The final part of chapter 2 itself breaks into two parts.  First is an appreciation for what even a seemingly modest amount of economic growth can do.

“In my view, the most important point…is that a per-capita output growth rate on the order of 1% is in fact extremely rapid, much more rapid then people think.” (page 95)

Following this is a bit of math, which invoves putting 1.01 or 1.015 to some power like 30 or 50 and get something really large.  1.01³⁰ = around 1.35, or a 35% increase.  1.015⁵⁰ = around 2.1, or a more-than-doubling.

Concretely, per-capita output growth in Europe, North America, and Japan over the past thirty years has ranged between 1 and 1.5 percent, and people’s lives have been subjected to major changes.  In 1980 there was no Internet or cell phone network, most people did not travel by air, most of the advanced medical technologies in common use today did not exist, and only a minority attended college.   (page 95)

Thomas Piketty points out that the relatively rapid change we see today stands in contrast with most of history.  “A society in which growth is 0.1% to 0.2% replicates itself with little or no change from one generation to the next.” (page 96)   That said, the relation between growth and inequality is a very complicated one.  Thomas Piketty points out that growth can create new inequality as new sectors can make certain people very wealthy very quickly.  (Bill Gates and other tech billionaires are great examples of this.)  Meanwhile, growth also can make inherited fortunes less important, thereby reducing inequality.
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Part 2 of Chapter 2 looks at the growth, first acknowledging that worldwide economic growth has been absolutely incredible over the past two centuries, with worldwide per capita income up more than tenfold since 1700.  He adds some qualifiers,

“Basically, the eighteenth century suffered from the same economic stagnation as previous centuries.  The nineteenth century witnessed the first sustained growth in per capita output, although large segments of the population derived little benefit from this, at least until the last three decades of the century.  It was not until the twentieth century that economic growth became a tangible, unmistakeable reality for everyone.” (pag e86-87)

Here is a four minute long video by Hans Reisling which makes much the same point in a rather impressive way!

That said, Thomas Piketty makes an excellent point about growth:

Economic development beings with the diversification of ways of life and types of goods and services produced and consumed.  It is thus a multidimensional process whose very nature makes it impossible to sum up properly with a single monetary index. (page 86)

In economics class I contrast our life to that of a Pharoah thousands of years ago.  We can hear any song we want whenever we want with the press of a button.  A pharaoh might be able to summon any musicians to his palace, but if they were elsewhere it might take over a week before they could return to Cairo and play the requested song.  Other modern products, from computers to telephones to cars to antibiotics to chocolate, where known in the Ancient World.  By contrast, certain things were relatively cheap, or at least cheaper, in the Ancient World:  land, servants, wood from huge old-growth trees.

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Chapter 2, titled “Growth:  Illusions and Realities,” consists of 3 parts:

– Part 1 defines economic growth, and looks at the “very long run” – literally the past couple of thousand years.  It ends with an intriguing question about what effect growth has on inequality.

– Part 2 looks at the past couple of centuries, looking at per capita productivity growth by sector, and what it implies, and asks if rapid economic growth is coming to an end.

– Part 3 looks at other aspects of growth, and focuses on the 20^th Century as a possible anomaly.

Parts 2 and 3 will show up in 2 weeks or so.

Growth rates can be measured an terms of total output, population, and output per capita.  Or, if you wish, size of the economy, number of people, and people’s incomes respectively. One good equation to keep in mind is that, measured as percentages:

(output per capita growth) + (population growth) = (total output growth)  
(You can do algebra to solve for any one of these three variables.  For example, total growth – pop. growth = output per capita growth)

Chapter 2 starts off by pointing out that both population and income per capita growth between year zero and 1700 AD was, on average, extremely close to zero.  (Thomas Malthus estimated 0.06% population growth and 0.02% per capita output growth.)

The reason is quite simple:  higher growth rates would imply, implausibly, that the world’s population at the beginning of the Common Era was miniscule, or else that the standard of living was very substantially below commonly accepted levels of subsistence.  For the same reason, growth in the centuries to come is likely to return to very low levels, at least insofar as the demographic ( = population ) component is concerned. (page 74)

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