Economists understand little about the causes of growth
OVER the past decade economists have been intensely scrutinised for their intellectual failings in the run-up to the 2007-08 financial crisis. Yet had the recession that followed been more severe—wiping a quarter off the GDP of every advanced economy, say—those countries would still have ended up four times as rich per person, in purchasing-power terms, as developing countries are now, and more than ten times as rich as sub-Saharan ones. Robert Lucas, a Nobel prizewinning economist, once wrote that after you have started to think about the gap between poor and rich countries it is hard to think about anything else. Economists understand even less about economic growth than about business cycles. But the profession has done too little to address this failure or to understand its implications.
Economists have precious few hard facts about growth. They know that sustained growth in GDP per person only started in the 18th century. They know that countries can become rich only by growing steadily over...Continue reading
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