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August 17, 2007

Comments

Lucy McKenzie

The handout uses a simple Cobb-Douglas function to account for the higher economic growth rates in the US, despite the upper hand held by Britain in terms of technology. The authors suggest that US settlers benefited from positive growth in natural resources per capita, whereas in overcrowded Britain, natural resources were becoming more scarce. Assuming this is correct, if Britain and France had continued to seek American empires, the GDP growth levels in the US may have been much reduced. However, using the function in the handout and assuming Britain's natural resources per capita continued to decline at the rate given, the Europeans would have had to stifle America's natural resources a great deal in order to catch their GDP growth rate.

Yelena Vinarskiy

The application of the Cobb-Douglas equation presented in this handout allows us to measure the roles of capital, technology, and natural resources in production. The industrial revolution clearly gave Britain the upper hand in technology and capital, leaving the natural resources term as the major factor for the U.S. having a higher growth rate. In the equation from the handout, growth in output per worker will be faster the larger the importance of natural resources in production and the faster availability to these resources grows relative to population. With France and Britain largely out of its territory, the U.S. had a huge advantage in access to a great amount of resources for a small population (which became small with the expulsion of Indians). Had the Europeans rivaled Americans in the use of those resources or had they populated more territory, the United States might have been out of luck since Britain’s technology and capital were much stronger.

Yelena Vinarskiy

The application of the Cobb-Douglas equation presented in this handout allows us to measure the roles of capital, technology, and natural resources in production. The industrial revolution clearly gave Britain the upper hand in technology and capital, leaving the natural resources term as the major factor for the U.S. having a higher growth rate. In the equation from the handout, growth in output per worker will be faster the larger the importance of natural resources in production and the faster availability to these resources grows relative to population. With France and Britain largely out of its territory, the U.S. had a huge advantage in access to a great amount of resources for a small population (which became small with the expulsion of Indians). Had the Europeans rivaled Americans in the use of those resources or had they populated more territory, the United States might have been out of luck since Britain’s technology and capital were much stronger.

Eric Hsiao

The handout states that the difference in natural resource growth accounted for the disparity in income between the US and Britain. Although it is mathematically sound, it does not provide a sufficient answer as to WHY natural resources played such a crucial role. Further, the handout does not state how natural resource growth is defined- how is land accounted for when it is discovered? Was there even a centralized system that documented "explored" land?

In response to the second question, the predicted economic growth of the US would have been significantly lower had Britain and France not readily conceded ripe American land. However, one could argue that less land would have subsequently lowered migration into the US, thus leading to a comparable rate of economic growth.

Kim Luong

Delong and Rehavi suggest that the vast amounts of natural resources are the leading cause for America’s immense growth during the early 19th century, despite Britain’s advantage in technology and relatively similar amounts of initial capital. I think the authors’ answer is very plausible; however, Britain’s resources per worker could not have been in such a steep decline (without evidence or statistics to prove it either way, all I can base this thought on is that Britain [as a first world country] has clearly continued to grow, and the nation pursued land/colony interests all over the rest of the world—India, controlled by the British East India Company at the time, is a rather large land mass and provides a good supply of resources).
Without the Louisiana Purchase, the United States would be missing significant resources, though the cash crops in the South and the peak of the Industrial Revolution in the North would have still been very profitable. If Britain had taken over that land area for Canada, the gateway to the West Coast would be completely blocked off, and the United States would have lost out on the whole area won from Mexico… reducing the economic growth of the US in the 19th century by an unfathomable amount.

Justin Fong

Although I somewhat struggled in followig DeLong's and Rahivi's mathematical solutions for the United States' peculiar pre-civil war growth, I did come to grasp the written explanations behind the equations. Britain may have been the first innovator of the industrial age, but certain circumstances in the United States can help explain the abnormal growth in per capita terms and income levels. Between 1790 and 1850, the population in the United States increased from 4 million to 25 million and the availability of natural resources increased eightfold. These figures can certainly help explain the growth behind the relationship between a growing labor force and abundant resources. I think American growth would have surely slowed had France and Britain decided to hold on to their empires in what is now part of the United States.

David Thomason

I find the handout’s conclusions satisfactory. The idea that the United States huge advantage in natural resources compensated for it being behind in technological advancement is definitely believable. Given this, had France and Britain maintained interest in the area and held onto land there, then America would not have grown at such a rate. One interesting thing, that I may need to be corrected on, is that the British and French weren’t as hostile towards the Indians as the Americans were. If that’s the case, and they were more reluctant to push them out of their land and take the resources in the area, then it calls into question the possibility that Britain and France would have benefited as much as the Americans did. It would still of course impede American GDP growth, but having that land may not have helped Britain and France as much as it helped the Americans due to Americans willingness to mistreat the Indians.

