Lecture: September 14: Our Unequal World

Lecture: September 14: Our Unequal World

*We live in a world in which output per worker levels vary by a factor of nearly 100--evenat purchasing power parities.

We live in a world in which America today is roughly eight times as rich as China today...*

Using the Solow growth model to decompose differences in productivity today:

• E(0): differences in where countries started (guns, germs, steel, and colonialism-imperialism)
• g: differences in ability to adapt (or invent) better technologies and organizations
  • These two are most of the ballgame
• n: countries that have not yet gone through the demographic transition are at a deep disadvantage
  • Vicious circle: if you're poor, you probably have high population growth--making you poorer
  • Aside: what to do when your model can be used by the architects of China's "mandatory abortion" policy?
  • Amartya Sen: take the objective to be not GDP per capita but human freedom
• s: savings and investment
  • Budget deficits, et cetera
  • Vicious circles: if you're poor capital goods are very expensive--especially imported capital goods

This model provides a framework for understanding and evaluating differences in growth...

The case for neoliberalism and free trade as a way of maximizing economic and cultural contact--and we don't know how else to aid technology-and-organizational transfer.