22 votes
Accepted

Why are real median household incomes stagnant?

The metric of median household income is also used by others to argue the presence of income inequality: https://en.wikipedia.org/wiki/Income_inequality_in_the_United_States#Causes However, it seems ...
Giskard's user avatar
  • 29.3k
20 votes

Why do we need to "get the economy moving again"?

Both Alice and Kate have bills to pay, regardless of whether they are earning money or not. Restaurants and salons have to pay rent and maintenance on their properties whether they are in business or ...
Darrel Hoffman's user avatar
16 votes
Accepted

Solow Model: Steady State v Balanced Growth Path

This is when the attempt at accuracy creates confusion and misunderstanding. Back in the day, growth models were not incorporating technological progress, and led to a long-run equilibrium ...
Alecos Papadopoulos's user avatar
16 votes
Accepted

Transversality Condition in neoclassical growth model

The transversality condition may be more easily understood if we start from a problem with finite horizon. In the standard version, our objective is to $$ \max_{\{c_t,k_{t+1}\}_{t=0}^T} \sum_{t=0}^...
Herr K.'s user avatar
  • 15.4k
13 votes

Why do we need to "get the economy moving again"?

Trade is good because it creates efficiency. Alice has invested in her kitchen and knows the supply chain of ingredients, and due to the efficiency of her business, she can sell a meal for $50. If ...
Nuclear Hoagie's user avatar
10 votes
Accepted

What fraction of new businesses die out within a year?

The Business Dynamics Statistics (BDS) of the Census provides annual measures of business dynamics (such as job creation and destruction, establishment births and deaths, and firm startups and ...
emeryville's user avatar
  • 6,935
10 votes
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Can the stock market grow faster than GDP indefinitely?

There are trends that has allowed stock markets in advanced economies to grow faster than GDP for a long time: Branching out abroad. This gives access to faster growing markets in developing ...
Klas Lindbäck's user avatar
10 votes
Accepted

Is investment in real estate a real investment?

Purchasing new homes would count as an investment. According to Blanchard et al. Macroeconomics: a European Perspective pp 568 in glossary investment is defined: Investment (I): Purchases of new ...
1muflon1's user avatar
  • 55.6k
8 votes

Why do we need to "get the economy moving again"?

Let's consider another example. I'm an automotive manufacturing service engineer; I build and repair machines that are used to build and repair cars. I use the money I earn to buy a variety of things, ...
Tanner Swett's user avatar
7 votes

Alpha interpretation in Solow growth model

I don't quite understand what you mean by "share that goes into capital", but the common interpretation is that $\alpha$ is the share of income/output spent on capital. You can show that the ...
option_select's user avatar
7 votes
Accepted

How is the GDP growing when nothing else seems to be?

There's a bit to unpack here. Consistent wage growth seems in line with rising GDP. So does a steadily falling unemployment rate. For other economic measures, the stock market is a whole other ...
Kitsune Cavalry's user avatar
  • 6,608
7 votes
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Macroeconomics for Mathematicians

I really think a great place to start in general is Olivier Blanchard's "Macroeconomics". However, this is an economics undergraduate text and may not be optimal for a mathematician, especially given ...
BB King's user avatar
  • 6,138
7 votes

Why do we need to "get the economy moving again"?

Most people aren't Alice and Kate. GDP is a measure of the total goods and services produced within an economy. The point is measuring total production, not measuring how much money is changing hands....
reirab's user avatar
  • 430
7 votes

How can the stock market keep growing indefinitely?

As mentioned in the other answer, the amount of money does not have to correspond to the total value of all assets in the economy. However, there is some correspondence that is not mentioned in the ...
1muflon1's user avatar
  • 55.6k
7 votes
Accepted

Conditional Convergence

Let me clarify the concepts of absolute and conditional convergence: The hypothesis that poor economies tend to grow faster per capita than rich ones without conditioning on any other characteristics ...
Tony's user avatar
  • 1,262
6 votes

Who really benefits from economic growth?

I suppose that it depends on the time scale you are considering. Over the very long run the poor seem to have benefited far more than the rich from growth. See for example Robert J. Samuelson in the ...
BKay's user avatar
  • 16.3k
6 votes

Why are real median household incomes stagnant?

Three points - one which has already been raised much better by denesp: Are household sizes the same (we see the answer as no)? How about amount of earners per household? What about the amount of ...
DoubleVu's user avatar
  • 161
6 votes
Accepted

Why does immigration boost the economy? (or does it not...?)

You’re right, the migration of workers boost the economy. It’s a stylized fact. It may have political consequences, though, but it is not the part of the analysis of economics. Let’s consider $A$ the ...
Übel Yildmar's user avatar
6 votes

Can an economy grow without its population growing?

Yes, there can be economic growth without population growth. As a reminder: gross domestic product (GDP) is the total value of all of the goods and services produced within an economy over a period ...
Ubiquitous's user avatar
  • 16.9k
6 votes

Transversality Condition in neoclassical growth model

In my opinion, the best derivation is by logic. Think about it this way: If the only thing we are telling the household is to maximize its utility, optimal behaviour would then be just making infinite ...
Chris tie's user avatar
  • 870
6 votes
Accepted

How is wealth created?

First we need to discuss what wealth is. Is it just the amassment of valubles? In the 16th-18th century, rulers thought so. This notion is called mercantilism. This idea was rejected by Adam Smith in ...
Klas Lindbäck's user avatar
6 votes
Accepted

How would gross world product look like if fossil fuel is treated as capital and not as income?

There is a large literature considering the depletion of natural resources, including fossil fuels, in relation to GDP. Some writers explicitly refer to such resources as a kind of natural capital. ...
Adam Bailey's user avatar
  • 8,346
6 votes

Does everyone prosper through development projects?

A lot of this comes down to risk. A developing country usually don't have very strong "institution" and are much more prone to various kinds of crisis (think military coup, hyperinflation, terrorist ...
Art's user avatar
  • 2,784
6 votes
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Derivation of Solow Growth Model (Solow, 1956)

We have that: $$ \dot K = s K^\alpha L_0^b e^{nbt} $$ Rewriting the differential equation gives: $$ K^{-\alpha} \frac{dK}{dt} = s L_0^b e^{nbt} $$ Integrate both sides with respect to $t$ from $0$ to ...
tdm's user avatar
  • 11.4k
6 votes
Accepted

Are there common alternative models of economic growth, compared to Solow's model

I think that you should start reading the Ramsey–Cass–Koopmans model, where saving choices are made endogenous (whereas in the Solow-Swan model there were exogenous). Then, the milestone literature ...
Maximilian's user avatar
6 votes
Accepted

How to use Leibniz Rule of integration to find interest rate in Expanding Variety model

The Leibnitz rule for differentiation of an integral is a consequence of the fundamental theorem of integral calculus. A so-called integral function is defined as $$F(x) = \int_a^x f(t)dt\;\;\;\;\;\;\;...
BakerStreet's user avatar
  • 3,587
5 votes

Solow Model: Steady State v Balanced Growth Path

Following the conversation with user @denesp at the comments of my previous answer, I have to clarify the following: the usual graphical device we use related to the basic Solow growth model (see for ...
Alecos Papadopoulos's user avatar
5 votes

Larry Summers on the causes of secular stagnation

French economist Jean-Baptiste Michau has published in 2018 a relatively simple model of secular stagnation: To investigate secular stagnation, I add two features to a standard Ramsey model with ...
Dolphin 613 Motorboat's user avatar

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