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©2010 Pearson Education, Inc. Publishing as Prentice Hall
CHAPTER 10| Long-Run Economic Growth:
Sources and Policies
Brief Chapter Summary and Learning Objectives
10.1 Economic Growth over Time and around the World (pages 304–308)
Define economic growth, calculate economic growth rates, and describe global trends in
economic growth.
▪ Real GDP per capita is the best measure of a country’s standard of living. Economic
growth occurs when real GDP per capita increases.
10.2 What Determines How Fast Economies Grow? (pages 308–315)
Use the economic growth model to explain why growth rates differ across countries.
▪ Labor productivity increases if there is an increase in the amount of capital available to
each worker or if there is an improvement in technology.
10.3 Economic Growth in the United States (pages 315–319)
Discuss fluctuations in productivity growth in the United States.
▪ Productivity in the United States grew rapidly from the end of World War II until the
mid-1970s, then slowed down for 20 years, before increasing again after 1995.
10.4 Why Isn’t the Whole World Rich? (pages 319–326)
Explain economic catch-up and discuss why many poor countries have not experienced
rapid economic growth.
▪ The economic growth model predicts that poor countries will grow faster than rich
countries, resulting in catch-up.
10.5 Growth Policies (pages 326–328)
Discuss government policies that foster economic growth.
▪ Governments can attempt to increase economic growth through policies that enhance
property rights and the rule of law, improve health and education, subsidize research and
development, and provide incentives for savings and investment.
Key Terms
Catch-up, p. 319. The prediction that the level
of GDP per capita (or income per capita) in poor
countries will grow faster than in rich countries.
Economic growth model, p. 308. A model that
explains growth rates in real GDP per capita
over the long run.

204 CHAPTER 10 | Long-Run Economic Growth: Sources and Policies
Foreign direct investment (FDI), p. 325. The
purchase or building by a corporation of a
facility in a foreign country.
Foreign portfolio investment, p. 325. The
purchase by an individual or a firm of stocks or
bonds issued in another country.
Globalization, p. 326. The process of countries
becoming more open to foreign trade and
investment.
Human capital, p. 309. The accumulated
knowledge and skills that workers acquire from
education and training or from their life
experiences.
Industrial Revolution, p. 305. The application
of mechanical power to the production of goods,
beginning in England around 1750.
Labor productivity, p. 308. The quantity of
goods and services that can be produced by one
worker or by one hour of work.
New growth theory, p. 313. A model of long-
run economic growth that emphasizes that
technological change is influenced by economic
incentives and so is determined by the working
of the market system.
Patent, p. 314. The exclusive right to produce a
product for a period of 20 years from the date
the product is invented.
Per-worker production function, p. 309. The
relationship between real GDP per hour worked
and capital per hour worked, holding the level of
technology constant.
Property rights, p. 323. The rights individuals
or firms have to the exclusive use of their
property, including the right to buy or sell it.
Rule of law, p. 323. The ability of a government
to enforce the laws of the country, particularly
with respect to protecting private property and
enforcing contracts.
Technological change, p. 309. A change in the
quantity of output a firm can produce using a
given quantity of inputs.
Chapter Outline
Google’s Dilemma in China
When Google expanded into China in 2006 the government insisted that Google block searches of
sensitive topics and that it stop showing results from some foreign Web sites. In recent years China has
experienced rapid economic growth in the context of government regulations that may stifle that growth.
The Chinese government has failed to fully establish the rule of law, particularly with respect to the
consistent enforcement of property rights. Without the rule of law entrepreneurs cannot fulfill their role in
the market system of bringing together the factors of production to produce goods and services.
>>Teaching Tips
Economics in YOUR LIFE!: Would You Be Better Off without China? asks students if they would
prefer to live in a world with the Chinese economy growing very rapidly or in a world with the Chinese
economy being very poor and growing slowly. Students can compare their answers with those provided
by the authors at the end of the chapter. An Inside Look at the end of this chapter discusses the Chinese
government’s attempts to spur economic growth through higher investment spending.

CHAPTER 10 | Long-Run Economic Growth: Sources and Policies 205
10.1 Economic Growth over Time and around the World (pages 304–308)
Learning Objective: Define economic growth, calculate economic growth rates, and describe
global trends in economic growth.
A. Economic Growth from 1,000,000 B.C. to the Present
No sustained economic growth occurred between 1,000,000 B.C. and 1300 AD. Significant growth did
not begin until the Industrial Revolution. The Industrial Revolution refers to the application of
mechanical power to the production of goods, beginning in England around 1750. Before that time,
production of goods had relied almost exclusively on human or animal power. First England, and then
other countries, experienced long-run economic growth with sustained increases in real GDP per capita.
B. Small Differences in Growth Rates Are Important
Because of compounding, over long periods small differences in economic growth rates result in big
differences in living standards.
C. Why Do Growth Rates Matter?
Growth rates matter because an economy that grows too slowly fails to raise living standards. In some
countries in Africa and Asia, very little economic growth has occurred in the past 50 years, resulting in
severe poverty.
D. “The Rich Get Richer and …”
The world can be divided into two groups: the high-income countries (or the industrial countries) and the
poorer countries (or developing countries). The high-income countries include the countries of western
Europe, Australia, Canada, Japan, New Zealand, and the United States. The developing countries include
most of the countries of Africa, Asia, and Latin America. In the 1980s and 1990s, a small group of
countries, mostly East Asian countries such as Singapore, South Korea, and Taiwan, experienced high
growth rates and are referred to as the newly industrializing countries.
>>Teaching Tips
The first Making the Connection in this section explains why the Industrial Revolution began in England
rather than another country. See related problem 1.3. The second Making the Connection explains how
countries like Japan that started experiencing sustained high growth rates earlier compared to other countries
like China, enjoy higher standards of living today. See related problem 1.7. Don’t Let This Happen To
YOU! emphasizes the difference between an average annual percentage change and a total percentage
change. See related problem 1.6.
Extra Solved Problem 10-1
Economic Growth in the U.S. Since 1929
Supports Learning Objective 10.1: Define economic growth, calculate economic growth rates, and
describe global trends in economic growth.
Figure 10-1 in the textbook shows that the world’s average annual growth rate of real GDP per capita in
the period 1800 to 1900 was 1.3 percent and equaled 2.3 percent from 1900 to 2000. Hubbard and
O’Brien comment: “In the long run, small differences in economic growth rates result in big differences
in living standards” (page 306 in the textbook). The Bureau of Economic Analysis has estimated that the
real gross domestic product (in 2005 prices) of the United States in 1929 was $977.0 billion. The table
below shows what real GDP would be for 1930 assuming that the growth rate of GDP was 1.3 percent,

