The Road Less Travelled on Economic Growth

A very good column by David Warsh;

Last week a group of Chicagoans met in Clemson, S.C., to mark the 20th anniversary of the appearance of the "Mechanics" paper. Lucas was there, as were his fellow University of Chicago professors Nancy Stokey, Kevin M. Murphy and Boyan Jovanovic; Isaac Erlich of the State University of New York at Buffalo; and Princeton's Esteban Rossi-Hansberg. Chicago's Gary Becker was called away. There was no preening at the conference, no speeches, no sociological claptrap, no press: just seven papers about aspects of the topic that Lucas had raised twenty years before.

(So much on the down-low was this Fourth Annual Development Conference at Clemson University kept that I learned of it only by accident: David Weil, of Brown University, was the star presence at the first, Acemoglu and Stanley Engerman, of the University of Rochester at the second; Oded Galor and John McDermott, both of Brown, and Joel Mokyr, of Northwestern University, at the third. Clemson chair Raymond (Skip) Sauer created the series.)

The meeting was organized by Robert Tamura, of Clemson, and fittingly so, for it was Tamura, more than any other, who fifteen years ago persuaded Lucas that the so-called demographic transition lay at the heart of the mystery of economic growth -- Tamura had been coauthor, with Murphy and Becker, of a model presented in 1988 at an influential meeting in Buffalo, at the height of the excitement, in which household decisions about the number of children to bear and the kinds of job skills to accumulate besides child-rearing were seen as inseparable from one another, and central to the advent of sustained income growth. (The so-called "quantity/quality" decision was originally described by Becker in 1960: you can have a lot of kids and let the ones who survive raise each other, or have a few and raise them yourself; as the number of children declines, the care devoted to them increases.) Today Tamura is a member of an up-and-coming Clemson department that has a strong Chicago flavor.

For a time the Becker-Murphy-Tamura fertility paper was overshadowed by Romer's "Endogenous Technological Change," which appeared in the same 1990 special issue of the Journal of Political Economy (edited by the same Isaac Erlich who edits the new start-up Journal of Human Capital). But gradually the fertility paper ("Human Capital, Fertility and Economic Growth") gained ground, especially after Lucas took up the issue in 1997, in his Simon Kuznets Lecture at Yale University. "The Industrial Revolution: Past and Future" serves as the capstone essay in Lucas' Lectures on Economic Growth. "I always thought that the Becker-Murphy-Tamura paper is a classic. I tried for weeks to understand it back when it came out and have read it again and again over the years," says Louis Johnson, College of St. Benedict/St. Johns University, who wrote to study guide for Robert Frank and Ben Bernanke's Principles of Economics. "I think there's one big problem with it: there's no simple version of the model that us mortals can work with. But the point about multiple equilibria determined by fertility and human capital levels surely has to be part of the growth and development story.”

The Clemson conference included papers by: Tamura and three co-authors (Chad Turner, of Nichols State Univrersity, Sean Mulholland of Mercer University, and Scott Baier, of Clemson) on the significance of black-white schooling differentials for productivity differentials; Chi-Wa Yuen, of the University of Hong Kong on alternative channels of human capital formation; Ehrlich on human capital and the demand for risky assets; Stokey on "catching up" and "falling behind;" Becker, Murphy and Tamura on certain features of the baby boom; Jovanovic and Peter Rousseau of Vanderbilt University, on the "Q-elasticity" of investment, with respect to old and new firms; and Rossi-Hansberg, on the importance of organization (in its most general sense) for growth.

Even confined to seven papers, the breadth of conference program was an effective demonstration of the wisdom of Charles (Chad) Jones, of the University of California at Berkeley, who observed as long ago as 1997 in his Introduction to Economic Growth that the "new growth" literature (of which Lucas's paper was among the most important specimens) had generated not one but three quite separate controversies, with a fundamentally different question at the center of each: "What is the engine of economic growth?" "Why are we so rich and they so poor?" And "How do we understand growth miracles?"