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  • Print publication year: 2016
  • Online publication date: May 2016

2.2 - Setting the Scene

from 2 - Economic Growth Literacy


Though the land were allotted to all men in equal amounts, only the strong would be able to keep their share. Though goods were allotted to all men in equal amounts, only the clever would be able to preserve their share. The clever can make profits ten times their outlay, but the stupid cannot even retain their capital. If the sovereign cannot regulate (the making of profits), the people's living standards will vary over a range in which one has a hundred times as much as the other.

– Guanzi

Economic growth literacy begins with the amazing fact that, when considered on a human history time scale, economic growth is brand new. Many of us take this knowledge for granted, but most students have never explicitly been made aware of this fact or considered its implications.

We manage to explain that economic growth is measured by the percentage change in real GDP per person but often fail to highlight how different the last few hundred years have been from everything that went on before. The rise of the market system and its ability to produce sustained increases in real GDP per person over long periods of time is a critical difference in kind and degree that must be brought front and center.

Depending on how you unveil it, you might get a gasp from Figure 2.2.1. This hockey stick graph is a great way to open any presentation on economic growth. It captures attention and provides a memorable image that reinforces the stunning discontinuity in output per person. It allows the very first message, something different happened suddenly and output per person exploded, to be the most important thing you communicate. Everything else is commentary, mopping up operations revolving around this most critical fact about the historical record.

Students are completely blind to the fact that, on a time scale of millennia, the market system has been in use only for several hundred years. Note that neither money nor trade (including bazaars and other marketplaces) is sufficient for a market system. Cuba has not one but two simultaneously circulating currencies and many stores with people paying with cash, yet everyone would agree that it does not have a market system.

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Arndt, H. 1978. The Rise and Fall of Economic Growth: A Study in Contemporary Thought. Longman Cheshire.
Baulch, B. 2011. Why Poverty Persists: Poverty Dynamics in Asia and Africa. Edward Elgar.
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