Macroeconomics 2 Reading and Writing Assigment #1

Due date: Thursday March 5, 2020

For each article assigned, read, analyze and write a verbal report by aswering
the following questions.

Article:

1. Solow, R., 1956, A Contribution to the Theory of Economic Growth, The

Quarterly Journal of Economics, 70(1), 65-94

2. Solow, Robert M. "Technical change and the aggregate production

function." The review of Economics and Statistics(1957): 312-320.

3. Swan, Trevor W. "Economic growth and capital accumulation." Economic

record 32.2 (1956): 334-361.

A. Questions:

1. What is the general problem area of the article?

2. What are the economic research questions that the article looked for
asnwers?

3. What are the significance of the economic research questions above?

4. What are the key assumptions imposed in the article when it answered the
research questions?

5. How does the article answer the economic research questions? What
approach it uses?

6. What are the key results?

7. What are the significance of the key results?

B. Results table

Put your analysis results on the table below:

Solow, R., 1956 Solow, R. 1957 Swan, Trevor W

1956

general problem All theory On this day of In the solow

area depends on an rationally model,
assumption that intended technological
is not truly real, econometric changes are
because when studies and treated
the theory has a super-input- independently.
dubious output tables, the Swan notices that
assumption the aggregate the model delivers
result is function is taken technical progress
questionable, vice seriously. But the an important way
versa. This is aggregate of increasing the
linked to the production standard of living
economic growth function is only and capital
model by Harrod- slightly less accumulation
Domar. reliable for certain disconcertingly
types of long- weak reed.
term macro
models, which is
almost as
essential as the
latter for the
short-term
economic research The critical How to He marks for an
questions question of separating explanation to this
stability driving to differences in anti-accumulation,
a comparison output per head pro-technology
between the due to line of argument
natural rate of technological and discusses
growth which change from two possibilities.
depends, in the those due to Do the higher
warranted rate of changes in the output per head
growth which availability of will influence
depends on the capital per head? more accelerated
saving and Naturally, every growth of the
investing additional bit of labor force? And
behavior of information has the rate of
household and its price. technical progress
firms may not be
independent of
 the rate of
accumulation of
capital
significance of the
economic research
questions

key assumptions

Approach/framewor
k to answer the
economic research
questions

key results

significance of the
key results

C. Write an essay

Write an essay to explaining how the three articles are connected in providing
contribution to the development of economic growth theory.

i. The essay consists of 3-5 pages, 1.5 spaces, font minimum 11.
ii. The essay should be structured as follow:

Introduction:  
the theme of the essay
objective of writing the essay
the articles used in the essay
the procedure in reviewing the article
the main conclusion of the essay

Main body:
review how the three articles are related
what are their hypotheses regarding the economic growth
what are the important assumptions to support those hypotheses
In what way the articles providing contribution to the economic growth.

conclusion: 
restate the objective of writing the essay
provide a summary of your results
 restate your main conclusion

References
Appendix
1. result table
2. turnitin check (must less than 20%)

1956
All theory depends on an assumption that is not truly real, because when the
theory has a dubious assumption the result is questionable, vice versa. This is
linked to the economic growth model by Harrod-Domar. The important result of
the Harrod Domar line of thought is that even in the long run the economic
process is at best settled on a knife-edge of equilibrium growth. Were the
magnitudes of savings ratio, the capital-output ratio, the rate of increase in the
labor force to shift from the dead core, the outcome would be either increasing
unemployment or boosted inflation. In this terms the critical question of balance
driving to a comparison between the natural rate of growth which depends in the
existing of technological changes, rising in the labor force, and explained rate of
growth which depends on saving also investments rules of HH and firms
But this major opposition of warranted and natural rates turns out, in the end, to
move from the crucial assumption that production takes place under conditions of
a fixed proportion
1957
On this day of rationally intended econometric studies and super-input-output
tables, the aggregate function is taken seriously. But the aggregate production
function is only slightly less reliable for certain types of long-term macro models,
which is almost as essential as the latter for the short-term. This paper describes
the basic method of separating variations in output per head due to technological
changes from those because of changes in the existing capital per head. The
price consists of one new time series required, the share of labor or property in
total income, which is paid out to their marginal products.
This paper describes a simple method of separating differences in output per
head due to technological change from those due to changes in the availability of
capital per head. Naturally, every additional bit of information has its price. In this
situation, the price consists of one new necessary time series, the share of labor
or property in total income, and one new assumption, that factors are returned to
their marginal products. Since the former is plausibly more acceptable than the
other data shall use, and since the latter is an assumption often executed, the
price may not be irrationally high.

Trevor 1956
In the solow model, technological changes are treated independently. Swan
notices that the model delivers technical progress an important way of increasing
the standard of living and capital accumulation disconcertingly weak reed. He
marks for an explanation to this anti-accumulation, pro-technology line of
argument and discusses two possibilities. Higher output per head will influence
more accelerated growth of the labor force, then something like Arthur Lewis’s
limitless supply of labor is already, and further capital accumulation becomes
much more strong. His second approach is that the rate of technical progress
may not be independent of the rate of accumulation of capital, or accumulation
provide growth to external economies so that the true social yield of capital is
higher than any ‘probable’ figure based on common private action.
ASUMSI
1. w would be the proportional portions of profits and wages in the net
national product (national income), as well as the proportional
contributions of capital and labor to output at the margins
2. It is also essential that r should decrease, and w increase for some
length to the right of the point at which they are unity and zero
respectively
3. If L, and K, and Y are to be contained in homogeneous yet significant
 units, we must put up a scarecrow to frighten away not only the index-
number birds but Joan Robinson herself – while greeting Joan
Robinson’s robin.
4. the economy is somehow regulated to make complete application of
the productive opportunities which the graph shows for varying
combinations of capital and labor. The physical building of the capital
stock must be continuously adaptable to hire the available labor and
capital in the relevant proportions, and in a capitalist economy, the rate
of interest and the real wage must be competent of functioning
themselves in such a way as to guarantee full employment for both
labor and capital. This is more difficult than the short-run problems of
The General Theory. But maybe it is reasonable to assume that our
Production Function already allows for a certain average percentage of
a shortfall in these respects
5. Despite the imperfections of competition and vision in the real world,
the actual incomes of labor and capital must be assumed to have
some significant connexion with the W, w, R, and r of the model
6. Not only Labour and Capital be the individual factors of production, but
their performance must provide growth neither to increase nor to
decrease RTS’ in the aggregate