Tuesday, March 15, 2016

Some Growth Isn’t Just Economic

Macroeconomists stress that real GDP is correlated with a lot of desirable non-economic outcomes.

I feel that sometimes non-economists don’t believe us when we say that.

Here’s an example from North and South Korea. After World War II this was the poorest place on Earth (or not far off of that).* Since then South Korea has displayed phenomenal growth, arguably the longest sustained high growth period of any country. On the other hand, North Korea has struggled, and even had periods of widespread famine.

There’s now been a formal study of a tidbit of data that economists have been talking about for a couple of decades: you can tell that the South is richer because its people are 1-3 inchest taller than those from North Korea. This is interesting because the Korean peninsula has a relatively homogenous population, with little historical colonization. So the only way to reasonably explain that difference is with better diet coming from a richer economy.

* Interestingly, South Korea was the poorer of the two. Most of the limited industriatlization before 1950 had taken place in the North.

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