Corrections and comments to lecture notes

and other course material for

Economic Growth Spring 2008

18.02.2008    Lecture note 4, p. 12, line 10 and 15: log(½) should be 0.69, not 0.70.

18.02.2008    Correction list 1

27.02.2008    Today, when trying to provide the economic intuition behind the result in Problem I.12, g), I made a mistake, confusing w with w-tilde. The truth is that the slower technology growth implies lower real interest rate in the long run, but also lower real wages in the long run (because of the lower T) in spite of higher future w-tilde. Thus, the effect on human wealth at time t0 is ambiguous (lower future wages, but also lower discount rate), and so is then the effect on c at time t0. More generally, B & S do not write much about the role of substitution, income and wealth effects in the Ramsey model. You can find an account in Example 1 on p. 188-190 in Groth, Chapter 4.

13.03.2008    Comment on question b) in Problem 1 of the Midterm Paper problem set: The question is only meant as a calculation exercise. The calculated result does not in any way resemble the economic history of India. In fact, in A. Maddison, The World Economy: Historical Statistics, OECD Development Centre Studies, 2003, Table 5c, there are estimates of real GDP per capita in India back to 1884. This data indicates a very low average annual growth rate between 1900 and 1950, namely 0.000657, which is far below the average annual growth rate between 1950 and 1990.

27.03.2008    Midterm Paper Problem 2, e), line 2: "with elasticity of marginal utility" should be "with (absolute) elasticity of marginal utility".

23.04.2008    In connection with today's Problem V.2, c), I made an unforgivable mistake. I confused human capital (a rival good) with technical knowledge (a non-rival good). If phi < 1 in this model, there will be no sustainable per capita growth even when n > 0 (it is like in the Solow or Ramsey model, x > 0 is needed for sustained per capita growth). The formula I sketched on the white-board, gy = n/(1-phi), is only relevant if h is a non-rival good. Since h isn't, there is not even a scale effect on levels, and therefore the formula is wrong and in fact there can only be a steady state with gy = 0.

25.05.2008    Correction list 2