2.3 percent and 3.3 percent from 1920 to 1930. The estimated values for 1930 were obtained by
multiplying $977 billion by 1.013, 1.023 and 1.033 respectively.
Estimated Real GDP For the U.S.
for Various Growth Rates
1.3
percent
2.3
percent
3.3
percent
1930 $990 billion $999 billion 1,009 billion
The differences in estimated real GDP for 1930 seem small, but how different would GDP be if these
growth rates continued through 2008?
Estimate real GDP for the U.S. if the economy grew from 1930 to 2008 at three different growth rates: (a)
1.3 percent annually (b) 2.3 percent annually, and (c) 3.3 percent annually.
Source: U.S. Bureau of Economic Analysis. http://www.bea.gov/
SOLVING THE PROBLEM:
Step 1: Review the chapter material.
This problem concerns the importance of economic growth over time, so you may want to
review the section “Economic Growth over Time and around the World,” which begins on
page 304 in the textbook.
Step 2: Estimate real GDP for the U.S. if the economy grew from 1930 to 2008 at three
different growth rates: (a) 1.3 percent (b) 2.3 percent and (c) 3.3 percent.
The table below shows what real GDP would be in 2008 if real GDP grew at three different
rates.
Estimated Real GDP For the U.S.
for Various Growth Rates
1.3
percent
2.3
percent
3.3
percent
2008 $2,746 billion $6,025 billion $13,120 billion
The actual real GDP for 2008 was $13,312, almost equal to the estimated value assuming a
3.3 percent growth rate. This is almost five times the estimated real GDP assuming a 1.3
percent rate of growth is more than twice as great as the estimated real GDP assuming a 2.3
percent rate of growth. This shows how apparently small differences in growth rates,
compounded for eighty years, can result in very different levels of real GDP.
10.2 What Determines How Fast Economies Grow? (pages 308–315)
Learning Objective: Use the economic growth model to explain why growth rates differ
across countries.
The economic growth model is a model that explains growth rates in real GDP per capita in the long run.
This model focuses on the causes of long-run increases in labor productivity, which is the quantity of
goods and services that can be produced by one worker or by one hour of work. Economists believe that
two key factors determine labor productivity: the quantity of capital per hour worked and the level of

technology. Technological change is a change in the quantity of output a firm can produce using a given
quantity of inputs. There are three main sources of technological change:
a. Better machinery and equipment, such as the steam engine and computers.
b. Increases in human capital.
c. Better means of organizing and managing production, such as the just-in-time system used by
firms to assemble goods at the exact time needed.
An economy will have a higher standard of living the more capital it has per hour worked, the better the
capital, the more human capital workers have, and the better job business managers do in organizing
production. Human capital is the accumulated knowledge and skills that workers acquire from education
and training or from their life experiences.
A. The Per-Worker Production Function
The economic growth model can be illustrated by using the per-worker production function, the
relationship between real GDP per hour worked and capital per hour worked, holding the level of
technology constant. Increases in the quantity of capital per hour worked result in movements up the per-
worker production function. Equal increases in the amount of capital per hour worked lead to diminishing
increases in output per hour worked; the addition of one more unit of one input to a fixed quantity of
another input makes output increase by smaller additional amounts.
B. Which Is More Important for Economic Growth: More Capital or Technological
Change?
Technological change helps economies avoid diminishing returns to capital.
C. Technological Change: The Key to Sustaining Economic Growth
Technological change shifts up the per-worker production function and allows an economy to produce
more real output per hour worked with the same quantity of capital per hour worked. In the long run, a
country will experience an increasing standard of living only if it experiences continuing technological
change.
D. New Growth Theory
The new growth theory is a model of long-run economic growth that emphasizes that technological
change is influenced by economic incentives and so is determined by the working of the market system.
Paul Romer, who developed the new growth theory, argues that the rate of technological change is
influenced by how individuals and firms respond to economic incentives. Firms add to an economy’s
stock of knowledge capital when they engage in research and development or otherwise contribute to
technological change. Romer argues that the accumulation of knowledge capital is subject to diminishing
returns at the firm level, but at the level of the entire economy knowledge capital is subject to increasing
returns. The use of knowledge capital is nonrival because one firm’s using that knowledge does not
prevent another firm from using it. Romer points out that firms are unlikely to engage in research and
development up to the point where the marginal cost of the research equals the marginal return from the
knowledge gained because much of the marginal return will be gained by other firms. Government policy
can help increase the accumulation of knowledge capital in three ways:
a. Protecting intellectual property with patents and copyrights. A patent gives a firm the exclusive
right to a new product for a period of 20 years from the date the product is invented.

b. Subsidizing research and development.
c. Subsidizing education.
There policies can bring the accumulation of knowledge capital closer to the optimal level.
E. Joseph Schumpeter and Creative Destruction
The new growth theory has revived interest in the ideas of Joseph Schumpeter. Schumpeter developed a
model of growth that emphasized his view that new products drive older products – and the firms that
produce them – out of the market. For Schumpeter, the key to rising living standards is not small changes
in existing products but new products that meet consumer needs in qualitatively different ways. The
entrepreneur is central to economic growth. Successful entrepreneurs can use their profits to finance the
development of new products.
>>Teaching Tips
Making the Connection in this section explains how the economic growth model can explain the
economic collapse of the Soviet Union. See related problem 2.10. Solved Problem 10-2 also uses the
economic growth model, and the information from the Making the Connection, to analyze the problems
the Soviet Union encountered in its attempt to achieve a high rate of growth. See related problems 2.7
and 2.8.
10.3
Economic Growth in the United States (pages 315–319)
Learning Objective: Discuss fluctuations in productivity growth in the United States.
The economic growth model can help us understand the record of growth in the United States.
A. Economic Growth in the United States since 1950
Productivity in the United States grew rapidly from the end of World War II until the mid-1970s. Growth
then slowed down for 20 years. Beginning in the mid-1990s, the growth rate picked up again, although it
remained below the levels of the immediate post-World War II period.
B. What Caused the Productivity Slowdown of 1973–1994?
Leading explanations for the productivity slowdown of the mid-1970s to the mid-1990s are: a)
measurement problems, b) high oil prices, and c) a decline in labor quality. Because all high-income
economies began producing more services and fewer goods and enacted environmental regulation at the
same time, explanations of the productivity slowdown that emphasize measurement problems become
more plausible. However, economists have not reached a consensus on why the productivity slowdown
took place.
C. Has the “New Economy” Increased Productivity?
Some economists argue that the development of a “new economy” based on information technology
caused the higher productivity growth that began in the mid-1990s. Faster data processing has had a
major impact on nearly every firm. Many economists are optimistic that the increases in productivity will
continue. Other economists are skeptical about the ability of the economy to sustain high rates of
productivity growth.

