MACRO NOTES 9/25

savings is a factor in the wealth level of the economy
-you need either savings or foreign investment
what determines savings?
-who the hell knows?
-why do some countries have high savings?
-rapid growth leads to high savings
-that might be why many of the east asian tigers have relatively high savings rates
-they form 'habits' of saving while they grow, it carries them onwards
-this is because they get used to a certain lifestyle, so when their income rises, they have money they dont know what to do with, so they save
-this gives rise to a "virtuous cycle," where the economy grows so people save, so the economy grows more
what determines foreign investment?
-political/legal situation is one factor
-war, political instability, unclear property rights, weak judicary, corruption, bureaucracy
-economic situation is also a factor
-wages are much cheaper, people more willing to work
-this can be overridden by the political/legal situation
-being poor can lead to political/legal problems, which in turn keeps you poor. which just sucks
Population growth is yet another factor here
-high population growth is bad for economic growth
-means that keeping all else equal, per-capita statistics go down
-poor countries tend to have high population growth
Most countries have roughly the same access to technology... what?
-some countries can produce things better than other countries
-during 1970s- japanese cars, etc
-in general, production information and technology gets out
-but some countries decrease their productivity a lot by interfering in the economy
-free markets better in general here
-example- USSR had pretty decent education levels, high amounts of human, physical capital, natural resources
-they failed because the government basically sucked at regulating the economy
-best contemporary example is N.Korea and S.Korea- S.Korea is free market while N.Korea has central planning, and so sucks