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Growth Theories
Growth Theories

... Robert Solow discovered that diminishing returns are well described by the one-third rule: With no change in technology, on the average, a 1 percent increase in capital per hour of labor brings a 1/3 percent increase in labor productivity (real GDP per hour of labor). For example, suppose capital pe ...
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... a massive destruction of US value and wealth; and the Great Depression of the 1930s also. Now we have suffered the first Great Recession and are in the Long Depression of the 21st century. We hold that the key to understand the sequence of booms and busts is the movement of the profit rate. 1 Indivi ...
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...  Derive AS/AD model  Understand cause & consequences of change in AS/AD • Short run vs Long run • Effects on economic growth, prices, unemployment. ...
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... lie the questions: is there indeed a new economy?; has higher business investment in new equipment coupled with technological advances mean there has been an increase in trend productivity growth thus raising prospects for continued robust econom ic growth in the future? As the Federal Reserve’ s Ch ...
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... •Access to basic services •Business climate improvement , private sector and financial sector development for inclusive growth • Global knowledge and TA for development of sector strategy and policy •Gender mainstreaming in projects ...
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... periods. It seems that very large deficits have recently been caused also by an overheating economy. In terms of financing, net inflows of direct investment covered almost entirely the external deficit until 2006. However, lately, a significant proportion of the deficit was financed by inflows of ot ...
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... Business cycles in the United States are highly synchronous with those of other economies (Figure 5.A). This partly reflects the strength of trade and financial integration between the U.S. economy and the rest of the world. The United States is prominent in virtually every global market, accounting ...
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... differs from it in that a hyperbola grows much faster in its final stage and much slower at the beginning. That is why humanity developed quite slowly over a very long period and very rapidly afterwards. Normally complex systems are elastic and restore their state once a deviation from equilibrium h ...
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... In textbook Keynesian analysis, fiscal policy works because consumption depends on income. But research on the consumption function after WWII (Dusenberry, 1949; Friedman, 1957) found that consumption is better explained by wealth. Milton Friedman developed the permanent income theory in which he ex ...
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Transformation in economics



Transformation in economics refers to a long-term change in dominant economic activity in terms of prevailing relative engagement or employment of able individuals.Human economic systems undergo a number of deviations and departures from the ""normal"" state, trend or development. Among them are Disturbance (short-term disruption, temporary disorder), Perturbation (persistent or repeated divergence, predicament, decline or crisis), Deformation (damage, regime change, loss of self-sustainability, distortion), Transformation (long-term change, restructuring, conversion, new “normal”) and Renewal (rebirth, transmutation, corso-ricorso, renaissance, new beginning).Transformation is a unidirectional and irreversible change in dominant human economic activity (economic sector). Such change is driven by slower or faster continuous improvement in sector productivity growth rate. Productivity growth itself is fueled by advances in technology, inflow of useful innovations, accumulated practical knowledge and experience, levels of education, viability of institutions, quality of decision making and organized human effort. Individual sector transformations are the outcomes of human socio-economic evolution.Human economic activity has so far undergone at least four fundamental transformations:From nomadic hunting and gathering (H/G) to localized agricultureFrom localized agriculture (A) to internationalized industryFrom international industry (I) to global servicesFrom global services (S) to public sector (including government, welfare and unemployment, GWU)This evolution naturally proceeds from securing necessary food, through producing useful things, to providing helpful services, both private and public (See H/G→A→I→S→GWU sequence in Fig. 1). Accelerating productivity growth rates speed up the transformations, from millennia, through centuries, to decades of the recent era. It is this acceleration which makes transformation relevant economic category of today, more fundamental in its impact than any recession, crisis or depression. The evolution of four forms of capital (Indicated in Fig. 1) accompanies all economic transformations.Transformation is quite different from accompanying cyclical recessions and crises, despite the similarity of manifested phenomena (unemployment, technology shifts, socio-political discontent, bankruptcies, etc.). However, the tools and interventions used to combat crisis are clearly ineffective for coping with non-cyclical transformations. The problem is whether we face a mere crisis or a fundamental transformation (globalization→relocalization).
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