Week 12, Session 1: Economic Growth and

Productivity (Ch. 12)

Theories of Economic Growth &

Debate over Economic Growth Policies
 Different approaches to Macroeconomics

 If you explore topics in Macroeconomics online, you can

sometimes find a bewildering variety of different
approaches, with baffling disagreements.
 Mainstream approaches: New Classical Economics, New
Keynesian Economics
 Other approaches: Austrian economics, Post Keynesian
economics, Modern Monetary Theory (MMT), American
Institutionalist Economics, Radical Political Economy,
NeoRicardian Economics, General Systems Economics
 The current “Macroeconomic Consensus”
 Class Discussion One

 Form groups of three to four.

 If most economists agree with the main elements of mainstream
macroeconomics, and if its easier to work in an approach that is
pursued by a large number of academics, why would some
macroeconomists decide to pursue different approaches?
 Report your conclusions to class.
 Economic Growth and Public Policy:
Mainstream Policy Approaches & Critiques
 Saving & Investment (& Radical Political Economy Critique)
 Diminishing Returns and Catch Up Effects (& American Institutionalist
Critique)
 Investment from Abroad (& Post Keynesian Critique)
 Education (& Neo-Ricardian Critique)
 Health & Nutrition (& Radical Political Economy Critique)
 Property Rights and Political Stability (& American Institutionalist Critique)
 Free Trade (& Post Keynesian Critique)
 Research and Development (& American Institutionalist Critique)
 Is Population Growth Good or Bad
for Real GDP Growth Per Capita?
 Kremer’s argument and Population Threshold vs
Population Growth
 Stretching Natural Resources & Thomas Malthus (1766-1824)
 Diluting Capital Stock
 Pragmatic considerations:
 Rapid population growth, impact on GDP/capita & demographic
challenge of young dependents
 Moderate population growth & benefits of a younger workforce
 No or declining population and demographic challenge of aged
dependents
 Not just economic models, also scientific issues of sustainability
 Class Discussion Two

 Form your permanent semester working groups of three to four

students, and discuss the following question.
 Which ONE of the Economic growth policies would you recommend
as being most important to a small underdeveloped economy such as
one of the smaller nations of Africa? Why?
 Report your conclusions to class.
 Class Discussion Three

 Form into your class group.

 For each of the four determinants of productivity, give a real world
example of the way that an increase in that determinant can lead to an
increase in output for the average hour of work in producing that good
or service.
 Report your conclusions to class.