Ch. 12 Reflection: Production and Growth



     What affects human productivity?  Does public policy affect the availability of resources people need to be productive?  How? Give an example of a public policy you think either inhibits or promotes long run productivity growth. 

There are many diverse factors that contribute to human productivity, namely education and nutrition. Physical capital, human capital, natural resources, technological knowledge also contribute to human productivity. In addition, a stable political system, foreign investment, free trade, and private property rights also improve human productivity. 

Public policy does affect the availability of resources people need to be productive, namely improved human capital of public education and health care. Physical capital can also be improved through public policy if for instance taxes were lowered on savings and investment in physical capital. Public policy that promotes long run productivity growth include better education and health care, as well as grants and subsidies for new research and development. Patents protected by a stable and fair court system will also incentivize new research and development over time which improves technological knowledge. Public policy that could inhibit long run productivity growth include inward-oriented policies and any tax policy that widens income inequality.

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