Monday, October 11, 2004

Naked (economics) 27

(from Curtis)

Just thought I'd share a paragraph out of Naked Economics by Charles Wheelan:

From 1947 to 1975, productivity grew at an annual rate of 2.7 percent
a year. From 1975 until the mid-1990s, for reasons that are still not
fully understood, productivity growth slowed to 1.4 percent a year.
That may seem like a trivial difference; in fact, it has a profound
effect on our standard of living. One handy trick in finance and
economics is the rule of 72; divide 72 by a rate of growth (or a rate
of interest) and the answer will tell you roughly how long it will
take for a growing quanitity to double (e.g. the principal in a bank
account paying 10 percent interest will double in seven years). When
productivity grows at 2.7 percent a year, our standard of living
doubles every 27 years. At 1.4 percent, it doubles every 51 years.

No comments: