Editing Economic growth (section)

===Productivity===
{{main|Productivity-improving technologies}}
Increases in labor [[productivity]] (the ratio of the value of output to labor input) have historically been the most important source of real per capita economic growth.{{sfn|Bjork|1999|p={{pn|date=July 2022}}}}<ref>{{Cite web |last1=Roubini |first1=Nouriel| last2=Backus |first2=David |work=Lectures in Macroeconomics |year=1998 |title=Productivity and Growth |url=http://pages.stern.nyu.edu/~nroubini/NOTES/CHAP4.HTM#topic2}}</ref><ref>{{Cite web
 |last1        = Wang
 |first1       = Ping
 |title        = Growth Accounting
 |year         = 2014
 |page         = 2
 |url          = http://pingwang.wustl.edu/Econ472/Growth%20Development-V.pdf
 |url-status      = dead
 |archive-url   = https://web.archive.org/web/20140715173535/http://pingwang.wustl.edu/Econ472/Growth%20Development-V.pdf
 |archive-date  = 2014-07-15
}}</ref><ref>{{ Cite web
 | last1 = Corry
 | first1 =Dan
| last2 = Valero
 | first2=Anna
| last3 = Van Reenen
 | first3 =John
 | title = UK Economic Performance Since 1997
 | date = Nov 2011
 | url = http://cep.lse.ac.uk/conference_papers/15b_11_2011/CEP_Report_UK_Business_15112011.pdf
 | quote = The UK‟s high GDP per capita growth was driven by strong growth in productivity (GDP per hour), which was second only to the US. 
}}</ref><ref name="Kendrick_1961"/> In a famous estimate, MIT Professor [[Robert Solow]] concluded that technological progress has accounted for 80 percent of the long-term rise in U.S. per capita income, with increased investment in capital explaining only the remaining 20 percent.<ref>{{ Cite journal
 | last = Krugman
 | first =Paul
 | title = The Myth of Asia's Miracle
 | year = 1994
|journal=Foreign Affairs
|volume=73
|issue=6
|pages=62–78
| url = https://www.foreignaffairs.com/articles/asia/1994-11-01/myth-asias-miracle
 | doi=10.2307/20046929
| jstor =20046929
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Increases in productivity lower the real cost of goods. Over the 20th century, the real price of many goods fell by over 90%.<ref>{{cite book |title=Inside the Black Box: Technology and Economics |last=Rosenberg |first=Nathan |year=1982 |publisher=Cambridge University Press |location=Cambridge, New York |isbn=978-0-521-27367-1 |page=[https://archive.org/details/insideblackboxte00rose/page/258 258] |url=https://archive.org/details/insideblackboxte00rose/page/258 }}</ref>

Economic growth has traditionally been attributed to the accumulation of human and physical capital and the increase in productivity and creation of new goods arising from technological innovation.<ref name="Lucas1988">{{cite journal |last=Lucas |first=R. E. |year=1988 |title=On the Mechanics of Economic Development |journal=[[Journal of Monetary Economics]] |volume=22 |issue=1 |pages=3–42 |doi=10.1016/0304-3932(88)90168-7 |s2cid=154875771 }}</ref> Further [[division of labour]] (specialization) is also fundamental to rising productivity.<ref>{{cite book|title= Capitalism: A complete understanding of the nature and value of human economic life|last=Reisman|first= George|year= 1998|isbn= 0-915463-73-3|publisher =Jameson Books }}</ref>

Before [[industrialization]] technological progress resulted in an increase in the population, which was kept in check by food supply and other resources, which acted to limit per capita income, a condition known as the [[Malthusian trap]].<ref name="Galor (2005)">{{cite book |last=Galor |first=Oded |year=2005 |chapter=From Stagnation to Growth: Unified Growth Theory |title=Handbook of Economic Growth |volume=1 |pages=171–293 |publisher=Elsevier |chapter-url=https://ideas.repec.org/h/eee/grochp/1-04.html}}</ref>{{sfn|Clark|2007|loc=Part I: The Malthusian Trap|p={{pn|date=July 2022}}}} The rapid economic growth that occurred during the [[Industrial Revolution]] was remarkable because it was in excess of population growth, providing an escape from the Malthusian trap.{{sfn|Clark|2007|loc=Part 2: The Industrial Revolution|p={{pn|date=July 2022}}}} Countries that industrialized eventually saw their population growth slow down, a phenomenon known as the [[demographic transition]].

