J. Bradford DeLong
delong@econ.berkeley.edu
http://www.j-bradford-delong.net/


Elsewhere on this website I have talked about the excellences of Greg Mankiw's Macroeconomics textbook. Here I want to put one of its deficiencies vis-a-vis DeLong's Macroeconomics textbook under the microscope.

To put it bluntly, Mankiw does a lousy job of setting out the theory and the facts of economic growth. On the facts, he spends 11 pages on "growth facts" where we spend 30. On the theory, his theoretical sections replicate the graduate-student treatment of the subject at a lower level--and so introduce concepts like "capital per effective worker" that students find confusing, and yet fail to provide students with enough in-depth instruction to actually allow them to be comfortable using the standard economic growth model to analyze economies.

Now this is not Greg Mankiw's fault: it is the fault of history. A decade ago Greg Mankiw introduced long-run growth into the intermediate macroeconomics syllabus. But because each successor book must be close enough to its predecessor to serve the same market, he could not make growth a major focus of his book. Hence he tried to do too much in too little space.

But I do not suffer from the same constraint. So I can do better. And below I outline eleven important points where I believe that the coverage in my book's growth chapters clearly dominates the coverage in Mankiw.


Can a student easily figure out the economy's steady-state growth path?

Can a student easily figure out how much changes in policy or the environment shift the steady-state growth path?

Does the student learn how rapidly economies converge to their steady-state growth paths?

Does the student learn why economic growth back before the Industrial Revolution was so different than economic growth today?

Does the student learn about economic growth and structural change?

Does the student learn about the different growth trajectories of different world regions?

Does the student learn about the overall shape of the world economy today?

Does the student learn why poor countries have trouble learning advanced technologies?

Does the student learn why poor countries have trouble achieving high savings-investment rates?

Does the student learn why poor countries are likely to have high population growth rates?

Does the student learn which countries have shifted from "relatively poor" to "relatively rich" over the past fifty years, and why?


Is it easy for a student to figure out what the economy's steady-state growth path is?

DeLong: Yes. P. 107 says "... calculating output per worker when the economy is on its steady-state growth path is a simple three step procedure. 1. Calculate the steady-state capital-output ratio k* = s/(n+g+d).... 2. Amplify the steady-state capital-output ratio k*.... Raise it to the l=a/(1-a) power.... 3. Multiply the result by the efficiency of labor..."

Mankiw: Not really. P. 107 tells us that there is a steady-state growth path. But if you don't already know how to calculate it, you will have a hard time figuring out how to do so: "...we need to reconifgure our notation. We now let k = K/(L x E) stand for capital per effective worker, and y = Y/(L x E) stand for output per effective worker. With these definitions, we can again write y = f(k). This notation is not really as new as it seems. If we hold the efficiency of labor E constant at the arbitrary vbalue of 1, as we have done implicitly up to now, then these neew definitions reduce to our old ones.... Our analysis of the economy proceeds just as it did when we examined population growth. The equation showing the evolution of k over time now changes to:

"Dk = s f(k) - (d + n + g)k.

"As before, the chagne in the capital stock Dk equals investment s f(k) minus break-even investment (d + n + g)k. Now, however, because k = K/EL, break-even investment includes three tersm: to keep k constant, dk is needed to replace depreciating capital, nk is needed to provide capital for new workers, and gk is needed to provide capital for the new "effective workers" created by technological progress. As shown in Figure 5-1, the inclusion of technological progress does not substantially atlter our analysis of the steady state. There is one level of k, denoted k*, at which capital per effective worker and output per effective worker are constant. As before, this steady state represents the long-run equilibrium of the economy..."


Is it easy for a student to figure out how much changes in economic policy or the economic environment shift the steady-state growth path?

DeLong: Yes. Pp. 111-114 say "...An increase in population growth: an example.... Depreciation and productivity growth.... An increase in the savings rate: an example..."

Mankiw: No. P. 87 and p. 100 contain diagrams only, without numerical expressions or algebraic equations.