D. Why Has Productivity Growth Been Faster in the United States than in Other
Countries?
Unlike the earlier productivity slowdown, the increase in productivity since the mid-1990s has not been
experienced by all high-income countries. From 1995 to 2008, productivity growth was significantly
higher in the United States. Many economists believe there are two main explanations: a) the greater
flexibility of U.S. labor markets, and b) the greater efficiency of the U.S. financial system.
>>Teaching Tips
Figure 10-5 shows average annual growth rates in real GDP per hour worked in the U.S. between 1800
and 2008. Figure 10-6 shows productivity growth in seven high-income economies between 1995 and
2008.
U.S. Productivity Growth and Employment
Supports Learning Objective 10.3: Discuss fluctuations in productivity growth in the United States.
Hubbard and O’Brien describe the productivity slowdown from 1973 to 1995 in which the annual growth
rate of real GDP per hour worked in the United States was 1 percentage point per year lower than during
the 1950–1972 period. Although the reasons for this anemic growth are still not certain, the subsequent
increase in productivity growth to an annual average rate of 2.5 percent was welcome news to economists.
But others have pointed to a dark lining in this silver cloud. The economic expansion that began after the
2001 recession was frequently referred to as a “jobless recovery” in newspaper and magazine articles.
Writers argued that faster productivity growth allowed employers to increase production without
increasing employment. Although employment growth subsequently increased, the concern expressed for
workers’ jobs highlights two different views of productivity. In the Federal Reserve Bank of San
Francisco’s Economic Letter, Carl Walsh wrote:
If higher productivity allows firms to shed workers, how can it raise wages and living
standards? If productivity does lead to improved wages and living standards, why do so many
feel the recent productivity growth has left workers behind?
Walsh notes that productivity growth and changes in technology cause structural changes that result in
increased production and employment in some industries and reductions in production and employment in
other industries. For example, the growth in demand for word processors and personal computers resulted
in a decline in the demand for typewriters. Small changes in overall employment mask what often are
large increases in employment and unemployment in individual industries. In other words, the negative
impact of productivity on employment occurs in the short run while the positive impact of productivity on
employment occurs in the long run.
…the long-run perspective emphasizes that an increase in labor productivity increases
potential GDP…by allowing more output to be produced with the same level of employment,
but it also increases employment because it decreases the cost of labor to firms and promotes
the creation of new industries.
Source: Carl E. Walsh, “The Productivity and Jobs Connection: The Long and the Short of It.” FRBSF Economic Letter. July 16,
2004.
The average annual growth rate of real GDP per hour worked from 1950 to 1972 was 2.6 percent.
Examine the fluctuations in the annual unemployment rate for this period in Figure 8-4 on page 244 in the

textbook. Is the behavior of the unemployment rate consistent with Carl Walsh’s explanation of the
impact of productivity growth on employment?
This problem concerns fluctuations in productivity growth so you may want to review the
section “Economic Growth in the United States,” which begins on page 315 in the textbook.
Step 2: Is the behavior of the unemployment rate consistent with Carl Walsh’s explanation
of the impact of productivity growth on employment?
Yes. Despite the relatively large increases in productivity from 1950 to 1972, the rate of
unemployment did not have an upward trend. Most of the fluctuation in the unemployment
rate occurred during recessions. This is consistent with the argument that increases in
productivity lead to increased employment in the long run. Other data are needed to show
how much total employment changed and which industries experienced job gains and losses.
Extra Making
the
Connection
Productivity Gains Limit Recession’s Impact on Job
Cuts
Productivity growth in the United States since 1995 has been higher than in most other high-income
countries. Increases in productivity result in higher per capita incomes over time, but the severe recession
of 2007–2009 revealed another consequence of productivity growth in many U.S. manufacturing firms: a
smaller number of job losses than occurred in past recessions. Donald Washkewicz, chief executive of
Parker-Hannifin Corporation, a manufacturer of parts used in applications including aerospace, climate
control and hydraulics, noted the importance of productivity gains to his company. “Because of
productivity gains, every one of my people carries more dollars in sales today. If I need to cut back, I
have to cut back fewer people to achieve the same goal.” Where in 2000, the average Parker employee
was responsible for about $125,000 in sales by 2009 this figure rose to about $200,000. Though the
recession resulted in about 1.3 million job losses through 2009, analysts believe that fewer jobs were lost
than were expected given the depth of the recession. During the last years of the 20th
century many
factories did so-called “batch work” which required many workers who performed identical tasks. In
recent years, many of these less-skilled jobs have moved to other countries while U.S. companies have
streamlined their operations and hired fewer, more highly trained workers. Between January 2000 and
December 2007, before the recession began, employment in manufacturing fell by 3.5 million but
production still rose by 10 percent. Kurt Karl, an economist at insurance firm Swiss Re, explains “When
you get down to where we are now, where manufacturing is less than 10% of the employed population,
there just isn’t much more you can cut.” Another reason for the lower number of job losses from the
recession was given by Donald Washewicz, who notes his reluctance to lay off workers Parker-Hannifin
has spent considerable time and money to train. “You want to sustain those skills.”
Source: Timothy Aeppel and Justin Lahart, “Lean Factories Find It Hard to Cut Jobs Even in a Slump, Wall Street Journal, March 9,
2009

10.4 Why Isn’t the Whole World Rich? (pages 319–326)
Learning Objective: Explain economic catch-up and discuss why many poor countries have
not experienced rapid economic growth.
The economic growth model tells us that economies grow when the quantity of capital per hour worked
increases and when technological change takes place. The profitability of using additional capital or better
technology is generally greater in a developing country than in a high-income country. The economic
growth model predicts that poor countries will grow faster than rich countries. Catch-up is the prediction
that the level of GDP per capita (or income per capita) in poor countries will grow faster than in rich
countries. The paradox is that lower-income industrial countries have been catching up to the higher-
income industrial countries, but the developing countries as a group have not been catching up to the
industrial countries as a group.
A. Catch-up: Sometimes, but Not Always
To illustrate whether catch-up is happening a graph can be used. The initial level of GDP per capita is
measured along the horizontal axis and the vertical axis shows the rate at which GDP per capita is
growing. Low-income countries should be in the upper-left part of the graph and high-income countries
should be in the lower-right part of the graph. Some countries, such as Niger and Madagascar, that had
low levels of real GDP per capita in 1960 had lower levels of real GDP per capita in 2008 than in 1960.
Other countries, such as Malaysia and South Korea that started with low levels of real GDP per capita,
grew rapidly.
B. Why Don’t More Low-Income Countries Experience Rapid Growth?
Some poor countries do not experience rapid growth for four main reasons:
a. Failure to enforce the rule of law. The rule of law is the ability of a government to enforce the
laws of the country, particularly with respect to protecting private property and enforcing
contracts.
b. Wars and revolutions.
c. Poor public education and health.
d. Low rates of saving and investment.
Property rights are the rights individuals or firms have to the exclusive use of their property, including
the right to buy or sell it.
C. The Benefits of Globalization
One way for a developing country to break out of the vicious cycle of low saving and investment and low
growth is through foreign direct investment. Foreign direct investment (FDI) is the purchase or building
by a corporation of a facility in a foreign country.
Foreign portfolio investment is the purchase by an individual or a firm of stock or bonds issued in
another country. Globalization is the process of countries becoming more open to foreign trade and
investment.

