Economic Growth: Malthusian vs Growth Regime

• Long-run economic growth faces limitations due to population growth and resource constraints, causing stagnant living standards as output gains are absorbed by population increases.
• The Malthusian Regime is characterized by low productivity, subsistence living, and high mortality rates.
• The Growth Regime is characterized by sustained technological advancements, capital accumulation, and improved living standards.
• The Growth Regime emerged around the Industrial Revolution (18th-19th centuries) and was driven by innovations, institutional reforms, and improved human capital.
• A key determinant of long-run economic growth is technological advancements.
• Strong institutions foster innovation, investment, and productivity.

Rule of 70

• The formula for the Rule of 70 is: Time to double = 70 / Growth rate (%).
• Example: If GDP grows at 5%, it takes 70/5 = 14 years to double.

Limitations of GDP

• GDP does not account for income distribution.
• GDP excludes non-market transactions.
• GDP ignores environmental and social factors.

Institutions

• Formal institutions are laws, regulations, and constitutions.
• Informal institutions are social norms, traditions, and unwritten rules.
• Good institutions protect property rights.
• Good institutions enforce contracts.
• Good institutions create incentives for innovation and investment.

Revolutionary War

• Causes of the Revolutionary War include taxation without representation, economic restrictions, and British control.
• The Revolutionary War was financed through war bonds, loans from France, and printing money.

Mercantilism

• Mercantilism is an economic theory emphasizing state control, trade surpluses, and accumulation of wealth.
• Trade restrictions and British economic policies fueled colonial dissent, thus influencing the Revolutionary War

U.S. Constitution and Institutions

• The U.S. Constitution established a federal system with separation of powers.
• The U.S. Constitution allowed taxation and regulation of commerce.
• The U.S. Constitution did not initially outlaw slavery.

Finance & Banking

• The National Banking Act of 1863/64 created national banks.
• The National Banking Act of 1863/64 established a national currency, and stabilized the financial system.
• The Federal Reserve was created in 1913.
• The functions of the Federal Reserve are to regulate banks, manage monetary policy, and control inflation.
• The history of money & modern banking includes a shift from state to national banks.
• Central banking developed to ensure stability.

Gresham’s Law

• Gresham’s Law states that "Bad money drives out good money" when both are used in circulation.

Population

• Over time, population shifted from rural to urban areas.
• Westward expansion and industrialization drove migration.
• Sources of population growth are natural increase and immigration.
• Immigration played a major role in U.S. population growth.

Indentured Servitude

• Indentured servitude was a temporary labor system where workers exchanged labor for passage to America.

Slavery

• Pressures for abolishing slavery include moral, economic, and political factors.
• Slavery persisted in the South due to agricultural dependence and economic profitability.
• Reconstruction outcomes included short-run political and social advancements.
• Reconstruction outcomes included long-run setbacks such as segregation and Jim Crow laws.

Transportation & Communication

• Elastic demand means demand changes significantly with price (luxury goods).
• Inelastic demand means demand remains stable despite price changes (necessities).
• For elastic demand, a price decrease leads to a revenue increase.
• For inelastic demand, a price decrease leads to a revenue decrease.
• First-degree price discrimination involves charging each consumer a different price. (Examples include auctions and negotiations.)
• Third-degree price discrimination involves charging different prices for different groups. (Example includes student/senior discounts.)
• The post office facilitated communication and commerce which supported business growth and market expansion in economic development.
• The growth of autos and roads resulted from industrialization (Ford’s assembly line).
• The growth of autos and roads led to suburbanization, infrastructure development, and economic expansion.