Capital Gains Tax Rates and Economic Growth (or not) - Forbes

Some of the most emotion-laden and -tinged debates oneconomic growth theory deal with two questions on which no broadconsensus seems likely in the near future: What sort of mixtureof government planning and control versus the free market ismost conducive to economic growth? And what are the effects ofdifferent cultures (especially differences in religious andethical values) on promoting or retarding economic growth?

On our AD-AS model we could illustrate this type of growth (producing more) by an increase in AD.

A. Growth can be illustrated with a production possibilities curve (Figure 8.2), where growth is indicated is an outward shift of the curve from AB to CD.


Tax Rates And Economic Growth: Is There Really A ..

B. Economic historians have identified several institutional features that promote and sustain modern economic growth.

Taking the second question first, it should be noted that many ofthe earliest theories about what causes economic growth werelargely cultural in nature. Adam Smith, David Ricardo, ThomasMalthus and many others (even Karl Marx) laid great stress on theimportance to economic growth of such culturally conditionedvalues or attitudes as thrift, the value of diligence and hardwork, ambition for a better material standard of living, respectfor other people's property rights, the sense of obligation tohonor agreements and contracts, inventiveness, willingness toadopt new ways of doing things and so on. Many of these valuesare fostered and reinforced (or possibly denigrated andcondemned) in different measure within different culturaltraditions, and an especially important role in this is played byorganized religion. It is not surprising then that nowadays westill see a lot of more or less informed speculation about therole of this religion or that in fostering or inhibiting economicgrowth, especially in less developed regions of the world. (MaxWeber's classic essay on "The Protestant Ethic and the Spirit ofCapitalism" is one of the best known and most closely reasonedclassic examples of this tradition in the social sciences.) Twoor three decades ago, the prevalence of Roman Catholicism insouthern Europe and Latin America and its alleged anti-commercialsocial and economic values were often invoked as a part of theexplanation for the relative economic backwardness of theseregions compared to mainly Protestant northern Europe and NorthAmerica. In much more recent times, the influence of Islam infostering fatalistic attitudes and anti-commercial oranti-materialist values (such as the condemnation of all lendingat interest) is often invoked as part of the explanation for therelative economic backwardness of the Moslem countries, despitethe huge advantages many of them enjoy in the form of richendowments of natural resources like petroleum. The conservativeanti-materialist and fatalistic elements of Hinduism are oftenput forward as an explanation for India's backwardness. Weberbelieved that Confucianism greatly hindered China's economicdevelopment over the centuries, but ironically the same Confucianheritage is today more often invoked as an explanation for therapid commercial development of such places as Hong Kong, Taiwan,and Singapore. The problem with such explanations is that allmajor religious traditions contain some elements that canencourage economic activity along with other elements thatinhibit it, and determining which influences will predominate inany particular place and time is a game that tends to be playedwith far too many wild cards, with the theorist opportunisticallyseizing upon whichever elements of the local religious traditionbest seem to fit with what he already knows has been happeninglately. It is hard to deny that cultural values matter foreconomic development and that religion plays an important role infostering the people's values, but correlating changesin people's values with changes in economic growthperformance requires much better measurement than is possible bysimplistic references to which particular religious faith haspredominated in the particular country for centuries. A morepromising approach is for researchers to go out periodically anddirectly sample the distributions of particular "pro-growth" and"anti-growth "attitudes among the populations of variouscountries (perhaps by survey research polling methods) ratherthan simply assuming the presence of these values and attitudeson the basis of formal religious doctrines. Only then does itmake sense to begin gingerly pronouncing upon how the prevalenceor lack of particular values correlate with actual long-termeconomic growth performance in subsequent years.


Europe and Central Asia Overview - World Bank

Since this increase maximum output that we are able to produce it shifts the production possibilities curve outward. On the graph below, economic growth would cause the production possibilities curve to move from PP1 to PP2.

Fed Predicts Modest Economic Growth From Tax Cut - …

The most commonly used definition of economic growth is simply increasing output or producing more. (Later we will call this INCREASING REAL GDP.) This is the type of economic growth most often mentioned in news reports like

Does Slower Growth Imply Lower Interest Rates?

The short term ups and downs of the business cycle have dramaticeffects on popular perceptions of the country's economicwell-being. In a recession, hundreds of thousands or evenmillions of people may become unemployed and suffer dramaticdeclines in their incomes for the duration of the crisis --usually for a period of somewhere between six months andone-and-a-half years before more normal economic conditionsreturn again. Yet over the long haul, even rather smallincreases or decreases in the trend rate of economic growth willhave much more profound and enduring effects on economicproduction and hence on the material living standards of thepopulation. As an illustration, consider the following: Duringthe period since the end of World War II (1946 to 1999-I), thegrowth rate of GDP for the United States (corrected forinflation) has averaged about 3.3% per year. Assuming that thetypical undergraduate student reading this text was born in 1979,the growth rate of the US economy over his or her lifetime hasaveraged a slightly lower 2.7% per year - a difference of "only"0.6 percentage points per year. But if the US had been able tomaintain the same average growth rate from 1979 to 1999 that ithad enjoyed during 1946 to 1978 (about 3.6%), 1998 GDP would havereached 9.152 trillion 1992 dollars worth of goods and servicesinstead of the 7.552 trillion dollars of production actuallyachieved. That means that the income of the average Americanhousehold in 1998 (and every single year thereafter) could havebeen more than 20% higher than it actually turned out to be ifonly a way could have been found to prevent this seemingly slightdecline in the trend rate of economic growth. And if the USeconomy had somehow managed to average the slightly higher growthrate of an even 4% for the whole postwar period, the income ofthe average American household from 1998 on could have been abouthalf again as much over what was (and will later be) at theirdisposal.