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PRINTED FROM the OXFORD RESEARCH ENCYCLOPEDIA, ECONOMICS AND FINANCE (oxfordre.com/economics). (c) Oxford University Press USA, 2020. All Rights Reserved. Personal use only; commercial use is strictly prohibited (for details see Privacy Policy and Legal Notice).

date: 13 August 2020

Summary and Keywords

In the early 21st century, the U.S. economy stood at or very near the top of any ranking of the world’s economies, more obviously so in terms of gross domestic product (GDP), but also when measured by GDP per capita. The current standing of any country reflects three things: how well off it was when it began modern economic growth, how long it has been growing, and how rapidly productivity increased each year. Americans are inclined to think that it was the last of these items that accounted for their country’s success. And there is some truth to the notion that America’s lofty status was due to the continual increases in the efficiency of its factors of production—but that is not the whole story.

The rate at which the U.S. economy has grown over its long history—roughly 1.5% per year measured by output per capita—has been modest in comparison with most other advanced nations. The high value of GDP per capita in the United States is due in no small part to the fact that it was already among the world’s highest back in the early 19th century, when the new nation was poised to begin modern economic growth. The United States was also an early starter, so has experienced growth for a very long time—longer than almost every other nation in the world.

The sustained growth in real GDP per capita began sometime in the period 1790 to 1860, although the exact timing of the transition, and even its nature, are still uncertain. Continual efforts to improve the statistical record have narrowed down the time frame in which the transition took place and improved our understanding of the forces that facilitated the transition, but questions remain. In order to understand how the United States made the transition from a slow-growing British colony to a more rapidly advancing, free-standing economy, it is necessary to know more precisely when it made that transition.

Keywords: economic growth, sources of growth, transitional economy, income inequality, conjectural estimation, statistical dark age, infrastructure, real GDP, GDP per capita

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