>>Teaching Tips
Solved Problem 10-4 uses real GDP per capita for several countries to test the economic growth model.
See related problems 4.4 and 4.5. Making the Connection in this section describes how the degree to
which delegates to the United Nations ignore parking tickets can be used as a reflection of the tolerance
for corruption in their countries. See related problem 4.7.
10.5
Growth Policies (pages 326–328)
Learning Objective: Discuss government policies that foster economic growth.
A. Enhancing Property Rights and the Rule of Law
Entrepreneurs are unlikely to risk their own funds unless property is safe from being arbitrarily seized. In
many developing countries the rule of law and property rights are undermined by corruption. Research
has shown that countries where corruption is most widespread grow much more slowly than countries
where corruption is less of a problem.
B. Improving Health and Education
As people’s health improves and they became taller, stronger, and less susceptible to disease, they also
become more productive. Many economists believe that government subsidies to education have played
an important role in promoting economic growth.
The rising incomes that result from economic growth can help developing countries deal with brain drain.
Brain drain refers to highly educated and successful individuals leaving developing countries for high-
income countries.
C. Policies that Promote Technological Change
Government policies that facilitate access to technology are crucial for low-income countries. The easiest
way for developing countries to gain access to technology is through foreign direct investment. In high-
income countries, government policies can aid the growth of technology by subsidizing research and
development.
D. Policies that Promote Saving and Investment
Governments can increase incentives for firms to engage in investment in physical capital by using
investment tax credits. These credits allow firms to deduct from their taxes some fraction of the funds
they have spent on investment.
E. Is Economic Growth Good or Bad?
The arguments against further economic growth tend to be motivated either by concern about the effects
of growth on the environment or by concern about the effects of the globalization process that has
accompanied economic growth in recent years.
What is the Proper Role for Government in Promoting Growth?
Supports Learning Objective 10.5: Discuss government policies that foster economic growth.
One popular explanation for the persistent poverty of developing nations is a lack of natural resources.
But Hong Kong and Japan have relatively few natural resources, yet experienced more rapid economic

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growth in recent decades than nations with abundant supplies of resources. Economist Paul Romer has
argued that it is ideas, not natural resources, that poor countries lack most.
The knowledge needed to provide citizens of the poorest countries with a vastly improved
standard of living already exists in the advanced countries. If a poor nation invests in
education and does not destroy the incentives for its citizens to acquire ideas from the rest of
the world, it can rapidly take advantage of the publicly available part of…knowledge. If…it
offers incentives for privately held ideas to be put to use within its borders its citizens can
soon work in state-of-the-art productive activities.
In the United States and developed countries most economists support three government policies that
encourage the production and dissemination of new knowledge:
▪ Subsidies for education
▪ Competitive grants for basic research
▪ Patents and copyrights
Romer warns that it is important to limit government’s power over economic policy:
…if the government has important discretionary power over economic affairs, members of
government can all too easily divert that power…to private use. The challenge…is…to invent
new institutions that support a high level of commercially relevant research in the private
sector…and…must not be vulnerable to capture by narrow interests.
Source: Paul M. Romer, “Economic Growth.” The Concise Encyclopedia of Economics.
http://wwweconlib.org/library/Enc/EconomicGrowth.html.
a. Paul Romer states that most economists favor government subsidies for education and basic
research. Why do economists believe that government, rather than private firms and individuals,
should subsidize these activities?
b. Romer warns that “…members of government can all too easily” divert power over economic
policy to private use. Explain Romer’s concern.
This problem concerns policies that can foster economic growth, so you may want to review
the section “Growth Policies,” which begins on page 326 in the textbook.
Step 2: Why do economists believe that government, rather than private firms and
individuals, should subsidize education and basic research?
Private firms have little incentive to invest resources in activities that, if successful, are not
profitable. The social returns to investment in education and basic research are significant,
but these returns are spread throughout the economy. Therefore, firms may not undertake
research that would increase economic growth and benefit the whole economy because the
research would not be profitable. A government subsidy may be necessary to provide firms
with the incentive to invest in research.
Step 3: Romer warns that “…members of government can all too easily” divert power
over economic policy to private use. Explain Romer’s concern.
Elected officials are likely to favor projects that are located in their own states or districts
rather than projects that have the greatest social returns. For example, politicians from Iowa
are apt to favor subsidies for the use of ethanol as a source of energy since this would benefit
corn farmers from their state.

Extra Making
the
Connection
The Role of Local Government in Promoting
Economic Growth in China
For over two decades, economic growth in China has been among the highest of any nation, often
reaching 7 to 9 percent annually. A key to achieving economic growth in a market economy is protection
of rights to private property. Hubbard and O’Brien argue that “A market system cannot work well unless
property rights are enforced. Entrepreneurs are unlikely to risk their own funds, and investors are unlikely to
lend their funds to entrepreneurs, unless property is safe from being arbitrarily seized” (page 326 in the
textbook). However, China has a relatively weak judicial system and a poor property-rights environment. An
explanation for China’s success in attracting private investment despite a poor track record in protecting
property rights is offered by X. Zhang, who argues that local Chinese governments engage in vigorous
competition for investment that benefits their own jurisdictions. The uncertainty of doing business is very high
and, as a result, the cost of completing contracts is high as well. To overcome these obstacles, businesses often
partner with local government officials who work hard to provide a stable environment for these businesses
and provide protection from local government regulations. The result is strong protection for investors, within
a weak system of protection of property rights for rural landowners. Farmers and other Chinese citizens are
often forced to sell their rights to land for allegedly “public purposes” – that is, for new private businesses.
Though this system has produced considerable prosperity for China, it has come at the expense of increased
social tension, especially among current and former landowners. It may be difficult to sustain China’s high rate
of economic growth far into the future without addressing this potential source of social conflict.
Source: Karol Boudreaux and Paul Dragos Aligica, “Legislation and creation by fiat,” in Paths to Property. London: The Institute of
Economic Affairs. 2007. pp. 65-6.
Extra Economics in YOUR LIFE!
Will “Economic Catch-Up” Catch Up to You?
Question: China has been enjoying higher economic growth for the last decade compared to the United
States. The per-capita income growth rate since 2000 has been greater in China than in the United States..
How will this “economic catch-up” affect your welfare (assuming you live in the United States)?
Answer: The standard of living in China can catch up with that in United States if China continues to
sustain an economic growth rate that is higher than the growth rate in United States The standard of living
in the United States will also be affected. The fact that China is experiencing rapid economic growth
allows firms located in China to manufacture more products at a cheaper cost. So, consumers in the
United States will be able to buy lower-priced imports from China.
Extra INSIDE LOOK News Article to Use in Class
Visit www.myeconlab.com for current Inside Look news articles.

