THE WORLD ECONOMY: GROWTH AND CRISIS Economics 1490 THE WORLD ECONOMY: GROWTH AND CRISIS with Professor Dale W. Jorgenson Lecture 01: September 1, 2016 INTRODUCTION Harvard University Department of Economics – Fall 2016

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS THE WORLD ECONOMY: GROWTH AND CRISIS Comparing Economies across the World and over Time. 2. The Great Debate over the Financial and Economic Crisis. 3. The European Slowdown and the Crisis in Europe. 4. Asian Economic Miracles: Will They Continue? 5. Sustainability of Economic Growth. 6. World Economic Outlook.

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS COMPARING ECONOMIES ACROSS THE WORLD AND OVER TIME 1. Course Outline. 2. The World Economy since 1990: Growth and Crisis. 3. Comparing Economies: Production and Welfare 4. The Sources of Growth: Asia, Europe, and the United States. 5. Growth and Competitiveness.

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS THE SOURCES OF ECONOMIC GROWTH Comparisons among Regions and Countries Sources of Growth in Capital Input Information Technology and Non-Information Technology Labor Input and Labor Quality Total Factor Productivity

THE WORLD ECONOMY: GROWTH AND CRISIS Sources of World Economic Growth Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS Sources of World Economic Growth Average annual growth rates, weighted by the income share.

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS The great debate over the Financial and Economic Crisis 6. The U.S. Financial Crisis. 7. Monetary Policy. 8. Financial Regulation: Micro-Prudential and Macro-Prudential. 9. Fiscal Policy. 10. Secular Stagnation.

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS TIMELINE OF THE FINANCIAL CRISIS IN 2008   March 14: Federal Reserve Provides Financial Backing to JPMorgan Chase's Purchase of Bear Stearns. September 7: Federal Government Bails Out Fannie Mae and Freddie Mac. September 12: Treasury Secretary Hank Paulson States That No Government Money Can Be Used in Any Rescue. September 13: Barclay's Purchase of Lehman Vetoed by British Regulators. September 15: Lehman Brothers Bankruptcy. September 16: Fed Announces $85 Billion Bailout of AIG. October 3: Congress Passes Troubled Asset Relief Program. October 14: TARP Equity Program Announced by the Treasury.

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS HOUSE OF DEBT   Debt and Destruction Cutting Back Levered Losses: The Theory Explaining Unemployment

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS DEBT AND DESTRUCTION   The Harshness of Debt Debt and Wealth Inequality in the Great Recession How the Poor Got Poorer The Geography of Net Worth Destruction Foreclosures and Fire Sales Debt: The Anti-Insurance

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS THE EUROPEAN SLOWDOWN AND THE CRISIS IN EUROPE 11. U.S. Growth Resurgence and European Slowdown. 12. European Competitiveness. 13. Europe 2020 and the Single Market. 14. Economic Policy Response: The Euro. 15. European Policy Response: Brexit.

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS Asian Economic Miracles: Will they Continue? 16. Is Asia’s Miracle a Myth? 17. Japan: Growth and Crisis. 18. The Four Tigers: Hong Kong, Singapore, South Korea, and Taiwan. 19.China: Before and After the Crisis. 20. India: Dancing with Giants.

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS KRUGMAN: 1994, 2005, and 2010 Paul Krugman, “The Myth of Asian Miracles,” Foreign Affairs, November-December 1994: “From the perspective of the year 2010, current projections of Asian supremacy extrapolated from recent trends may well look as silly as l960s-vintage forecasts of Soviet industrial supremacy did in from the perspective of the Brezhnev years.” Paul Krugman Blog, New York Times, October 31, 2005: “[I]n the mid-1990’s I made some modestly pessimistic predictions about Asia back when everyone else was wildly optimistic. When a terrible financial crisis struck, people said I had been proved right. My response was that I had been 90 percent wrong, it’s just that everyone else had been 150 percent wrong.”

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS

THE WORLD ECONOMY: GROWTH AND CRISIS INDIA: OUTLOOK AND OPPORTUNITIES Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS INDIA: OUTLOOK AND OPPORTUNITIES   Macroeconomic Fundamentals Have Dramatically Improved Shifts in Policies and Persistent Incrementalism Could Cumulate to “Big Bang” Reforms Political Mandate for Reform Has Created a Historic Moment of Opportunity

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS Chapter 13, Figure 6: Japan-U.S. TFP Gaps in Manufacturing and Non-Manufacturing,1955–2012

THE WORLD ECONOMY: GROWTH AND CRISIS Sustainability of Economic Growth Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS Sustainability of Economic Growth 21. Comparing Populations: Demographic Projections. 22. Human Capital: Education and Experience. 23. Fiscal Sustainability. 24. Environmental Sustainability. 25. Poverty and Development.

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS Reading List: Congressional Budget Office (2016), “Summary” and “The Long-Term Fiscal Imbalance,” The 2016 Long Term Budget Outlook, Washington, DC, Congressional Budget Office, June, pp. 1-21.

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS

THE WORLD ECONOMY: GROWTH AND CRISIS Outlook for the World Economy Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS Outlook for the World Economy Hours Worked from Labor Force Projections; Labor Quality from Projections of Educational Attainment Productivity Growth from Production Possibility Frontier: IT and Non-IT Productivity Growth, Capital Quality, and the Gap between Growth of Output and Capital GDP Growth Is the Sum of Growth in Hours Worked and Productivity Growth

THE WORLD ECONOMY: GROWTH AND CRISIS Range of World Output Projections Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS Range of World Output Projections

THE WORLD ECONOMY: GROWTH AND CRISIS Lecture 01: September 1, 2016 THE WORLD ECONOMY: GROWTH AND CRISIS GROWTH AND CRISIS IN THE WORLD ECONOMY Comparing Economies across the World and over Time The Great Debate over the Financial and Economic Crisis European Slowdown and the Crisis in Europe Asian Economic Miracles: Will They Continue? Sustainability of Economic Growth Outlook for the World Economy