ECON213 Lecture Notes - Lecture 6: Process Engineering, Yttrium, Mit Press
19 Jun 2016
School
Department
Course
Professor
Document Summary
Economic growth by paul m. romer (from the concise encyclopedia of economics, david r. henderson, ed. Liberty fund: reprinted by permission of the copyright holder. ) In the modern version of an old legend, an investment banker asks to be paid by placing one penny on the first square of a chess board, two pennies on the second square, four on the third, etc. If the banker had asked that only the white squares be used, the initial penny would have doubled in value thirty-one times, leaving . 5 million on the last square. Using both the black and the white squares would have made the penny grow to ,000,000 billion. People are reasonably good at forming estimates based on addition, but for operations such as compounding that depend on repeated multiplication, we systematically underestimate how quickly things grow. As a result, we often lose sight of how important the average rate of growth is for an economy.
