Deirdre McCloskey, an economist at the University of Illinois at Chicago, argued, “A poor country that adopts thoroughgoing innovation … can get within hailing distance
of the West … in about two generations.”
a. What does McCloskey mean by a country adopting
“thoroughgoing innovation”? What does she mean
by a country getting within “hailing distance of the
West”?
b. A generation is usually considered to be about 25 years.
In 2016, real GDP per capita in Italy was about $33,500
(measured in 2010 U.S. dollars), and real GDP per capita
in Haiti was about $1,500. If Haiti adopted thoroughgoing innovation and as a result its average annual
growth rate over the next 50 years increased to 6.5
percent, would Haiti end up with the level of real GDP
per capita that Italy enjoyed in 2016? [Hint: Use the following equation: Real GDP per capita2016 3 (1 1 g)50 5
Real GDP per capita2066, where g is the average annual
growth rate expressed as a decimal.]
c. McCloskey also noted that her previous observation
“does not mean that catch-up is inevitable.” Briefly
explain why low-income countries catching up with
high-income countries isn’t inevitable.
Source: Deirdre N. McCloskey, Bourgeois Dignity: Why Economics Can’t
Explain the Modern World, Chicago: University of Chicago Press, 2010,
p. 122.