Increases in productivity are the major factor responsible for per capita economic growth—this has been especially evident since the mid-19th century. Most of the economic growth in the 20th century was due to increased output per unit of labor, materials, energy, and land (less input per widget). The balance of the growth in output has come from using more inputs. Both of these changes increase output. The increased output included more of the same goods produced previously and new goods and services.<ref name="nber.org">Kendrick, J. W. 1961 "[https://www.nber.org/books/kend61-1 Productivity trends in the United States] {{Webarchive|url=https://web.archive.org/web/20190304154526/https://www.nber.org/books/kend61-1 |date=2019-03-04  }}", Princeton University Press</ref>

During the [[Industrial Revolution]], [[mechanization]] began to replace hand methods in manufacturing, and new processes streamlined production of chemicals, iron, steel, and other products.<ref name="Landes1969">
{{cite book
|title=The Unbound Prometheus: Technological Change and Industrial Development in Western Europe from 1750 to the Present
 |last=Landes
 |first= David. S.
|author-link=David Landes
|year= 1969|publisher =Press Syndicate of the University of Cambridge
|location= Cambridge, New York
|isbn= 978-0-521-09418-4
}}
</ref> [[Machine tool]]s made the economical production of metal parts possible, so that parts could be interchangeable.<ref name="Houndshell_1984">{{Hounshell1984}}</ref> (See: [[Interchangeable parts]].)

During the [[Second Industrial Revolution]], a major factor of [[productivity]] growth was the substitution of inanimate power for human and animal labor. Also there was a great increase in power as steam-powered [[electricity generation]] and internal combustion supplanted limited wind and [[water power]].<ref name="Landes1969"/> Since that replacement, the great expansion of total power was driven by continuous improvements in [[energy conversion efficiency]].<ref name="Ayres-Warr2004">{{Cite journal
 |last1        = Ayres
 |last2        = Warr
 |first1       = Robert U.
 |first2       = Benjamin
 |title        = Accounting for Growth: The Role of Physical Work
 |date         = June 2005
 |url          = https://www.academia.edu/5771930
 |access-date  = 2022-08-09
 |journal=Structural Change and Economic Dynamics |volume=16 |issue=2 |pages=181–209 |doi=10.1016/j.strueco.2003.10.003 |citeseerx=10.1.1.1085.9040
}}</ref> Other major [[Productivity improving technologies (historical)|historical sources of productivity]] were [[automation]], transportation infrastructures (canals, railroads, and highways),<ref>{{Cite book
| last1 = Grubler
| first1 = Arnulf
| title = The Rise and Fall of Infrastructures
| year = 1990
| url = http://www.iiasa.ac.at/Admin/PUB/Documents/XB-90-704.pdf
| access-date = 2011-02-01 
| archive-date = 2012-03-01 
| archive-url = https://web.archive.org/web/20120301221205/http://www.iiasa.ac.at/Admin/PUB/Documents/XB-90-704.pdf
| url-status = dead
}}</ref><ref>
{{cite book
|title=The Transportation Revolution, 1815–1860
 |last=Taylor
 |first= George Rogers
|isbn= 978-0873321013|year=1951
 |publisher=Rinehart
 }}
</ref> new materials (steel) and power, which includes steam and internal combustion engines and [[electrification|electricity]]. Other [[productivity]] improvements included [[mechanized agriculture]] and scientific agriculture including chemical [[fertilizer]]s and livestock and poultry management, and the [[Green Revolution]]. [[Interchangeable parts]] made with [[machine tool]]s powered by [[electric motor]]s evolved into [[mass production]], which is universally used today.<ref name="Houndshell_1984" />

[[File:Cost of chicken in time worked.jpg|thumb|upright=1.4|right|Productivity lowered the cost of most items in terms of work time required to purchase. Real [[food prices]] fell due to improvements in transportation and trade, [[mechanized agriculture]], [[fertilizer]]s, scientific farming and the [[Green Revolution]].]]

Great sources of productivity improvement in the late 19th century were railroads, steam ships, horse-pulled [[reaper]]s and [[combine harvester]]s, and [[steam engine|steam]]-powered factories.<ref name="Wells_1890">{{cite book
|title=Recent Economic Changes and Their Effect on Production and Distribution of Wealth and Well-Being of Society
|last=Wells
 |first=David A.
|year=1890 |publisher= D. Appleton and Co.|location= New York|isbn= 978-0543724748 |url= https://archive.org/details/recenteconomicc01wellgoog }}</ref><ref>
{{cite book |title      = A New Economic View of American History
 |last1      = Atack
 |first1     = Jeremy
 |last2      = Passell
 |first2     = Peter
 |year       = 1994
 |publisher  = W.W. Norton and Co.
 |location   = New York
 |isbn       = 978-0-393-96315-1
 |url        = https://archive.org/details/neweconomicviewo00atac
}}
</ref> The invention of processes for making cheap [[steel]] were important for many forms of [[mechanization]] and transportation. By the late 19th century both prices and weekly work hours fell because less labor, materials, and energy were required to produce and transport goods. However, real wages rose, allowing workers to improve their diet, buy consumer goods and afford better housing.<ref name="Wells_1890"/>

