In 2021, economists Arvind Subramanian, Justin Sandefur, and Dev Patel announced that poor countries had finally started catching up to rich ones, vindicating the Solow growth model's prediction of "convergence." Now they say the rumors of Solow convergence's vindication were premature; the convergence trend reversed and poor countries are falling behind again.

David Oks, writing about their retraction, argues that the whole convergence episode was a mirage produced by the Chinese commodities boom. China's industrial buildout created massive demand for raw materials. Poor countries that exported copper, soybeans, iron, and oil experienced a surge of income. When Chinese demand slowed in the mid-2010s, their growth collapsed.

Oks is probably right about the proximate cause, but the convergence debate is asking a malformed question. The way economists measure convergence doesn't correspond to the abstractions Solow uses to justify the intuitions behind his model. And in the rare case where economists have bothered to measure a quantity relevant to the Solow growth model, they find convergence after all.

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A system that requires people to work longer hours to afford housing, creates jobs to absorb those hours, and counts both the housing appreciation and the job output towards GDP growth, will [...]

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First published:
March 4th, 2026

Source:
https://www.lesswrong.com/posts/xCWiFGezwMPswZ6Ea/is-gdp-a-kind-of-factory-d-draft

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Narrated by TYPE III AUDIO.

“Is GDP a Kind of Factory? d Draft” by Benquo

LessWrong (30+ Karma)