Raymond Kei

The article written by DeLong and Rehavi used a mathematical approach to explain the rapid growth of GDP between 1790 and 1850. The Cobb-Douglas production function incorporated capital, labor, and natural resources into consideration. The result is compelling. Pre-civil war U.S. lagged behind in capital and labor, but have an advantage over natural resources because of westward expansion and other factors. This articles explained economic growth in a supportive manner.

Michelle Chung

The solution by DeLong and Rehavi is quite satisfactory and has interesting functions. It explains why the United States had faster growth of the income and started out richer in per capita terms. Britain certainly had higher growth rate of technology and organization by the industrial revolution, which is 0.49%, and considering that the U.S. had smaller growth rate of technology and organization, which is 0.39%, Britain should have had higher rate of income. However, the growth of natural resources per capita was higher for the U.S. because it had full access to the resources and no interferences of Britain and France. If Britain and France continued to seek American empires, the U.S. would not have had this higher growth rate of income, perhaps even lower than Britain and France's.

Joseph Chang

Since slavery wasn't widely practiced in Great Britain in the first half of this period and in the 2nd half of the period there were none, let S be a separate resource for the (Laborers).

Let S = Slaves Resource, s = S / L, δ= diminishing returns of slaves resource,

Then,

y = a*k^α*n^β*s^δ

which reduces to:

(1/y)dy/dt = [(1/a)(da/dt) +β(1/r)(dr/dt) +δ(1/s)(ds/dt)] / (1- α)

According to a census.gov document cited by Wikipedia, the slave population from 1790 to 1850 grew from 697,681 to 3,204,313.

Assume that this slave population grew at one constant continually compounding rate. Then:

3204313 = 697681 * e^(60r)
ln 3204313/697681 = 60r
r = 0.025408 or at about 2.54%

this r = (1/s)(ds/dt)

Also, let δ = .10 (an arbitrarily chosen small number for the fact that people having larger number of slaves leads to less and less more output)

plugging it back into the equation and solving for (1/r)(dr/dt) = [0.0086*(1-.4)-.0039-.10(.0254) ]/.25 = -.00512 = -.5%

Assuming the exact same thing for the U.K. except that since i don't have an easily findable wikipedia entry and that it doesn't change the proportional growth rates of a and r, i'm going to assume δ* (1/s)(ds/dt) is zero.

Thus, comparing -.5% to -.75% doesn't seem to be that much of a difference (and the -.5% can be raised to a positive by raising δ)

Rather than the acquisition of new territory -- and new resources -- combined with the discovery of new technologies that "discovered" resources in previously held territories, a growing slave population and a reasonable growth in the emergence of new resources the U.S. had higher per capita growth.


but yeah, i think that had the British and French empires continued to seek territories in the America's the United States, i think it wouldve had a much smaller impact than the paper suggests (also since the population would also not have grown as fast).

p.s. just a thought.

p.s.s. shouldn't the differing rates of population growth also play a factor? such as in one of the parameters or as a resource.

Luke Brennan

It is certainly compelling to see Delong and Rehavi use such a simple tool in such an insightful way. There is a lot of contemporary evidence that suggests that resource differences can cause major disparities in GDP/capita levels of otherwise very similar countries. While I was reading the paper, however, I was struggling to remember something that I and I'm sure others remember from Intermediate Macro (Econ 100B) - the Solow-Romer Growth model. Essentially, a successful developing nation is capable of growing at seemingly astronomical rates, until it's capital/capita ratio approximately equals that of already developed nations, resting at a some optimal level. At that point, long-term growth will continue, at a lower rate, as it it entirely powered by innovation/knowledge/technology. The paper opens by posing the question, why did America's GDP/capita grow faster than Britains, even though Britain was innovating faster. At first glance, the Solow-Romer explanation seems adequate. The United States started out capital poor relative to Britain, and thus was able to achieve higher growth because its growth was powered not only by domestic innovation, but also by simply increasing the capital per capita ratio. Am I missing something? I know the paper states that there shouldn't be a difference in the preference for capital in either country... perhaps I am not convinced of this, or maybe it's unrelated.

Orie Guo

The math in this article was an interesting follow (I'm also taking 101b concurrently). However, from my standpoint the purpose of math in economics is only to explain things that happen in real life (phenomena?). Essentially, the point of the article was to say that even though Britain started off with a huge industrial and technological advantage, the enormous amount of untapped resources in the United States allowed them to overcome this disadvantage.

However, the article brought up an interesting ethical point: westward expansion, including expulsion of the American Indians, was a key factor in our success. It is interesting that our success came at the cost of others, and from the article I gathered that it would have been impossible to grow at the rate we did without that moral burden.

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