Transcript Economics of the Constitution

Rising Living Standards in the
New Nation
Lesson 10
Why Did the Economy Grow after the Revolution?
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From the end of the
American Revolution to
the beginning of the Civil
War, the population of the
United States grew from
approximately 4 million
people to 32 million.
It is not surprising that,
with more people able to
work at making more
things, the economy
would grow.
The puzzling thing is that
the output of goods grew
faster during this time
than the population did.
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The standard of living of
the average American in
1860 was double what it
had been at the end of
the Revolution.
How can an economy
grow faster than the
population of the society
in which it develops?
Scarcity
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How do market
economies cope
with the problem
of scarcity?
PRODUCTION POSSIBILITIES
CURVE
$46,000
There are 6.6 billion people on our planet; 5 billion are in the Third
World. 2.5 billion live on less than $2 a day. The direst poverty
is in Africa, home of the world’s 10 poorest countries. Over ½
the people of Sub-Sahara Africa live on less than $2 a day.
8 million people die each year because they are too poor to stay alive.
The Poorest Nations
Nation
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Per Capita
Congo, Rep. of
$300
Zimbabwe
$500
Liberia
$500
Somalia
$600
Ethiopia
$700
Niger
$700
Cen. African Rep. $700
Gambia, The
$800
Sierra Leone
$800
Malawi
$800
Djibouti
$1,000
½ of the world’s
population have
yet to make their
$25,989
first phone call.
GDP Per Capita
[in 1992 dollars]
$15,931
$6,538
1929
1967
1996
2007
The Business Cycle in U.S. History
[11 Recessions since WWII, from 6 months to 16 months]
GROWTH RATE (percent per year)
Recessions
20
Annual
growth
15
10
5
3
0
-5
Zero growth
-10
1930
1940
1950
1960
1970
Long-term average
growth (3%)
1980
1990
2000 2005
Visual 10.1 Things Changed for
Americans after the Revolutionary War
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Between 1789 and the 1830s . . .
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the number of wooden chairs per household almost
doubled.
most of the upper-middle class had upholstered sofas
and chairs.
most people in cities and villages had replaced open
fireplaces with cook stoves and parlor stoves.
many houses had larger windows because window
glass was cheaper.
farm families owned more candlesticks, and oil lamps
were becoming common in cities and villages.
one household in four or five owned a carpet, and
houses in most cities and villages had window
curtains.
most households owned at least one clock.
Source: Jack Larkin, The Reshaping of Everyday Life, 1790 – 1840 (New York: Harper & Row, 1989), pp. 139 – 143.
Visual 10.2 Productivity and Productive
Resources
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Productivity is the amount of a good or
service that can be produced with a given
amount of productive resources over a
certain period of time.
Productive resources include natural,
capital and human resources.
Productive resources are scarce.
Productivity increases when:
1. more goods or services are produced with the
same amount of productive resources.
2. the same amount of goods or services is
produced with fewer productive resources.
PRODUCTIVITY GAME
INSTRUCTIONS
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ACTIVITY: These game instructions should be put on an overhead and reviewed with the class.
The twelve workers should have their desktops cleared.
Each worker has a set of cards numbered 0-9. Display them on top of your desk, numbers up, in the
same pattern as a touch-tone phone.
At this point, there should be no talking in the room.
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The workers are members of a three person labor force who will attempt to produce a product
consistently every time they are asked with the cards in front of them.
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Throughout the activity, focus on nothing but the cards and do not communicate to anyone else until
told to do so.
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The teacher is going to read off a random sequence of ten numbers, from Activity One, between 0 and
27 inclusive.
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When a number is called, each worker should grab a card from the group in front of them while their coworkers do the same with their cards. All three will hold their numbers up simultaneously so that the
class can read them and the numbers should add up to the number called.
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Once the number has been registered with the scorekeeper, each worker should place the card quickly in
its original place.
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Even if the number called is zero (0), each worker must hold up a card.
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Do this without talking, looking at, signaling, or in any way communicating with the person next to them.
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Each group’s scorekeeper will tally up the number correct out of ten on a scrap piece of paper and report
it to the class at the end of each round.
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In between rounds, the managers will approach the workers they’ve been assigned to and help develop a
system to improve productivity.
ELI WHITNEY’S COTTON GIN
18th CENTURY BRITISH TEXTILE
INDUSTRY
COST REDUCTIONS HAD
POWERFUL EFFECTS ON
AMERICAN SOCIETY
How Do Market Systems Solve the
Scarcity Problem?
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Market systems
provide incentives
to increase
productivity.