Quotation of the Day…

by Don Boudreaux on November 9, 2011

in Growth, Seen and Unseen, Standard of Living, The Economy, The Future

… is from page 117 of Joel Mokyr’s deep and lovely 2002 book The Gifts of Athena [original emphasis]:

The economic history of knowledge suggests that an emphasis on aggregate output figures and their analysis in terms of productivity growth may be of limited use in understanding rapid growth over long periods.  The full economic impact of some of the most significant inventions in the past two centuries would be almost entirely missed in that way.  One reason for that has been restated by [Brad] DeLong (2000).  Income and productivity measurement cannot deal very well with the appearance of entirely new products….  Traditional measures underestimate the rate of progress and do so at a rate that grows over time.

The (superb) DeLong paper cited here by Mokyr is this one.

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{ 6 comments }

Henri Hein November 9, 2011 at 6:28 pm

Skimming through the DeLong paper, I have to ask: did you get the idea of the Sear’s catalog comparison’s from him, or did he get it from you, or is it a case of “great minds think alike?” (At least in this case).

Don Boudreaux November 9, 2011 at 6:36 pm

I’m sure that he didn’t get the idea from me, and I’m sure that I didn’t get it from him. The catalog idea had been floating around for some time. I first heard the idea from Tyler back in the mid-1990s, and it is also implied in the work of Mike Cox and Richard Alm, whose work much influenced my thinking even before the publication of their book Myths of Rich & Poor in 1999.

kyle8 November 9, 2011 at 6:55 pm

One of my favorite books on this theme is Indur Goklany’s “The Improving State of the World”. Of course his thesis is that even with traditional models we are all richer than before.

Don Boudreaux November 9, 2011 at 6:56 pm

Yep. That, too, is a superb book – although very different than Mokyr’s.

Indur M. Goklany November 9, 2011 at 10:06 pm

Thanks very much. This has been one of my favorite blogs (and now I feel vindicated!). (Confirmation bias, anyone?)

By the way, I recognize that the “traditional” models underestimate improvements in living standards, sometimes dramatically. As noted on pp. 45-46 of “The Improving State of the World” at http://books.google.com/books?id=e81YsqaUQH8C&printsec=frontcover&source=gbs_ge_summary_r&cad=0#v=onepage&q&f=false :

Note that comparing so-called real GDP per capita for any two years separated by even as much as a generation apart can lead to a very misleading picture of the magnitude of changes. This is especially true during periods of rapid technological change. The goods and services which could be purchased in the year 1200, for instance, were probably not all that different from what could be purchased in 1100 or 1300. But if we compare 2000 with 1970, for instance, we can identify several goods and services (for e.g., personal computers, cell phones, VCRs, and instant access to the Library of Congress’s electronic catalogue) which simply were not available or, if they were, it was at prices that exceeded the per capita GDP of the richest nations (at that time). Clearly, you can buy a lot more with $1,000 (in constant dollars) today than you could in the year 1800 or, for that matter, 1900, and the improvements in the level of economic development shown in Figure 2-11 are substantial underestimates.

Don Boudreaux November 9, 2011 at 10:13 pm

Thanks Indur! Russ and I are pleased and honored that you are a Cafe patron.

And thanks, too, for sharing the above important quotation from your book.

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