Arnold Kling

Exuberant Growth?

Arnold Kling, Great Questions of Economics
Previous Entry Next Entry

In this article, I point out that economists are becoming optimistic about economic growth, because of Moore's Law.

in fifteen years, computers have become a much bigger deal in the economy as a whole. As this chart shows, information technology investment relative to GDP grew from less than 2 percent in 1987 to 6 percent today. Also, keep in mind that in 1987 the state-of-the-art microprocessor was the Intel 386. In fifteen years of progress from 1985 to 2000, the standard microprocessor went from the 386 with 275,000 transistors to the Pentium 4 with 42,000,000 transistors.

Discussion Question. If one sector of the economy is growing at an annual rate of 30 to 80 percent, how large does that sector have to be as a share of the economy in order to raise the overall growth rate by 1 percent?

Return to top