5/10/16

On the decaying rate of economic growth in the USA

We have published a few papers [1, 2, 3] and a book on the evolution of real GDP per capita. The message is very simple – economies grow with a constant step, not a constant rate. Therefore, the rate of economic growth is inversely proportional to the attained level of GDP per capita. Three figures below just update our previous results obtained for the USA using new estimates for the past three years. How dare economists confuse people and authorities with fairy tales that the rate of economic growth will return to that observed in the 1960s. The average rate of 3% per year will never happen again, short term excursions are possible, although. In the long run, the rate of growth will fall from the current 1.6% to 1% per year in 2035.

Fig. 1. Evolution of annual increment of GDP per capita, i.e. the difference of the current GDP per capita and that one year ago.

Fig. 2. Annual increment of the GDP per capita as a function of real GDP per capita.

Fig. 3. The rate of growth of the real GDP per capita. Currently, it is about 1.6% per year and will be above 1% another 20 years.

1. It looks like you have wrong sequence of points at the first picture.

I mean, there should not be any lines drawn back in time.

1. Please notice that during recessions GDP falls and graph goes back. the curve is all right.

2. Sorry, figures 1 and 2 should be swapped. Mea culpa

3. Oh!.. So I completely misunderstand what is axis X at fig. 1? Total GDP?

=) It's just because it is a little bit unusual charting method...

4. Essentially, this is our basic idea that the growth rate depends only on the level of GDP per capita.
Economy grows linearly, not exponentially. Then the trend in annual increment has to be constant. For many countries it is negative, however. Our plots are best to illustrate such behaviour.