ECONOMIC GROWTH THE FUTURE

The American standard of living today is the world’s highest. We have achieved this position of eminence in only two short centuries. Will our economy continue to grow at the rate of the past two centuries? Will other nations catch us and overtake us, or will we widen the gap? What will be the future of the economic race between the U.S. and the U.S.S.R., between capitalism and communism?

Table 1-2 provides some interesting data.The first column shows, for a number of leading nations, the annual percentage increase in output per capita over the past century. The second column shows the same data, but only for the period since 1990. Will the recent higher growth rates persist with their rapid improvement in living standards? What accounts for some of the fascinating differences among the nations shown for example, the remarkable surge of Japan during the past century arid, especially, during the period since World War II?

Table 1-2 does not include the underde veloped countries which hold over two-thirds of the world’s people. India and Communist China alone contain about one out of every three human beings alive. Yet there is little evidence that the average standard of living of the Indian or Chinese peasant—that is, Indian or Chinese output per capita—is significantly higher now than it was a thousand years ago. The gap in living standards between the underdeveloped nations and the Western world is widening dramatically, not closing!

Is there an answer in the experience of the Western industrialized world for the poverty-stricken masses of the underdeveloped nations? What can those nations do to help themselves, or what can we do to help them to get started on the path towards self-sustaining economic growth? What are the key factors in rapid economic growth? Perhaps no questions in economics are more important than these, for it is only through growth in output per capita that the living stan-dards of the people of the world can rise over the long ruu.

A SAMPLER OF SMALLER PROBLEMS

All the preceding examples have been big problems, at the national or international level.But economies is equally concerned with “little” problems, close to home in everyday life. You work summers as a resort waitress; why is your hourly wage what it is? You are studying to be an accountant; will electronic computers replace people in many middle-management jobs, and what will they do to accountants’ salaries? Most big cities require licenses to operate taxicabs. For example, in New York City there is a fixed supply of some 25,000 such licenses, which can he bought and sold by taxi operators. Is the public better served by such a system of limited licenses than by one of open entry for anyone who will obey city-specified rules on rates and service? I\4anv cities regulate the rates parking lot operators can charge, to prohibit their “gouging” the public on special occasions such as big ball- game days; others have rent ceilings for apart- ments in low-income areas. What are the real effects of such regulations? Whom do they help and whom do they hurt? Your city has to raise more tax revenues to finance its spending on education and general services; what are the relative advantages and disadvantages of a city sales tax, a wage tax, and higher property taxes? Economic issues are everywhere in everyday life.

ECONOMICS IN A DEMOCRACY

These are the problems of economics. They, and many others like them—big and little, national and local, public and personal—are the problems of this website. Some are difficult and complex, some are simple. All are problems of the real world around us every day. To understand them, it is necessary both to understand some basic economic concepts and principles and to understand how to use those concepts and principles in analyzing different problems. In order to reach intelligent conclusions on government policy and private policy, economic analysis is the essential foundation. For without such analysis, debates may be lively, but they are likely to generate more heat than light—to be primarily an airing of hunches and emotions, rather than rational analysis of issues involved.

Throughout your life, economics will play a major role in determining what you do and how happy you are doing it. If there are depressions or inflations, you will not be able to escape them. Your income will depend largely on how effectively you participate in the economic process.Thus, from a purely selfish point of view, it will
pay you to understand how your economic system works.

But the main reason citizens in a democracy need to understand the economic system is that they are voters as well as active participants in the economy. Not long ago governments didn’t inter-fere much in economic life, but that time has
passed. Today, almost everybody agrees that the government should provide national defense, highways, education, and a score of other services not
forthcoming through the private enterprise economy; that it should regulate the supply of money; that it should protect consumers against the excesses of monopoly; that it should prohibit exploitation of child labor; that it should help
avoid depressions and inflations. Fill out the list for yourself. Many people believe the government should do many more things—provide old-age and
medical protection for the poor, support the prices of farm products, legislate minimum wages, even guarantee full employment.

This is a website on “political economy.” It isconcerned with using economic analysis to find answers to the problems above and to many more.

The goal is to understand how our economy works and how we may hope to make it work better. The political economist doesn’t sit on the sidelines. He is interested in what to do about the big and little problems we face, as well as in understanding how the economy works just for the sake of understanding it.

But if you expect to find the answers in this website to what you or the government should and should not do, you’re in for a disappointment. The job of a course in economic analysis is to give you the tools and the background for making up
your own mind on the important economic issues of the day, and to teach you how to use the tools—not to tell you what to think. Better understanding of how the system works will go a long way toward making you a more intelligent citizen. But you should recognize from the outset that even with a thorough understanding of economics, not everybody will come out with the same an-swers on the problems of public policy. This is because we have different ideas on where the nation ought to be headed. Some people, for example, think that avoiding inflation is the most important thing. Others believe that assuring everyone a reasonable minimum income should have first priority. Any respectable economist will advise the government to do different things, depending on which of these objectives is placed first. Such conflicts among the goals of different individuals and groups are an important part of the modern American democracy in action.