Economics 2150A/B Study Guide - Quiz Guide: Victorian Era, Workforce Productivity, Market Failure

• School: Western University
• Department: Economics
• Course: Economics 2150A/B
• Professor: Colin Denniston

Document Summary

By 19th century britain was the wealthiest economy in history, citizen income greater than anyone else, 40% of world trade, 1/3 of production. What was the economy like: large imports of inputs (raw materials and food, highly reliant on foreign demand (over 50% of gdp in 1875, traditional manufacturing industries) Gdp growth from 1856-73: 2. 2% from there to 1913 dropped to 1. 8% Gdp per cap higher in 1880s than 1910. Britain declined relative to others (us, ger, fra) Gdppc overtaken by us and sweden for example. Mccloskey says no: to maintain would need double the labour force, savings rate of 42% to keep capital growth, labour productivity growth (1%) already close to us max (1. 5%) However mccloskey assumes same industrial structure as other countries (not true) Model ignores possibility of underutilised labour and capital markets. Static model ignores sustained increasing returns to scale and dynamic gains. Therefore mccloskey could be wrong, might not have reached potential!