4 ms·
It would be a change to macro models of economic growth, if accepted. The default is that TFP grows exponentially. There's also a useful comment by Marginal Rev
by dash2 5y ago
It would be a change to macro models of economic growth, if accepted. The default is that TFP grows exponentially. There's also a useful comment by Marginal Revolution here (https://marginalrevolution.com/marginalrevolution/2022/04/additive-growth.html https://marginalrevolution.com/marginalrevolution/2022/04/ad...) where he points out that TFP itself is really just a residual, and perhaps not a very well-defined concept. That is, if you regress
Y = AK^beta L^(1-beta)
with K being the amount of capital and L the amount of labour, A is just the unexplained "scaling factor" and it gets called TFP. But what TFP actually is... is a bit of a whatever-you-like.
- pishpash 5y agoWhy is TFP assumed exponential by default? What's the theory behind that? A time lag in the transfer between exponential input growth (e.g. population) and exponential output growth?
- jasoncrawford 5y agoIt's not always assumed to be exponential. It was assumed exponential by Paul Romer because long-term economic growth is pretty exponential. Much subsequent work has followed that model, but not all of it.
- marcosdumay 5y ago> long-term economic growth is pretty exponential Yeah, that graph with the largest time scale on the article strongly disagrees.
- pishpash 5y agoBut TFP is not output. Exponential output growth can come directly from exponential input growth, which would be a trivial obvervation.
- dash2 5y agoNo. The inputs are labour and capital, so that's already taken care of. One answer might be "TFP reflects technical knowledge; the more knowledge there is, the easier it is to generate new knowledge". But you'd have to get into growth macro for the details. Indeed, Romer is the person.