[[Mass production]] of the 1920s created [[overproduction]], which was arguably one of several [[causes of the Great Depression]] of the 1930s.<ref>{{cite book |title=Mass Production, the Stock Market Crash and the Great Depression |last=Beaudreau |first=Bernard C. |year=1996 |publisher=Authors Choice Press|location=New York, Lincoln, Shanghi }}</ref> Following the [[Great Depression]], economic growth resumed, aided in part by increased demand for existing goods and services, such as automobiles, telephones, radios, electricity and household appliances. New goods and services included television, air conditioning and commercial aviation (after 1950), creating enough new demand to stabilize the work week.<ref>{{Cite journal| last1 = Moore
| first1 = Stephen
| last2 = Simon
| first2 = Julian
| title = The Greatest Century That Ever Was: 25 Miraculous Trends of the last 100 Years |publisher = The Cato Institute |journal =Policy Analysis |issue=364
| date = December 15, 1999
| url = http://www.cato.org/pubs/pas/pa364.pdf
}}[[Diffusion curve]]s for various innovations start at Fig. 14</ref> The building of highway infrastructures also contributed to post-World War II growth, as did capital investments in manufacturing and chemical industries.<ref>
{{cite book
|title=A Great Leap Forward: 1930s Depression and U.S. Economic Growth
 |last1=Field
 |first1= Alexander J.
|year= 2011 |publisher =Yale University Press
|location= New Haven, London
|isbn=978-0-300-15109-1 
}}
</ref> The post-World War II economy also benefited from the discovery of vast amounts of oil around the world, particularly in the [[Middle East]]. By [[John Whitefield Kendrick|John W. Kendrick's]] estimate, three-quarters of increase in U.S. per capita GDP from 1889 to 1957 was due to increased productivity.<ref name="Kendrick_1961">{{cite book |title=Productivity Trends in the United States |last=Kendrick |first=John W. |year=1961 |publisher= Princeton University Press for NBER |page=3 |url=https://www.nber.org/chapters/c2236.pdf}}</ref>

Economic growth in the [[United States]] slowed down after 1973.<ref>[https://research.stlouisfed.org/fred2/series/USARGDPC St. Louis Federal Reserve] {{Webarchive|url=https://web.archive.org/web/20150413023638/https://research.stlouisfed.org/fred2/series/USARGDPC |date=2015-04-13  }} Real GDP per capita in the U.S. rose from $17,747 in 1960 to $26,281 in 1973 for a growth rate of 3.07%/yr. Calculation: (26,281/17,747)^(1/13). From 1973 to 2007 the growth rate was 1.089%. Calculation: (49,571/26,281)^(1/34) From 2000 to 2011 average annual growth was 0.64%.</ref> In contrast, growth in [[Asia]] has been strong since then, starting with [[Japan]] and spreading to [[Four Asian Tigers]], [[China]], [[Southeast Asia]], the [[Indian subcontinent]] and [[Asia Pacific]].<ref name="MarketWatch 2019">{{cite web | title=Semiconductor Foundry Market: 2019 Global Industry Trends, Growth, Share, Size and 2021 Forecast Research Report | website=MarketWatch | date=2019-11-28 | url=https://www.marketwatch.com/press-release/semiconductor-foundry-market-2019-global-industry-trends-growth-share-size-and-2021-forecast-research-report-2019-11-28 | access-date=2019-12-20 | archive-date=2019-12-20  | archive-url=https://web.archive.org/web/20191220172649/https://www.marketwatch.com/press-release/semiconductor-foundry-market-2019-global-industry-trends-growth-share-size-and-2021-forecast-research-report-2019-11-28 | url-status=dead }}</ref> In 1957 [[South Korea]] had a lower per capita [[GDP]] than [[Ghana]],<ref>[https://www.independent.co.uk/news/education/education-news/leading-article-africa-has-to-spend-carefully-407666.html Leading article: Africa has to spend carefully] {{Webarchive|url=https://web.archive.org/web/20120124072325/https://www.independent.co.uk/news/education/education-news/leading-article-africa-has-to-spend-carefully-407666.html |date=2012-01-24  }}. The Independent. July 13, 2006.</ref> and by 2008 it was 17 times as high as Ghana's.<ref>Data refer to the year 2008. $26,341 GDP for Korea, $1513 for Ghana. ''World Economic Outlook Database – October 2008''. [[International Monetary Fund]].</ref> The Japanese economic growth has slackened considerably since the late 1980s.

