The Solow Model and the Steady State
HTML-код
- Опубликовано: 11 апр 2016
- Remember our simplified Solow model? One end of it is input, and on the other end, we get output.
What do we do with that output?
Either we can consume it, or we can save it. This saved output can then be re-invested as physical capital, which grows the total capital stock of the economy.
There's a problem with that, though: physical capital rusts.
Think about it. Yes, new roads can be nice and smooth, but then they get rough, as more cars travel over them. Before you know it, there are potholes that make your car jiggle each time you pass. Another example: remember the farmer from our last video? Well, unless he's got some amazing maintenance powers, in the end, his tractors will break down.
Like we said: capital rusts. More formally, it depreciates.
And if it depreciates, then you have two choices. You either repair existing capital (i.e. road re-paving), or you just replace old capital with new. For example, you may buy a new tractor.
You pay for these repairs and replacements with an even greater investment of capital.
We call the point where investment = depreciation the steady state level of capital.
At the steady state level, there is zero economic growth. There's just enough new capital to offset depreciation, meaning we get no additions to the overall capital stock.
A further examination of the steady state can help explain the growth tracks of Germany and Japan at the close of World War II.
In the beginning, their first few units of capital were extremely productive, creating massive output, and therefore, equally high amounts available to be saved and re-invested. As time passed, the growing capital stock created less and less output, as per the logic of diminishing returns.
Now, if economic growth really were just a function of capital, then the losers of World War II ought to have stopped growing once their capital levels returned to steady state.
But no, although their growth did slow, it didn't stop. Why is this the case?
Remember, capital isn't the only variable that affects growth. Recall that there are still other variables to tinker with. And in the next video, we'll show two of those variables: education (e) and labor (L).
Together, they make up our next topic: human capital.
Subscribe for new videos every Tuesday! bit.ly/1Rib5V8
Macroeconomics Course: bit.ly/1R1PL5x
Next video: bit.ly/1Sdlrvx
Help us caption & translate this video!
amara.org/v/IM5L/
I've never seen macroeconomic models being brought to life and thus made as understandable as it's done here. Thank you for all the work!
Brought to life ??? This model has nothing to do with real life, such as all neoclassical economics
your animation team rocks!!!
Thank you!
-Roman
i be paying all that fkn money in college just to understand nothing and eventually come here and study with these nice guys. well, when i graduate, I will have a whole letter saved for youtube professors. we love and appreciate you so much
Big THANK YOU from Germany. You explained it SO well. I could understand it a bit in my university class, but I got confused often. With this video, it is much more understandable! bless
I always fall asleep studying Economics or when Economics is being taught but you SIR, explain it amazingly well. I AM GLAD!
the quarantine brought me here since my professor doesn't want to do Zoom or upload lectures
Jungbae Eriel fun fact, mine is still expecting an essay on this without having taught it to us.
Ugh same got assignment about Solow model. But I got to tell, its really interesting.
The way you all illustrate this model is brilliant. Thank you so much for doing this!
such cute sounds, it's really fun to watch!!
i've got my macro test tomorrow, wish me luck guys!!!
Good luck, Angela! You'll ace it. :) -Meg
same here
what did you get on ur test?
angelasings24 what did you get on it?
Hey. How'd it go?
Test tomorrow, your vids really help a lot, thank you!
I love this, the sheer simplicity and expression to explain complex ideas.
really helpful... it's so easy to understand all those things. how easily you explain all the key things... thank you...
Exceptional videos! Can't stop viewing them one after one. Helped me in grasping these concepts. Thanks Professors!
Thank you very much for this fantastic explanation of the Solow growth model. I have always struggled with growth models, and this is the best explanation. Thank you again!
The actual calculus for the Solow model is quite simple and quite beautiful. One of the reasons I love economics.
That was really good, very entertaining and informative video. I've been struggling with understanding the Solow model, and I've got my final tomorrow. I'm pretty sure that finding this video has saved me some points! Thanks.
I know this was years ago, but I just came across your comment and was curious. How did your final go?
SUCH A GREAT PROFESSOR, ANIMATION, EXPLANATION, EVERYTHING!!! MANY THANKS! PLEASE KEEP DOING IT! :)
dude, my words cant describe how happy I am to find ur videos
This is incredibly helpful. Thank you so much!
Thank you very much :) your videos are really good! Much appreciated :)
Thank god for this video. It's so clear now!
Spuriously so.
You guys made the concept so much easier to understand, my macro econ prof can't relate... Thanks so much!
Hey how'd the rest of your econ class go?
cant believe that there is such a good explanation like this
This is so helpful! Thank you!
Could've shown a 5 year old this and he would've understood this model. Great video!
amazing work!
easy, fast and very understandable, keep up the good work!
This explanation is so great! It really helped me! Thank you so much!
