Rising Living Standards in the New Nation

1
Rising Living Standards in the New Nation

• Lesson 10

2
Why Did the Economy Grow after the Revolution?

• 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.

• 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?

3
Scarcity

• How do market economies cope with the problem of
  scarcity?

4
PRODUCTION POSSIBILITIES CURVE
5
46,000 2007

• The World's Have-nots

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 worlds 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.
½ of the worlds population have yet to make
their first phone call.
25,989 1996

• The Poorest Nations
• Nation 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

GDP Per Capita in 1992 dollars
15,931 1967
6,538 1929
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The Business Cycle in U.S. History11 Recessions
since WWII, from 6 months to 16 months
Recessions
20
Annual growth
15
10
5
3
GROWTH RATE (percent per year)
0
-5
Zero growth
Long-term average growth (3)
-10
2005
1930
1940
1950
1960
1970
1980
1990
2000
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Visual 10.1 Things Changed for Americans after
the Revolutionary War

• Between 1789 and the 1830s . . .
• 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.

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Visual 10.2 Productivity and Productive Resources

• 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.

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PRODUCTIVITY GAME INSTRUCTIONS

• 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.
• 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.
• Throughout the activity, focus on nothing but the
  cards and do not communicate to anyone else until
  told to do so.
• The teacher is going to read off a random
  sequence of ten numbers, from Activity One,
  between 0 and 27 inclusive.
• When a number is called, each worker should grab
  a card from the group in front of them while
  their co-workers 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.
• Once the number has been registered with the
  scorekeeper, each worker should place the card
  quickly in its original place.
• Even if the number called is zero (0), each
  worker must hold up a card.
• Do this without talking, looking at, signaling,
  or in any way communicating with the person next
  to them.

10
ELI WHITNEYS COTTON GIN
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18th CENTURY BRITISH TEXTILE INDUSTRY
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COST REDUCTIONS HAD POWERFUL EFFECTS ON AMERICAN
SOCIETY
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How Do Market Systems Solve the Scarcity Problem?

• Market systems provide incentives to increase
  productivity.