Wednesday, November 09, 2005

Progressive(s and) Economics

by Tom Bozzo

I get to apply the Principle of Least Effort this lunchtime by expanding massively on the sidelong reference to the role of progressive economists from the previous post merely by pointing to this extensive TPMCafe discussion of Gene Sperling's The Pro-Growth Progressive.

I particularly recommend James K. Galbraith's entry, "Humpty-Dumpty Redefinitions, Magical Thinking, and False Trade-offs."
I know it's standard economic theory, but I'm still stuck on how, definitionally, a larger population leads to greater growth. (I will readily grant that it provides the possibility for greater growth, but unlike improved efficiency through technological innovation or an increase in capital growth rates, the relationship is not intuitively.)
Ken: In the Solow growth model, market-clearing conditions yield the result that in equilibrium, labor force growth (n.b., not population size, though other things equal you might assume that labor force growth will track population growth) will be accommodated by capital growth. If the labor force were to grow without corresponding capital growth, the decline in capital intensity would increase the marginal product of capital, and in turn also the savings rate and rate of capital formation, until the economy returns to the steady state.

Obviously, this is a very simple model and you need to add significant complications (or exogenous technical progress) to get increasing output per worker.
Post a Comment

<< Home

This page is powered by Blogger. Isn't yours?