Economics 375

1. Economics 375 Economic Growth Exam Fall 2001 Professor Kenneth Ng California State University, Northridge

2. Problem 1 • Use the graph entitled the “Progress of the Human Race” on the next page where appropriate. • According to Cippolla what are the three stages of human history? What distinguishes these three stages? • Hunter Gather, Agricultural, Industrial. They are distinguished by the sources of energy used. In the HG stage, human muscle power was paramount. In the Agricultural stage, animals, the Ox and horse, were domesticated. In the Industrial stage, inanimate converters were utilized. • On the graph indicate the approximate dates during which the human race was in each stage. • Hunter Gatherer-pre-10,000BC, Agricultural-to 1750, Industrial 1750 to present. • On the graph, draw lines representing the energy available to the average person. Label the corresponding values on the vertical axis. • Hunter Gatherer-4,000 cal. Agricultural-10,000. • On the graph draw lines representing the life expectancy at birth of the average person. Label the corresponding values on the vertical axis. • Hunter Gatherer-20 yrs. Agricultural-40 yrs., Industrial-70+ years • On the graph, draw lines representing human population. Label the corresponding values on the vertical axis. • On the graph, draw lines representing per capita income during each period. Label the corresponding values on the vertical axis. • Where does the U.S. fit into Cippolla version of human history? Explain and indicate on your graph. • Can Cippolla explain the rise of culture, religion, and art? Explain. • Consider the article by Thomas Sowell. Comment, criticize, and discuss in light of what you have learned in this class and your answer to 1-8 above.

7. Question 1 (continued) • Where does the U.S. fit into Cippolla version of human history? Explain and indicate on your graph. • The U.S. only appeared at the tail end of human history. Mankind’s condition had been improving steadily since the beginning of the Agricultural Period. • Can Cippolla explain the rise of culture, religion, and art? Explain. • In the Hunter Gatherer stage, providing the basics, food, clothing, and shelter, required all of a person’s time and energy. There was nothing left for anything else. Only during the Agricultural Period was there a social surplus which could be devoted to anything besides mere subsistence. • Consider the article by Thomas Sowell. Comment, criticize, and discuss in light of what you have learned in this class and your answer to 1-8 above. • Sowell is correct. Population growth has never been a precluder of economic growth. In fact, increases in population density have always accompanied an increase in the standard of living.

8. Problem 2 • Suppose you had census returns for 1800 and 1860. The returns provided the following information. From local newspapers you know that labor was paid $50 per year in 1800 and $100 per year in 1860 and that farmland could be rented for $25 per acre in 1800 and $75 per acre in 1860. • How much did GNP increase from 1800 to 1860? Show your calculations. • Construct an index of the amount of inputs being used in 1800 and 1860. How much did the supply of inputs increase from 1800 to 1860? Show your calculations. • How much of the increase in output from 1840 to 1860 is due to increased inputs and how much to improvements in productivity? Show your calculations.

9. Problem 2 GNP increased from $12,500 to $95,000-a 660% increase.

10. Problem 3 • Consider the following formula was used by Paul David. • What does the variable V stand for? Why was Paul David interested in computing V? What historical questions was he trying to address? Why are these questions germane? • What assumption did Paul David have to make to compute V? Discuss. • After computing V, what was Paul David able to show? What relevance does this have for the present? • Read the following two articles. Comment and analyze in light of Paul David’s research.

11. What does the variable V stand for? Why was Paul David interested in computing V? What historical questions was he trying to address? Why are these questions germane? • V stands for per capita income. • David was interested in computing V because he was interested in the economic growth and it’s causes before 1840. • This is a crucial period to understand because it is the period when the U.S. increased per capita income from $500 to $1000 per capita. • How the U.S. accomplished this is germane because a larger proportion of the current world population have per capita incomes below or around $500. • Understanding the causes of per capita income growth in this range is also important if the U.S. uses tax money to assist poor countries to develop. How exactly should this money be spent for maximum effect?

12. What assumption did Paul David have to make to compute V? Discuss. After computing V, what was Paul David able to show? What relevance does this have for the present? • David assumed that the ratio of per worker output in the agricultural and non-agricultural sectors (Z) remained constant from 1800 to 1860. • This was done because the census does not contain sufficient information to compute non-agricultural output (Pn) before 1840. This assumption is unlikely to cause a large error in computing V because only a small portion of the population was engaged in non-agriculture in 1800. • David was able to show: • No take-off. • Productivity improvements in agriculture were responsible for most of the income growth during the period. Sectoral shifts and demographic changes were minor contributors. • David’s results provide insight into how poor countries today could increase per capita output.

13. The Curve.

14. Questions about exam? ONE WEEK MANDATORY COOLING OFF PERIOD. No questions answered about exam until next Tuesday.