I love this wonderful story
Great video, the animations and explanations really help :)
Great videos and explanations! I wish macro were this interesting and easy to understand in school.
Thank you for all your posts! :)
Great video, just saw this video after reading Blanchard's macroeconomics and it complements perfectly.
awesome explanation and visualization. thanks a lot it will surely help me
Such a great video and explanation!
This video helped me understanding the concept so well
thank you thank you thank you !!!! saved me so much time, visual understanding is the best
You guys rock every video is awesome and I love it ! Great Job Guys
I LOVE YOU GUYS SO MUCH. YOU ARE THE BEST. I'M LITERALLY JUST A DEPRESSED STUDENT TRYING TO LEARN TOPICS FOR THE EXAM BUT YOU MAKE EVERYTHING BETTER AND ACTUALLY MAKE ME WANT TO LEARN MORE NOT JUST FOR THE EXAM BUT JUST FOR THE SAKE OF LEARNING. I LOVE YOU GUYS SOOOOO MUCH
best explanation channel I have seen so far and not only inn contex of macro but everything
Thank you so much for this video you guys are awesome
Thanks for this great explanation, better than the book
Thank you for the video! It helps a lot:)
Thank you so much! You explain so good :D
You have no idea how helpful this was
thank you soooo much!!! you are just great! explanation is so easy!!
Nicely explained.
you just helped me write my whole assignment.. thank you
great video. thank you very much!
did not have any idea but watching this video, I already feel like a pro
thank you so much professors
i paid 9k to try understand this at uni i’ve been to 3 2 hour lectures and 2 1 hour tutorials and i SWEAR TO GOD i’ve been clueless until i stumbled on this 7 minute video.
awesome series.. i have completed one... learned alot.. thanks
And some of it no doubt is true.
thank you very much for the excellent videos. they made my concept clear, and this even better than attending my degree class
I was just curious; how'd the rest of your class go?
amazing explanation to such a tricky topic in economics!
This is AWESOME thankyou heaps!!!
Amazing video!!! Super helpful =)
Thanks Sir !! You do Great job
Can we all take a moment to appreciate the amazing graphics
This is so useful.. thank you!
this video very helpful, thanks sir
Thank you sir. Understood clearly
This is an excellent explanation. Thaankk youuu sirr
thanks, you cleared my doubts.
Nicely explained
amazing video!
Beautiful video, subscribed!
this video is really helpful！
excellent explanation
God! My book is really nothing compared to this animation video. Thanks. Keep growing.
Steady state? More like "Stupendous and great!" Thanks for putting together a collection of such high-quality videos.
Glad you enjoyed it!
thank you bestie this helped sooo much
But your explanations and animation are just great!🙏🏻
FANTASTIC!
Amazing! Steady state is key :-)
Thank you so much! It was really useful. I like that description with all the useful links, but could you also make links for previous lessons? That would be great.
Sooo amazing and helpful
damn this helps a lot! Thank you :)
The video editing is lit🔥🔥🔥
U great people,,, this vedio open my mind and i understand... i appreciate u alot,,, and your teaching method is soo good... i think not good its excellent,,,, i learn more things of it
Thank you - keep going!
Roman
I am about to take my last economics exam and university and have only just found this channel!! its so useful thanks so much!
Good luck!
-Roman
Very helpful. thanks
this the best explanation ever
LOVE U GUYS U R THE BEST
damn this is so high-quality content
Thank You ❤
amazing thank you!
Amazing!
Excelent video
really wonderful
great video ty :')
i love your channel. please keep posting. i subsribed and liked
I was trying to find a video explaining the Steady State theory for astrophysics... ended up watching an economics video lol
Thank you! Advanced macroeconomics is my last course before getting my master's. I feel completely clueless after two years of studying journalism, these videos are really helping me get back into it.
Hey I know this was years ago, but how did the rest of your master's go?
@@PunmasterSTP Actually I got a 5/5 on that last course after a lot of work and then I graduated.
@@rebeccaed2018 I'm really glad to hear that! Btw, are you working in journalism now?
@@PunmasterSTP I'm studying animal training now. Mainly assistance dogs. Interested in misinformation research. What are you up to?
@@rebeccaed2018 That’s really cool! To clarify, are you interested in misinformation research as it pertains to assistance dogs, or misinformation research in general? Either way I think that’s neat.
I do a fair amount of tutoring in different subjects online, and I try to read up on related material. Two of my subjects are intermediate micro and macro, and I came across some questions on the Solow model recently. So I found myself here…
Thank you, you saved me !!!
Glad it helped!
-Roman
very helpful!
Sir you are awesome ... Love from Pakistan ❤️
You guys are amazing. please upload Ramsey cass kopman model, Diamond models, DSG models etc.
thank you!
Thanks!!