SOLUTIONS TO END-OF-CHAPTER EXERCISES
Answers to Thinking Critically Questions
1. The government in China can spend more on technological change, such as replacing existing capital
with more productive capital. Technological change causes the per-worker production function to shift up
so that real GDP per hour worked is higher at any given level of capital per hour worked.
2. China’s government has recognized that property rights and growth of business enterprises are key
determinants of economic growth in the long run. Since 1978, the government has carried out economic
reforms that have gradually raised the size of the private sector relative to the public sector. The sudden
increase in government spending, however, was a response to the economic slowdown in association with
a global economic recession. The economic stimulus policy was aimed at raising China’s GDP growth in
the short run. Even though the increase in spending on infrastructure and other capital goods might face
large diminishing returns to capital, it might still have a positive effect on China’s long-run economic
growth.
10.1 Economic Growth over Time and around the World
Learning Objective: Define economic growth, calculate economic growth rates, and describe
global trends in economic growth.
Review Questions
1.1 A country’s economic growth matters because living standards tend to rise with economic
growth. Higher economic growth provides a country with more opportunities to improve the lives of its
citizens by, for example, increasing average life expectancy.
1.2 The total percentage increase is the percentage increase in real GDP from 1999 to 2009. It is not
an annual growth rate. The average annual growth rate is the growth rate at which the value for real GDP
in 1999 would have to grow on average each year to end up with the value for real GDP in 2009.
Problems and Applications
1.3 The finding of the importance of market efficiency in long-run economic growth by Shiue and
Keller supports North’s argument that a government can promote economic growth by protecting private
property rights and wealth, as the British government did beginning with the Glorious Revolution of 1688.
1.4 Growth Rates
2005 2006 2007 2008
Average Annual
Growth Rate
Brazil 3.69% 5.41% 5.10% 4.73%
Mexico 4.77 3.29 1.80 3.29
Thailand 5.11 4.75 5.25 5.04
a. During 2006, Thailand experienced the highest economic growth rate of 5.11%.
b. During 2007, Brazil experienced the highest economic growth rate of 5.41%.

c. Between 2006 and 2008, Thailand experienced the highest average annual growth rate of
5.04%.
1.5 You will have earned more on your Andover Bank CDs.
Bank Value of CD at end of year
2009 2010 2011
Andover Bank $1,050.00 $1,102.50 $1,157.63
Lowell Bank $1,020.00 $1,081.20 $1,156.88
1.6
Year
Real GDP per capita
(2000 prices)
Annual
growth rate
2004 $41,806
2005 42,692 2.12%
2006 43,425 1.72
2007 43,926 1.15
2008 43,714 –0.48
a. The percentage increase in real GDP per capita between 2004 and 2008 was.
$43,714 $41,806
100 4.56%
$41,806
−
 
 =
 
 
b. The average annual growth rate in GDP per capita between 2004 and 2008 can be measured as
the average of the annual growth rates in the above table, which is 1.26%.
1.7 The answer depends on several factors: Whether country A sustains high rates of growth relative
to country B, on how long a period of time has passed since rapid economic growth first began in country
A, and on how long a period of time there was between rapid economic growth beginning in country A
and rapid economic growth beginning in country B. For example, the standard of living in China can
catch up with that in Japan if China continues to sustain an economic growth rate that is higher than the
growth rate in Japan.

10.2 What Determines How Fast Economies Grow?
Learning Objective: Use the economic growth model to explain why growth rates differ
across countries.
Review Questions
2.1
A movement from A to B shows the effect on real GDP per hour worked of an increase in capital per hour
worked, holding technology constant. A movement from A to C shows the effect of an increase in
technology, holding the quantity of capital per hour worked constant.
2.2 Diminishing returns to capital imply that, holding technology constant, additional capital per hour
worked results in smaller and smaller increases in real GDP per hour worked. Therefore, sustained
increases in real GDP per hour worked require more than continuing increases in capital per hour worked.
To maintain high growth rates despite diminishing returns to capital, economies must experience
technological change.
2.3 Initially, the increases in capital per hour worked in the Soviet Union produced rapid increases in
real GDP per hour worked. The prediction did not adequately consider diminishing returns to capital and
the crucial role of technological change.
2.4 Firms are likely to underinvest in research and development because much of the additional
return from the research and development will be gained by other firms. To increase the accumulation of
knowledge capital, governments can protect intellectual property with patents and copyrights, subsidize
research and development, and subsidize education.

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in connection with it. The mixture of punctilio and decorum, on the one
hand, with passionate resentment and greed on the other, must be realised as
underlying all the transactions, and giving the leading psychological tone to
the natives’ interest. The obligation of fairness and decency is based on the
general rule, that it is highly improper and dishonourable to be mean. Thus,
though a man will generally strive to belittle the thing received, it must not
be forgotten that the man who gave it was genuinely eager to do his best.
And after all, in some cases when a man receives a really fine valuable, he
will boast of it and be frankly satisfied. Such a success is attributed of
course not to his partner’s generosity, but to his own magic.
A feature which is universally recognised as reprehensible and
discreditable, is a tendency to retain a number of valuables and be slow in
passing them on. A man who did this would be called “hard in the Kula.”
The following is a native description of this feature as exhibited by the
natives of the Amphletts.
“The Gumasila, their Kula is very hard; they are mean, they are retentive. They
would like to take hold of one soulava, of two, of three big ones, of four perhaps.
A man would pokala them, he would pokapokala; if he is a kinsman he will get a
soulava. The Kayleula only, and the Gumasila are mean. The Dobu, the Du’a’u,
the Kitava are good. Coming to Muyuwa—they are like Gumasila.”
This means that a man in Gumasila would let a number of necklaces
accumulate in his possession; would require plenty of food as pokala—a
characteristic reduplication describes the insistence and perseverance in
pokala—and even then he would give a necklace to a kinsman only. When I
inquired from the same informant whether such a mean man would also run
a risk of being killed by sorcery, he answered
“A man who is very much ahead in the Kula—he will die—the mean man not; he
will sit in peace.”

III
Returning now to the concrete proceedings of the Kula, let us follow the
movements of a Sinaketan toliwaga. He has presumably received a
necklace or two on his arrival; but he has more partners and he expects
more valuables. Before he receives his fill, he has to keep a taboo. He may
not partake of any local food, neither yams, nor coco-nuts, nor betel pepper
or nut. According to their belief, if he transgressed this taboo he would not
receive any more valuables. He tries also to soften the heart of his partner
by feigning disease. He will remain in his canoe and send word that he is ill.
The Dobu man will know what such a conventional disease means. None
the less, he may yield to this mode of persuasion. If this ruse does not
succeed, the man may have recourse to magic. There is a formula called
kwoygapani or ‘enmeshing magic,’ which seduces the mind of a man on
whom it is practised, makes him silly, and thus amenable to persuasion. The
formula is recited over a betel-nut or two, and these are given to the partner
and to his wife or sister.

Kwoygapani Spell
“O kwega leaf; O friendly kwega leaf; O kwega leaf hither; O kwega leaf thither!”
“I shall enter through the mouth of the woman of Dobu; I shall come out through
the mouth of the man of Dobu. I shall enter through the mouth of the man of
Dobu; I shall come out through the mouth of the woman of Dobu.”
“Seducing kwega leaf; enmeshing kwega leaf; the mind of the woman of Dobu is
seduced by the kwega leaf, is enmeshed by the kwega leaf.”
The expression “is seduced,” “is enmeshed “by the kwega leaf, is repeated with a
string of words such as: “Thy mind, O man of Dobu,” “thy refusal, O woman of
Dobu,” “Thy disinclination, O woman of Dobu,” “Thy bowels, thy tongue, thy
liver,” going thus over all the organs of understanding and feeling, and over the
words which describe these faculties. The last part is identical with that of one or
two formulæ previously quoted:
“No more it is my mother; my mother art thou, O woman of Dobu, etc.”
(Compare the Kaykakaya and Ka’ubana’i spells of the previous chapter.)
Kwega is a plant, probably belonging to the same family as betel pepper,
and its leaves are chewed with areca-nut and lime, when real betel-pods
(mwayye) are not available. The kwega is, remarkably enough, invoked in
more than one magical formula, instead of the real betel-pod. The middle
part is quite clear. In it, the seducing and enmeshing power of the kwega is
cast over all the mental faculties of the Dobuan, and on the anatomical seats
of these faculties. After the application of this magic, all the resources of the
soliciting man are exhausted. He has to give up hope, and take to eating the
fruit of Dobu, as his taboo lapses.
Side by side with the Kula, the subsidiary exchange of ordinary goods takes
place. In Chapter VI, Division VI, we have classified the various types of
give and take, as they are to be found in the Trobriand Islands. The inter-
tribal transactions which now take place in Dobu also fit into that scheme.
The Kula itself belongs to class (6), ‘Ceremonial Barter with deferred

