Finance Webinar（2021-03)

Topic: Recipes and Economic Growth: A Combinatorial March Down an Exponential Tail

Speaker: Charles I. Jones, Stanford GSB and NBER

Time: Wednesday, 24 February,10:00-11:30 AM Beijing Time

Location: Microsoft Teams Online Conference Room

Abstract:

New ideas are often combinations of existing goods or ideas, a point emphasized by Romer (1993) and Weitzman (1998). A separate literature highlights the links between exponential growth and Pareto distributions: Gabaix (1999) shows how exponential growth generates Pareto distributions, while Kortum (1997) shows how Pareto distributions generate exponential growth. But this raises a “chicken and egg” problem: which came first, the exponential growth or the Pareto distribution? And regardless, what happened to the Romer and Weitzman insight that combinatorics should be important? This paper answers these questions by demonstrating that combinatorial growth in the number of draws from standard thin-tailed distributions leads to exponential economic growth; no Pareto assumption is required. More generally, it provides a theorem linking the behavior of the max extreme value to the number of draws and the shape of the tail for any continuous probability distribution.

Introduction:

Charles I. (Chad) Jones is the STANCO 25 Professor of Economics at the Stanford Graduate School of Business and a Research Associate of the National Bureau of Economic Research. Professor Jones has been honored as a member of the American Academy of Arts and Sciences, a Fellow of the Econometric Society, and a co-editor of Econometrica. He is currently the Area Coordinator for the economics group at the GSB. Professor Jones is the author of numerous research papers as well as two textbooks, Introduction to Economic Growth (2013) and Macroeconomics (2020).

Professor Jones is noted for his research on long-run economic growth. In particular, he has examined theoretically and empirically the fundamental sources of growth in incomes over time and the reasons underlying the enormous differences in living standards across countries. In recent years, he has used his expertise in macroeconomic methods to study how race and gender contribute to economic growth, changes in top income inequality, and the economics of data.

https://www.gsb.stanford.edu/faculty-research/faculty/chad-jones

Your participation is warmly welcomed!