Productivity in the United States grew at an increasing rate throughout the 19th century and was most rapid in the early to middle decades of the 20th century.<ref>{{Cite journal
 | last1 = Kendrick
 | first1 = John
 | title = U.S. Productivity Performance in Perspective, Business Economics, October 1, 1991
 | journal = Business Economics
 | volume = 26
 | issue = 4
 | pages = 7–11
 | year =1991
 | jstor = 23485828
 }}</ref><ref>{{Cite journal
 | last = Field
 | first = Alezander J.
 | title = U.S. Economic Growth in the Gilded Age
 | journal = Journal of Macroeconomics
 | volume = 31
 | year = 2007
 | pages = 173–190
 | doi = 10.1016/j.jmacro.2007.08.008
 | s2cid = 154848228
 | url = http://www.scu.edu/business/economics/research/upload/field_macroecon_2009.pdf
 | access-date = 2014-07-12 
 | archive-date = 2016-01-08 
 | archive-url = https://web.archive.org/web/20160108181103/http://www.scu.edu/business/economics/research/upload/field_macroecon_2009.pdf
 | url-status = dead
 }}</ref><ref>{{Cite journal|title=Technological Change and Economic Growth the Interwar Years and the 1990s|last=Field|first=Alexander|journal=The Journal of Economic History|year=2004|volume=66|issue=1 |url=https://www.cambridge.org/core/journals/journal-of-economic-history/article/technological-change-and-us-productivity-growth-in-the-interwar-years/99E3F7A9C33CA30278F06C1442A913E3|pages=203–236 |doi=10.1017/S0022050706000088 |doi-broken-date=1 November 2024 |ssrn=1105634 |s2cid=154757050}}</ref><ref name="Gordon2000">{{Cite journal
 | last1 = Gordon
 | first1 = Robert J.
 | title = Interpreting the 'One Big Wave' in U.S. Long Term Productivity Growth
 | journal = NBER Working Paper No. 7752 
 | date = June 2000
 | doi = 10.3386/w7752
| doi-access = free
 }}</ref><ref>{{cite book
 |title        = Two Centuries of American Macroeconomic Growth From Exploitation of Resource Abundance to Knowledge-Driven Development
 |last1        = Abramovitz
 |first1       = Moses
 |last2        = David
 |first2       = Paul A.
 |year         = 2000
 |publisher    = Stanford University
 |pages        = 24–5 (pdf pp. 28–9)
 |url          = http://www-siepr.stanford.edu/papers/pdf/01-05.pdf
 |access-date  = 2014-07-13 
 |archive-date = 2020-07-31 
 |archive-url  = https://web.archive.org/web/20200731023437/http://www-siepr.stanford.edu/papers/pdf/01-05.pdf
 |url-status   = dead
}}</ref> U.S. productivity growth spiked towards the end of the century in 1996–2004, due to an acceleration in the rate of technological innovation known as [[Moore's law]].<ref name="Gordon 2013">{{cite journal |title=U.S. Productivity Growth: The Slowdown Has Returned After a Temporary Revival |journal=International Productivity Monitor, Centre for the Study of Living Standards |date=Spring 2013 |last=Gordon |first=Robert J. |volume=25 |pages=13–9 |url=http://faculty-web.at.northwestern.edu/economics/Gordon/SAN-to-NBER%20Baily-Sharpe%20as%20published_130327.pdf |access-date=2014-07-19 |quote=The U.S. economy achieved a growth rate of labour productivity of 2.48 per cent per year for 81 years, followed by 24 years of 1.32 per cent, then a temporary recovery back to 2.48 per cent per cent, and a final slowdown to 1.35 per cent. The similarity of the growth rates in 1891–1972 with 1996–2004, and of 1972–96 with 1996–2011 is quite remarkable. |url-status=dead |archive-url=https://web.archive.org/web/20140809065612/http://faculty-web.at.northwestern.edu/economics/Gordon/SAN-to-NBER%20Baily-Sharpe%20as%20published_130327.pdf |archive-date=2014-08-09 }}</ref><ref name="Jorgenson&Ho_2014"><!-- Jorgenson, Ho, and Samuels (2014) Long-term Estimates of U.S. Productivity and Growth -->{{cite Q|Q111455533}}</ref><ref>{{cite journal|doi=10.1257/jep.22.1.3 |title=A Retrospective Look at the U.S. Productivity Growth Resurgence |journal=Journal of Economic Perspectives |volume=22 |issue=1 |pages=3–24 |author1=Dale W. Jorgenson |author2=Mun S. Ho |author3=Kevin J. Stiroh |year=2008 |doi-access=free }}</ref><ref>{{cite web|url=http://bea.gov/papers/pdf/ip-nipa.pdf |title=Information Processing Equipment and Software in the National Accounts |publisher=U.S. Department of Commerce Bureau of Economic Analysis |author1=Bruce T. Grimm |author2=Brent R. Moulton |author3=David B. Wasshausen |year=2002 |access-date=2014-05-15}}</ref> After 2004 U.S. productivity growth returned to the low levels of 1972–96.<ref name="Gordon 2013"/>