence ofprocesses, products, or complexes are the consequence of
many separate breakthroughs as well as learning by doing,many separate breakthroughs as well as learning by doing,
much of which has been sector specific. IT for example,much of which has been sector specific. IT for example,
has required advances in sector specific semiconductorhas required advances in sector specific semiconductor
manufacturing, and the thin film technology andmanufacturing, and the thin film technology and
mechanical engineering that underlies most mass storage,mechanical engineering that underlies most mass storage,
let alone software.let alone software.
Because of the potential for multiplying GPT candidaciesBecause of the potential for multiplying GPT candidacies
and the lack of an authoritative tribunal applying uniformand the lack of an authoritative tribunal applying uniform
rules passing judgment about which ones qualify, economicrules passing judgment about which ones qualify, economic
and technological history may be better off without theand technological history may be better off without the
concept.concept.
66. ConclusionsConclusions
IT was responsible for about 60IT was responsible for about 60
percent of MFP growth and about 28percent of MFP growth and about 28
percent of labor productivity growthpercent of labor productivity growth
between 1995 and 2000between 1995 and 2000
67. ConclusionsConclusions
MFP Growth in the 1920s was 15 percent lower than theMFP Growth in the 1920s was 15 percent lower than the
benchmark 1929-41 period. During the 1920s it wasbenchmark 1929-41 period. During the 1920s it was
almost entirely a story about progress in manufacturing,almost entirely a story about progress in manufacturing,
although advance was broadly experienced throughout thealthough advance was broadly experienced throughout the
sector, in contrast with the 1990ssector, in contrast with the 1990s
In the 1930s, manufacturing’s contribution declined,In the 1930s, manufacturing’s contribution declined,
although remaining high in absolute terms. Transport andalthough remaining high in absolute terms. Transport and
Public Utilities played a much more important role. ThePublic Utilities played a much more important role. The
same was true to a lesser extent of distribution. Thesesame was true to a lesser extent of distribution. These
latter effects reflect a roughly three decade long delaylatter effects reflect a roughly three decade long delay
between the invention of the internal combustion enginebetween the invention of the internal combustion engine
and the full reaping of its productivity benefits in usingand the full reaping of its productivity benefits in using
sectors.sectors.
MFP growth in 1995-2000 was three times what it had beenMFP growth in 1995-2000 was three times what it had been
during the anemic years 1973-1995, but less than half theduring the anemic years 1973-1995, but less than half the
rate clocked between 1929 and 1941.rate clocked between 1929 and 1941.
68. ConclusionsConclusions
In accounting for the expansion of potentialIn accounting for the expansion of potential
output, there is no single process, product, oroutput, there is no single process, product, or
technological complex for the 1930s aroundtechnological complex for the 1930s around
which one can build a compelling narrative.which one can build a compelling narrative.
What was exceptional about 1929-41,What was exceptional about 1929-41,
distinguishing the period from the other twodistinguishing the period from the other two
examined in this paper, was the broad frontierexamined in this paper, was the broad frontier
across which technological progress wasacross which technological progress was
advancing.advancing.
In contrast, MFP advance 1995-2000 wasIn contrast, MFP advance 1995-2000 was
narrowly concentrated within a decliningnarrowly concentrated within a declining
manufacturing sector in SIC 35 and 36, andmanufacturing sector in SIC 35 and 36, and
within the using sectors in wholesale and retailwithin the using sectors in wholesale and retail
trade and securities trading.trade and securities trading.
69. A Century of TechnologicalA Century of Technological
ExpositionsExpositions
1893 –Chicago1893 –Chicago
• Columbian Exposition – The White CityColumbian Exposition – The White City
• AC current for illumination, but still powered by coal andAC current for illumination, but still powered by coal and
steamsteam
1939-40 – New York1939-40 – New York
• GM’s Futurama – Norman Bel Geddes’ wildly popular andGM’s Futurama – Norman Bel Geddes’ wildly popular and
largely accurate vision of the US in 1960largely accurate vision of the US in 1960
• DemocracityDemocracity
1964-65 – New York1964-65 – New York
• Failure of the new Futurama – either to inspire or toFailure of the new Futurama – either to inspire or to
accurately forecastaccurately forecast
1996 – Anaheim1996 – Anaheim
• A Retro TomorrowlandA Retro Tomorrowland
70. Is Comdex a Substitute?Is Comdex a Substitute?
The last “successful” North American world’s fair was ExpoThe last “successful” North American world’s fair was Expo
’67 at Montreal, and the first (and last Asian fair Expo ’70’67 at Montreal, and the first (and last Asian fair Expo ’70
was also a successwas also a success
Subsequent fairs (Spokane - 1974, Knoxville - 1982, NewSubsequent fairs (Spokane - 1974, Knoxville - 1982, New
Orleans - 1984, Vancouver - 1986, and Seville -1992) haveOrleans - 1984, Vancouver - 1986, and Seville -1992) have
been more narrowly themed. Who now remembers them?been more narrowly themed. Who now remembers them?
The fading impact of these international expositionsThe fading impact of these international expositions
coincides roughly with the collapse of the residualcoincides roughly with the collapse of the residual
beginning in the 1970s.beginning in the 1970s.
World’s fairs emerged out of commercial fairs, and in theWorld’s fairs emerged out of commercial fairs, and in the
1990s trade shows such as Comdex generated some of the1990s trade shows such as Comdex generated some of the
same kind of excitement as had earlier internationalsame kind of excitement as had earlier international
expositions, but they were much more narrowly focused,expositions, but they were much more narrowly focused,
reflecting the relatively narrow based of technical advancereflecting the relatively narrow based of technical advance
in recent years, and have not been targeted at the generalin recent years, and have not been targeted at the general
public.public.
71. Table 9
Sectoral Contributions to Multifactor Productivity Growth Within the Private Nonfarm Economy
United States, 1929-1941
Sectoral Sector's
1941 Share of 1941 Share of Private MFP Growth Contribution to Aggregate
National Income Nonfarm Economy 1929-1941 (PNE) MFP Growth
Manufacturing 31.86 42.57 2.91 1.239
Transport and Public Utilities 9.21 12.30 4.48 0.551
Wholesale and Retail Trade 16.70 22.31 1.81 0.404
Other Sectors
(net) 17.08 22.82 0.51 0.116
Min
ing 2.30
Construction 4.03
Finance, Insurance, Real Estate
(see note a) 4.78
Other Services (see note b) 5.97
TOTAL 74.85 100.00 2.310