Does the student learn how rapidly economies converge to their steady-state growth paths?

DeLong: Yes. Pp. 109-10.conclude "This economy would... close a fraction of the gap between its current state and its steady state each year equal to (1-a) x (n+g+d)... = 3.5%. This 3.5 rate of convergence would allow th eeconomy to close half of the gap to the steady state in 20 years."

Mankiw: No. There is, however, one particular numerical example of convergence to the steady state (in a model lacking population growth and lacking technological progress) on pp. 84-5.


Does the student learn why economic growth back before the Industrial Revolution was so different than economic growth today?

DeLong: Yes. Pp. 120-24 contain an extended discussion of technological change, endogenous population growth, and living standards back before the Industrial Revolution.

Mankiw: No.


Does the student learn about economic growth and structural change--that productivity growth in making high-tech and mass-produced manufactures has been much more rapid than in making other goods?

DeLong: Yes. Pp. 127-8 discuss how economic growth brings huge changes in the relative prices of different kinds of commodities and the occupational distribution of the labor force.

Mankiw: No.


Does the student learn about the different growth trajectories of different world regions since the Industrial Revolution?

DeLong: Yes. Pp. 132-138 discuss the divergence in worldwide productivity levels over the past century, the difficulty of making cross-country income comparisons, convergence within the set of OECD economies and between the OECD and East Asia, the destructive effects of Communism on economic growth behind the Iron Curtain, and the output declines in ex-Communist countries since 1989.

Mankiw: No. The book contains one case study on post-WWII recovery in West Germany and Japan (p. 86), and one case study on the productivity slowdown (pp. 116-117).


Does the student learn about the overall shape of the world economy today?

DeLong: Yes. Pp. 132-141 discuss the historical roots and present shape of the world economy's distribution of prosperity, focusing on the topics noted above, and also on cross-country differences in the efficiency of labor, the role played by education and trade in technology transfer, and potential vicious spirals as poor countries that have not completed the demographic transition have high rates of population growth that help keep them poor, and as poor countries have relative price structures that require an enormous savings effort to achieve even a moderate investment outcome.

Mankiw: No. on p. 78 there is a short summary table that shows GDP per capita levels for twelve large countries from the United Statest to Nigeria.


Does the student gain a sense of why it has been so hard for poor countries to gain knowledge of advanced rich-country technologies?

DeLong: Yes. Pp. 139-140 discuss the effect of low education levels and barriers to trade in blocking technology transfer. Pp. 146-147 discuss corruption, the pursuit of "prestige" projects, and other forms of government failure.

Mankiw: No. If cross-country differences in use of technology and thus the efficiency of labor are mentioned at all, I missed it.


Does the student learn why it is that poor countries have had such a hard time achieving high savings-investment rates?

Delong: Yes. Pp. 141-3 discuss how poor countries have relative price structures that make attaining high investment rates difficult, how corruption and instability in government finance reduce investment, and how market-unfriendly policies run the risk of channeling investment into areas in which its productivity is low.

Mankiw: No. P. 89 is as close as Mankiw comes to exploring the determinants of savings-investment shares.


Does the student learn why it is that poor countries are likely to have relatively high population growth rates?

DeLong: Yes. P. 141 and pp. 143-144 discuss why it is that poor countries, especially poor countries with low levels of female literacy, are likely to have high rates of population growth.

Mankiw: Slightly. On eparagraph on p. 100 talks about how policies, "...increasing education about birth-control methods... expanding women's job opportunities... totalitarian policy of allowing only one child per couple" could reduce population growth in poor countries, and raise the steady-state capital-output ratio.


Does the student learn which countries have shifted from "relatively poor" to "relatively rich" over the past fifty years, and why?

DeLong: Yes. Pp. 134-7 discuss convergence within the OECD, and the convergence of East Asia to the industrial core.

Mankiw: No. Pp. 109-110 talk--very abstractly--about "convergence."