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Question

What are the great "constants" of economics?

Background

In his Structural Slumps (Chapter 3, p.20), Phelps refers to the great "constants" of economics. He explains that the natural unemployment rate has been treated as one of these great constants. So, what else is a great constant in economics? The natural interest rate? The natural level of output? And, so on? References would be greatly appreciated!

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One of the original statements of this kind were Kaldor's Stylized Facts on growth, Kaldor's Facts, the most important of which are that:

  • Labor and capital receive approximately constant share of output (about 0.6 for labor and 0.4 for capital)

  • The rate of growth of output per worker is roughly constant (about 2%)

  • The rate of return on investment is roughly constant (if you look at long enough intervals, i.e. about 3%...)

More recently, the famous growth theorist Paul Romer came up with a renewed set of facts New Kaldor Facts paper. The most salient ones are that:

  • Market is constantly increasing its dominance as a way to organize economic activity.

  • The rate of economic growth has been accelerating for millenia.

  • Measured inputs explain only a small part of income differences across countries.

  • Human capital is constantly being accumulated, and yet, the human capital premia has not changed over time.

Also, a newly minted constant, as theorized by Minsky:

  • The nature of financial markets and risk taking implies periodic financial crisis.
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  • $\begingroup$ That makes sense, thank you for letting me know. $\endgroup$ – Fix.B. May 5 '16 at 15:51

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