payment.’ The offering of the pari, of landing gifts by the visitors, returned
by the talo’i or farewell gifts from the hosts fall into the class (4) of
presents more or less equivalent. Finally, between the visitors and the local
people there takes place, also, barter pure and simple (gimwali). Between
partners, however, there is never a direct exchange of the gimwali type. The
local man will as a rule contribute a bigger present, for the talo’i always
exceeds the pari in quantity and value, and small presents are also given to
the visitors during their stay. Of course, if in the pari there were included
gifts of high value, like a stone blade or a good lime spoon, such solicitary
gifts would always be returned in strictly equivalent form. The rest would
be liberally exceeded in value.
The trade takes place between the visitors and local natives, who are not
their partners, but who must belong to the community with whom the Kula
is made. Thus, Numanuma, Tu’utauna and Bwayowa are the three
communities which form what we have called the ‘Kula community’ or
‘Kula unit,’ with whom the Sinaketans stand in the relation of partnership.
And a Sinaketa man will gimwali (trade) only with a man from one of these
villages who is not his personal partner. To use a native statement:
“Some of our goods we give in pari; some we keep back; later on, we gimwali it.
They bring their areca-nut, their sago, they put it down. They want some article of
ours, they say: ‘I want this stone blade.’ We give it, we put the betel-nut, the sago
into our canoe. If they give us, however, a not sufficient quantity, we rate them.
Then they bring more.”
This is a clear definition of the gimwali, with haggling and adjustment of
equivalence in the act.
When the visiting party from Sinaketa arrive, the natives from the
neighbouring districts, that is, from the small island of Dobu proper, from
the other side of Dawson Straits, from Deyde’i, the village to the South,
will assemble in the three Kula villages. These natives from other districts
bring with them a certain amount of goods. But they must not trade directly
with the visitors from Boyowa. They must exchange their goods with the
local natives, and these again will trade them with the Sinaketans. Thus the

hosts from the Kula community act as intermediaries in any trading
relations between the Sinaketans and the inhabitants of more remote
districts.
To sum up the sociology of these transactions, we may say that the visitor
enters into a threefold relation with the Dobuan natives. First, there is his
partner, with whom he exchanges general gifts on the basis of free give and
take, a type of transaction, running side by side with the Kula proper. Then
there is the local resident, not his personal Kula partner, with whom he
carries on gimwali. Finally there is the stranger with whom an indirect
exchange is carried on through the intermediation of the local men. With all
this, it must not be imagined that the commercial aspect of the gathering is
at all conspicuous. The concourse of the natives is great, mainly owing to
their curiosity, to see the ceremonial reception of the uvalaku party. But if I
say that every visitor from Boyowa, brings and carries away about half-a-
dozen articles, I do not under-state the case. Some of these articles the
Sinaketan has acquired in the industrial districts of Boyowa during his
preliminary trading expedition (see Chapter VI, Division III). On these he
scores a definite gain. A few samples of the prices paid in Boyowa and
those received in Dobu will indicate the amount of this gain.
Kuboma to Sinaketa. Dobu to Sinaketa.
1 tanepopo basket = 12 coco-nuts = 12 coco-nuts + sago + 1 belt
1 comb = 4 coco-nuts = 4 coco-nuts + 1 bunch of betel
1 armlet = 8 coco-nuts = 8 coco-nuts + 2 bundles of betel
1 lime pot = 12 coco-nuts = 12 coco-nuts + 2 pieces of sago
This table shows in its second column the prices paid by the Sinaketans to
the industrial villages of Kuboma, a district in the Northern Trobriands. In
the third column what they receive in Dobu is recorded. The table has been
obtained from a Sinaketan informant, and it probably is far from accurate,
and the transactions are sure to vary greatly in the gain which they afford.
There is no doubt, however, that for each article, the Sinaketan would ask
the price which he paid for them as well as some extra article.

Thus we see that there is in this transaction a definite gain obtained by the
middlemen. The natives of Sinaketa act as intermediaries between the
industrial centres of the Trobriands and Dobu, whereas their hosts play the
same rôle between the Sinaketans and the men from the outlying districts.
Besides trading and obtaining of Kula valuables, the natives of Sinaketa
visit their friends and their distant relatives, who, as we saw before, are to
be found in this district owing to migrations. The visitors walk across the
flat, fertile plain from one hamlet to the other, enjoying some of the
marvellous and unknown sights of this district. They are shown the hot
springs of Numanuma and of Deyde’i, which are in constant eruption.
Every few minutes, the water boils up in one spring after another of each
group, throwing up jets of spray a few metres high. The plain around these
springs is barren, with nothing but here and there a stunted kind of
eucalyptus tree. This is the only place in the whole of Eastern New Guinea
where as far as I know, eucalyptus trees are to be found. This was at least
the information of some intelligent natives, in whose company I visited the
springs, and who had travelled all over the Eastern islands and the East end
of the mainland.
The land-locked bays and lagoons, the Northern end of Dawson Strait,
enclosed like a lake by mountains and volcanic cones, all this must also
appear strange and beautiful to the Trobrianders. In the villages, they are
entertained by their male friends, the language spoken by both parties being
that of Dobu, which differs completely from Kiriwinian, but which the
Sinaketans learn in early youth. It is remarkable that no one in Dobu speaks
Kiriwinian.
As said above, no sexual relations of any description take place between the
visitors and the women of Dobu. As one of the informants told me:
“We do not sleep with women of Dobu, for Dobu is the final mountain
(Koyaviguna Dobu); it is a taboo of the mwasila magic.”
But when I enquired, whether the results of breaking this taboo would be
baneful to their success in Kula only, the reply was that they were afraid of

1
breaking it, and that it was ordained of old (tokunabogwo ayguri) that no
man should interfere with the women of Dobu. As a matter of fact, the
Sinaketans are altogether afraid of the Dobuans, and they would take good
care not to offend them in any way.
After some three or four days’ sojourn in Dobu, the Sinaketan fleet starts on
its return journey. There is no special ceremony of farewell. In the early
morning, they receive their talo’i (farewell gifts) of food, betel-nut, objects
of use and sometimes also a Kula valuable is enclosed amongst the the
talo’i. Heavily laden as they are, they lighten their canoes by means of a
magic called kaylupa, and sail away northwards once more.
It will be noted, that this is the third meaning in which the term pokala is used by the
natives. (Cf. Chapter VI, Division VI.) ↑

