Arnold Kling

Economic History Lesson

Arnold Kling, Great Questions of Economics
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This quarter's Milken Institute Review is filled with interesting articles. For example, in a round table discussion that includes four Nobel Laureates, economic historian Robert Fogel reminds us about the effects of productivity.

In the United States in 1800, it took five people working on the farm to support one person working off the farm. Today, 2 percent of the labor force not only feeds--and overfeeds--the United States, but another 300 million people around the world...

The share of the labor force in manufacturing today in the United States is lower than it was at the time of the Civil War--again, because productivity in that area has just leaped along.

Fogel argues that we can afford to shift resources into health care because of higher productivity in these other sectors.

Discussion Question. Fogel forecasts that the share of health care in GDP will rise from 14 percent to 21 percent. In 1993, the Clinton Administration viewed the increase to 14 percent of GDP as a "crisis" that required an overhaul of the nation's health care system. Why would Fogel disagree?

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