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Problem 1.2
(a) Using the information provided in the question,
the path of the growth rate of X, X X(t), is X (t)
(t) X(t)
depicted in the figure at right.
Problem 1.3
(a) The slope of the break-even investment line is
Inv/ (n + g +
given by (n + g + ) and thus a fall in the rate of )k
depreciation, , decreases the slope of the break- eff lab
even investment line. (n + g +
k* k*NEW k
k*NEW k* k
1-3 Solutions to Chapter 1 Solutions to Chapter 1 1-3
sk sk
(1) sk ln k NEW
. sk
so that lnk = 0, the new actual investment curve intersects the old one.
In addition, the effect of a rise in on k* is ambiguous and depends on the relative magnitudes of s and
(n + g + ). It is possible to show that a rise in capital's share, , will cause k* to rise if s > (n + g + ).
This is the case depicted in the figure above.
(d) Suppose we modify the intensive form of the
production function to include a non-negative Inv/
constant, B, so that the actual investment curve is eff lab
(n + g +
given by sBf(k), B > 0. )k
sBNEW f(k)
Then workers exerting more effort, so that output
per unit of effective labor is higher than before, can
be modeled as an increase in B. This increase in B sBf(k)
shifts the actual investment curve up.
Problem 1.4
(a) At some time, call it t0 , there is a discrete upward jump in the number of workers. This reduces the
amount of capital per unit of effective labor from k* to kNEW . We can see this by simply looking at the
definition, k K/AL . An increase in L without a jump in K or A causes k to fall. Since f ' (k) > 0, this
fall in the amount of capital per unit of effective labor reduces the amount of output per unit of effective
labor as well. In the figure below, y falls from y* to yNEW .
1-4 Solutions to Chapter 1 Solutions to Chapter 1 1-4
(c) Capital per unit of effective labor will continue to rise until it eventually returns to the original level
of k*. At k*, investment per unit of effective labor is again just enough to offset technological progress
and depreciation and keep k constant. Since k returns to its original value of k* once the economy again
returns to a balanced growth path, output per unit of effective labor also returns to its original value of
y* = f(k*).
Problem 1.5
(a) The equation describing the evolution of the capital stock per unit of effective labor is given by
(1) k sf (k) (n g )k.
On the balanced growth path, is zero; investment per unit of effective labor is equal to break-even
k
investment per unit of effective labor and so k remains constant. Denoting the balanced-growth-path
value of k as k*, we have sk* = (n + g + )k*. Rearranging to solve for k* yields
1 (1 )
(3) k* s (n g ) .
To get the balanced-growth-path value of output per unit of effective labor, substitute equation (3) into
the intensive form of the production function, y = k :
(1 )
(4) y* s (n g ) .
Consumption per unit of effective labor on the balanced growth path is given by c* = (1 - s)y*.
Substituting equation (4) into this expression yields
(1 )
(5) c* (1 s) s (n g ) .
(b) The golden-rule level of the capital stock is that level at which consumption per unit of effective
labor is maximized. To derive this level of k, take equation (3), which expresses the balanced-growth-
path level of k, and rearrange it to solve for s:
(6) s = (n + g + )k*1- .
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BILIBID.
As we are going to press, there comes to hand a little pamphlet
describing the industries and production of Bilibid.
Why not send our wardens who desire to do things to Bilibid?
Perhaps, it would be better to send our legislators, who after
observing the practical achievements of Bilibid may be induced to
authorize our wardens to inaugurate a sound industrial policy.
Where is Bilibid? Take the train for San Francisco, engage passage
on some leviathan of the deep and get off probably at the second
station which is Manila. Thence it is a short excursion to Bilibid, a trip
taken by twenty thousand visitors in a single year, not to mention
those who take involuntary trips thither.
Forty buildings, seventeen acres of ground, plan of main building like
Eastern Penitentiary, one of the best ever constructed if we consider
continual inspection as an essential factor. 2800 prisoners there; as
many others in prisons elsewhere in the islands but all co-ordinated
under a central administration.
The great aim is to prepare the inmates for “honorable position in the
community upon their release.”
The men work and play. We enumerate some of the industries.
PENNSYLVANIA.
William E. Mikell, Member of State Commission to Revise
the Criminal Code.
The work of the commissioners who framed the Code of 1860 shows
an utter lack of any consistent theory not only of grading the crimes
as felonies and misdemeanors, but also in grading the punishment
fixed for the various crimes. It may not be easy to do this in all cases.
Persons may intelligently differ as to whether perjury should be more
seriously punished than assault and battery, and whether larceny or
bigamy be deserving of the greater penalty. But it is difficult to see
why embezzlement by a consignee or factor should be punished with
five years’ imprisonment and embezzlement by a person
transporting the goods to the factor should be punished by one
year’s imprisonment. * * *
Under the Act of 1860, having in possession tools for the
counterfeiting of copper coin is punished by six years’ imprisonment,
while by the next section the punishment for actually making
counterfeit copper coin is only three years, though it cannot be made
without the tools to make it. * * *
The distinction just mentioned is, however, no stranger than that
made by the code between a councilman on the one hand and a
judge on the other, in the provisions against bribery. Section 48 of
the Act of 1860 provides that if any judge * * * shall accept a bribe,
he shall be fined not more than $1000 and be imprisoned for not
more than five years. But by Section 8 of the Act of 1874, a
councilman who accepts a bribe may be fined $10,000, ten times as
much as a judge, and be imprisoned the same number of years—
five years. The statute also provides that the councilman shall be
incapable of holding any place of profit or trust in this
Commonwealth thereafter. But the convicted judge is placed under
no such disability.
In the case of almost every crime denounced by the code fine and
imprisonment are associated. In most cases the penalty provided is
fine and imprisonment, in some it is fine or imprisonment. In a few
cases imprisonment alone without a fine is prescribed, and in a few
others it is a fine alone without imprisonment. We seek in vain for
any principle on which the fine is omitted, where it is omitted; or for a
principle on which it is inflicted in addition to imprisonment in some
cases, and as an alternative to imprisonment in others. Thus the
penalty for exhibiting indecent pictures on a wall in a public place is a
fine of $300, but no imprisonment, while by the same act the drawing
of such pictures on the same wall carries a fine of $500 and one
year’s imprisonment. Manslaughter carries a fine of $1000 as well as
imprisonment for twelve years, but train robbery and murder in the
second degree involve no fine, but fifteen and twenty years in prison
respectively. It cannot be the length of the imprisonment that does
away with the fine in this latter case, for the crime of aiding in
kidnapping may be punished with twenty-five years in prison, but
also has a fine of $5000.
More striking still, perhaps, is the lack of any relation between the
amount of the fine and the length of the imprisonment provided in the
code. In the case of some crimes the fine is small and the
imprisonment short, as in blasphemy, which is punished by a fine of
$100 and three months in prison, extortion and embracery punished
with $500 and one year. In a few the fine is large and the
imprisonment long, as in accepting bribes by councilmen, $10,000
and five years, and malicious injury to railroads, $10,000 and ten
years. But in others the fine is small while the imprisonment is long
and in others the fine large and the imprisonment short.
Incomplete Crimes.
CLINICAL WORK.