Macroeconomics 3rd Edition Hubbard Solutions Manual

The Journey Home—The Fishing and Working of the
Kaloma Shell
I
The return journey of the Sinaketan fleet is made by following exactly the same
route as the one by which they came to Dobu. In each inhabited island, in every
village, where a halt had previously been made, they stop again, for a day or a few
hours. In the hamlets of Sanaroa, in Tewara and in the Amphletts, the partners are
revisited. Some Kula valuables are received on the way back, and all the talo’i gifts
from those intermediate partners are also collected on the return journey. In each of
these villages people are eager to hear about the reception which the uvalaku party
have received in Dobu; the yield in valuables is discussed, and comparisons are
drawn between the present occasion and previous records.
No magic is performed now, no ceremonial takes place, and there would be very
little indeed to say about the return journey but for two important incidents; the
fishing for spondylus shell (kaloma) in Sanaroa Lagoon, and the display and
comparison of the yield of Kula valuables on Muwa beach.
The natives of Sinaketa, as we have seen in the last chapter, acquire a certain
amount of the Koya produce by means of trade. There are, however, certain articles,
useful yet unobtainable in the Trobriands, and freely accessible in the Koya, and to
these the Trobrianders help themselves. The glassy forms of lava, known as
obsidian, can be found in great quantities over the slopes of the hills in Sanaroa and
Dobu. This article, in olden days, served the Trobrianders as material for razors,
scrapers, and sharp, delicate, cutting instruments. Pumice-stone abounding in this
district is collected and carried to the Trobriands, where it is used for polishing. Red
ochre is also procured there by the visitors, and so are the hard, basaltic stones
(binabina) used for hammering and pounding and for magical purposes. Finally,
very fine silica sand, called maya, is collected on some of the beaches, and imported

into the Trobriands, where it is used for polishing stone blades, of the kind which
serve as tokens of value and which are manufactured up to the present day.
II
But by far the most important of the articles which the Trobrianders collect for
themselves are the spondylus shells. These are freely, though by no means easily,
accessible in the coral outcrops of Sanaroa Lagoon. It is from this shell that the
small circular perforated discs (kaloma) are made, out of which the necklaces of the
Kula are composed, and which also serve for ornamenting almost all the articles of
value or of artistic finish which are used within the Kula district. But, only in two
localities within the district are these discs manufactured, in Sinaketa and in Vakuta,
both villages in Southern Boyowa. The shell can be found also in the Trobriand
Lagoon, facing these two villages. But the specimens found in Sanaroa are much
better in colour, and I think more easily procured. The fishing in this latter locality,
however, is done by the Sinaketans only.
Whether the fishing is done in their own Lagoon, near an uninhabited island called
Nanoula, or in Sanaroa, it is always a big, ceremonial affair, in which the whole
community takes part in a body. The magic, or at least part of it, is done for the
whole community by the magician of the kaloma (towosina kaloma), who also fixes
the dates, and conducts the ceremonial part of the proceedings. As the spondylus
shell furnishes one of the essential episodes of a Kula expedition, a detailed account
both of fishing and of manufacturing must be here given. The native name, kaloma
(in the Southern Massim districts the word sapi-sapi is used) describes both the
shell and the manufactured discs. The shell is the large spondylus shell, containing a
crystalline layer of a red colour, varying from dirty brick-red to a soft, raspberry
pink, the latter being by far the most prized. It lives in the cavities of coral outcrop,
scattered among shallow mud-bottomed lagoons.
This shell is, according to tradition, associated with the village of Sinaketa.
According to a Sinaketan legend, once upon a time, three guya’u (chief) women,
belonging to the Tabalu sub-clan of the Malasi clan, wandered along, each choosing
her place to settle in. The eldest selected the village of Omarakana; the second went
to Gumilababa; the youngest settled in Sinaketa. She had kaloma discs in her
basket, and they were threaded on a long, thin stick, called viduna, such as is used in

the final stage of manufacture. She remained first in a place called Kaybwa’u, but a
dog howled, and she moved further on. She heard again a dog howling, and she took
a kaboma (wooden plate) and went on to the fringing reef to collect shells. She
found there the momoka (white spondylus), and she exclaimed: “Oh, this is the
kaloma!” She looked closer, and said: “Oh no, you are not red. Your name is
momoka.” She took then the stick with the kaloma discs and thrust it into a hole of
the reef. It stood there, but when she looked at it, she said: “Oh, the people from
inland would come and see you and pluck you off.” She went, she pulled out the
stick; she went into a canoe, and she paddled. She paddled out into the sea. She
anchored there, pulled the discs off the stick, and she threw them into the sea so that
they might come into the coral outcrop. She said: “It is forbidden that the inland
natives should take the valuables. The people of Sinaketa only must dive.” Thus
only the Sinaketa people know the magic, and how to dive.
This myth presents certain remarkable characteristics. I shall not enter into its
sociology, though it differs in that respect from the Kiriwinian myths, in which the
equality of the Sinaketan and the Gumilababan chiefs with those of Omarakana is
not acknowledged. It is characteristic that the Malasi woman in this myth shows an
aversion to the dog, the totem animal of the Lukuba clan, a clan which according to
mythical and historical data had to recede before and yield its priority to the Malasi
(compare Chapter XII, Division IV). Another detail of interest is that she brings the
kaloma on their sticks, as they appear in the final stage of manufacturing. In this
form, also, she tries to plant them on the reef. The finished kaloma, however, to use
the words of one of my informants, “looked at her, the water swinging it to and fro;
flashing its red eyes.” And the woman, seeing it, pulls out the too accessible and too
inviting kaloma and scatters them over the deep sea. Thus she makes them
inaccessible to the uninitiated inland villagers, and monopolises them for Sinaketa.
There can be no doubt that the villages of Vakuta have learnt this industry from the
Sinaketans. The myth is hardly known in Vakuta, only a few are experts in diving
and manufacturing; there is a tradition about a late transference of this industry
there; finally the Vakutans have never fished for kaloma in the Sanaroa Lagoon.
Now let us describe the technicalities and the ceremonial connected with the fishing
for kaloma. It will be better to give an account of how this is done in the Lagoon of
Sinaketa, round the sandbank of Nanoula, as this is the normal and typical form of
kaloma fishing. Moreover, when the Sinaketans do it in Sanaroa, the proceedings
are very much the same, with just one or two phases missed out.
The office of magician of the kaloma (towosina kaloma) is hereditary in two sub-
clans, belonging to the Malasi clan, and one of them is that of the main chief of

Plate L (A)
Kasi’etana. After the Monsoon season is over, that is, some time in March or April,
ogibukuvi (i.e., in the season of the new yams) the magician gives the order for
preparations. The community give him a gift called sousula, one or two bringing a
vaygu’a, the rest supplying gugu’a (ordinary chattels), and some food. Then they
prepare the canoes, and get ready the binabina stones, with which the spondylus
shell will be knocked off the reef.
Next day, in the morning, the magician performs a rite called ‘kaykwa’una la’i,’ ‘the
attracting of the reef,’ for, as in the case of several other marine beings, the main
seat of the kaloma is far away. Its dwelling place is the reef Ketabu, somewhere
between Sanaroa and Dobu. In order to make it move and come towards Nanoula, it
is necessary to recite the above-named spell. This is done by the magician as he
walks up and down on the Sinaketa beach and casts his words into the open, over
the sea, towards the distant seat of the kaloma. The kaloma then ‘stand up’ (itolise)
that is start from their original coral outcrop (vatu) and come into the Lagoon of
Sinaketa. This spell, I obtained from To’udavada, the present chief of Kasi’etana,
and descendant of the original giver of this shell, the woman of the myth. It begins
with a long list of ancestral names; then follows a boastful picture of how the whole
fleet admires the magical success of the magician’s spell. The key-word in the main
part is the word ‘itolo’: ‘it stands up,’ i.e., ‘it starts,’ and with this, there are
enumerated all the various classes of the kaloma shell, differentiated according to
size, colour and quality. It ends up with another boast; “My canoe is overloaded
with shell so that it sinks,” which is repeated with varying phraseology.

