Lecture Notes: Economic Growth and Divergence/Convergence

Key Concepts

Divergence vs. Convergence: The discussion revolves around whether poorer countries are catching up to richer ones (convergence) or falling further behind (divergence).
The Great Fact: Deidre McCloskey highlights a major trend in global economic history, showing a significant increase in economic output over the past 2,000 years, often visualized as a 'hockey stick' growth curve.

Industrial Revolution: Marked a divergence in growth paths:
- US and Western Europe followed a rapid growth trajectory, akin to a 'hockey stick'.
- Other regions experienced stagnation.
- Termed as "divergence big time" in economics literature.

Argentina (1950-2015):
- 1950: Similar standard of living to Western Europe.
- Experienced periods of negative growth, doubling its living standard only once in 65 years.
- By 2015, Argentina had stagnated in comparison to Japan.
Japan (1950-2015):
- Initially poor, similar to Mexico.
- Rapid growth, doubling living standards approximately every 8 years.
- By 2015, became one of the most prosperous countries.
- A growth miracle with a standard of living over ten times higher than in 1950.

Catch-up Potential:
- Poor countries can achieve rapid growth and catch up to developed countries.
- What took the US 200 years can potentially be matched in 40 years with rapid growth.
- Catch-up is possible in one or two generations.

Failures in Growth:
- Some countries experience initial growth but then stall (e.g., Argentina).
- Others, like Niger and Chad, have experienced negligible growth, remaining extremely poor.

Growth Miracles:
- Lead to more goods/services, better health, and greater happiness.
Growth Disasters:
- Result in reduced prosperity, shorter lifespans, and less happiness.

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