The Economic Development of the Global Main Economies US, EU, Japan, and China Together Account for 70% of the Global Economy

The Importance of Productivity and National Saving Lecture #1

All Economic Activity is Devoted to Two Things --

This is in fact what we mean by standard of living

Government Can Sometimes be Useful in Helping Us Accomplish These Goals

as well as

Government Can Sometimes be Useful in Helping Us Accomplish These Goals Helping to Control Externalities, Provide a System of Justice and Enforcement of Contracts, Supply Goods and Services which the Private Market Fails to Provide, Ensure a Reasonable Distribution of Income and Wealth, and Moderate the Business Cycle

U = utility C = consumption L = leisure Both C and L ultimately depend on y = output per population

We Must Increase y Steadily Over the Long Run

How Can We Increase (r1) (r2) and (r3) ?

Suppose we just want to increase (r1) which is

Child Labor – Not Really Elderly Workers – Limited at Best

Foreign Workers – Maybe, but Problems, Problems Robot Workers – Not for Many Years

< 1 No Matter What, (r1) has an Upper Limit

Okay …..suppose we try instead to increase (r2) which is

No Sleeping ---- No Eating ---

Just Work, Work, Work ---

< 24 Hours/Day No Matter What, (r2) has an Upper Limit

In Fact…the Trend is for Less Hours Not More Hours of Work !

US Data

How Can We Increase y? The Only Reliable, Long Run Way is to Increase (r3) = Average Labor Productivity

How Do We Get High Long Run Growth in Labor Productivity?

Saving Necessary for Productivity Growth How Do We Get High Long Run Growth in Labor Productivity?

Saving Necessary for Productivity Growth 1.Creation of Physical Capital – Tools, Machines, Plant, Equipment 2.Creation and Improvement of Human Capital and Skills 3.Creation and Improvement in Technology and Production Advances 4.Creation and Expansion of New Markets for Goods and Services 5.Development of New and Better Industries 6.Development of Financial and Capital Markets 7.Creation of Inventions, New products, and Innovations

We can also Increase Output per person with More Land and Raw Materials

Terracing Can Give Us More Land – But Ultimately Limited

Parts of the Zuider Zee in the Netherlands as Reclaimed Land from the Ocean – Really Difficult and Costly Noordoostpolder, Netherlands

Hong Kong Airport – Land Reclaimed from the Ocean

Not Land, but Space, Coupled with Physical Capital

Recycling Can Help Us Reduce Some Resource Problems

Renewable Energy Can Help a Little in Our Search for Energy

Ultimately, all our efforts will require saving as a temporary sacrifice -- in order to grow the economy. This is what we must prepare for and why the challenges in the future are so daunting to the world economy.

1. How Can We Encourage Capital Formation and Capital Usage? 2. Why Does the US Save Very Little? 3. What Factors Determine the Successful Growth of an Economy? 4. Why is Productivity Growth So Difficult to Understand? 5. How Can We Encourage an Increase in National Saving? 6. Does Sustained Growth in Productivity Need Freedom and Democracy? Basic Questions to be Discussed in Afternoon

Video of Robert Barro in South Korea Discussing Economic Growth Does Education Really Matter for Growth…..?