Plate L (B)
Working the Kaloma Shell (I.)
The spondylus shell broken and made into roughly circular pieces by knocking all round; this is done
by men.

Working the Kaloma Shell (II.)
Women grinding pieces of shell into flat discs. Each piece is inserted into a hole at the end of a
wooden cylinder and ground on a flat sandstone.(See Div. III.)
This spell the magician may utter once only, or he may repeat it several times on
successive days. He fixes then the final date for the fishing expedition. On the
evening before that date, the men perform some private magic, every one in his own
house. The hammering stone, the gabila, which is always a binabina (it is a stone
imported from the Koya), is charmed over. As a rule it is put on a piece of dried
banana leaf with some red hibiscus blossoms and leaves or flowers of red colour. A
formula is uttered over it, and the whole is then wrapped up in the banana leaf and
kept there until it is used. This will make the stone a lucky one in hitting off many
shells, and it will make the shells very red.
Another rite of private magic consists in charming a large mussel shell, with which,
on the next morning, the body of the canoe will be scraped. This makes the sea
clear, so that the diver may easily see and frequently find his spondylus shells.

Next morning the whole fleet starts on the expedition. Some food has been taken
into the canoes, as the fishing usually lasts for a few days, the nights being spent on
the beach of Nanoula. When the canoes arrive at a certain point, about half-way
between Sinaketa and Nanoula, they all range themselves in a row. The canoe of the
magician is at the right flank, and he medicates a bunch of red hibiscus flowers,
some red croton leaves, and the leaves of the red-blossomed mangrove—red
coloured substances being used to make the shell red, magically. Then, passing in
front of all the other canoes, he rubs their prows with the bundle of leaves. After
that, the canoes at both ends of the row begin to punt along, the row evolving into a
circle, through which presently the canoe of the magician passes, punting along its
diameter. At this place in the Lagoon, there is a small vatu (coral outcrop) called
Vitukwayla’i. This is called the vatu of the baloma (spirits). At this vatu the
magician’s canoe stops, and he orders some of its crew to dive down and here to
begin the gathering of shells.
Some more private magic is performed later on by each canoe on its own account.
The anchor stone is charmed with some red hibiscus flowers, in order to make the
spondylus shell red. There is another private magic called ‘sweeping of the sea,’
which, like the magic of the mussel shell, mentioned above, makes the sea clear and
transparent. Finally, there is an evil magic called ‘besprinkling with salt water.’ If a
man does it over the others, he will annul the effects of their magic, and frustrate
their efforts, while he himself would arouse astonishment and suspicion by the
amount of shell collected. Such a man would dive down into the water, take some
brine into his mouth, and emerging, spray it towards the other canoes, while he
utters the evil charm.
So much for the magic and the ceremonial associated with the spondylus fishing in
the Trobriand Lagoon. In Sanaroa, exactly the same proceedings take place, except
that there is no attracting of the reef, probably because they are already at the
original seat of the kaloma. Again I was told that some of the private magic would
be performed in Sinaketa before the fleet sailed on the Kula expedition. The objects
medicated would be then kept, well wrapped in dried leaves.
It may be added that neither in the one Lagoon nor in the other are there any private,
proprietary rights to coral outcrops. The whole community of Sinaketa have their
fishing grounds in the Lagoon, within which every man may hunt for his spondylus
shell, and catch his fish at times. If the other spondylus fishing community, the
Vakutans, encroached upon their grounds, there would be trouble, and in olden days,
fighting. Private ownership in coral outcrops exists in the Northern villages of the
Lagoon, that is in Kavataria, and the villages on the island of Kayleula.

Plate LI
III
We must now follow the later stages of the kaloma industry. The technology of the
proceedings is so mixed up with remarkable sociological and economic
arrangements that it will be better to indicate it first in its main outlines. The
spondylus consists of a shell, the size and shape of a hollowed out half of a pear,
and of a flat, small lid. It is only the first part which is worked. First it has to be
broken into pieces with a binabina or an utukema (green stone imported from
Woodlark Island) as shown on Plate L (A). On each piece, then, can be seen the
stratification of the shell: the outside layer of soft, chalky substance; under this, the
layer of red, hard, calcareous material, and then the inmost, white, crystalline
stratum. Both the outside and inside have to be rubbed off, but first each piece has
to be roughly rounded up, so as to form a thick circular lump. Such a lump (see
foregrounds of Plates L (A), L (B)) is then put in the hole of a cylindrical piece of
wood. This latter serves as a handle with which the lumps are rubbed on a piece of
flat sandstone (see Plate L (B)). The rubbing is carried on so far till the outside and
inside layers are gone, and there remains only a red, flat tablet, polished on both
sides. In the middle of it, a hole is drilled through by means of a pump drill—gigi’u
—(see Plate LI), and a number of such perforated discs are then threaded on a thin,
but tough stick (see Plate LII), with which we have already met in the myth. Then
the cylindrical roll is rubbed round and round on the flat sandstone, until its form
becomes perfectly symmetrical (see Plate LII). Thus a number of flat, circular discs,
polished all round and perforated in the middle, are produced. The breaking and the
drilling, like the diving are done exclusively by men. The polishing is as a rule
woman’s work.

Plate LII
Working the Kaloma Shell (III.)
By means of a pump drill, a hole is bored in each disc. (See Div. III.)

Working the Kaloma Shell (IV.)
The shell discs, flat and perforated, but of irregular contour still,
are now threaded on to a thin, tough stick, and in this form they
are ground on a flat sandstone till the roll is cylindrical, that is,
each disc is a perfect circle. (See Div. III.)
This technology is associated with an interesting sociological relation between the
maker and the man for whom the article is made. As has been stated in Chapter II,
one of the main features of the Trobriand organisation consists of the mutual duties
between a man and his wife’s maternal kinsmen. They have to supply him regularly
with yams at harvest time, while he gives them the present of a valuable now and
then. The manufacture of kaloma valuables in Sinaketa is very often associated with
this relationship. The Sinaketan manufacturer makes his kutadababile (necklace of
large beads) for one of his relatives-in-law, while this latter pays him in food. In
accordance with this custom, it happens very frequently that a Sinaketan man

marries a woman from one of the agricultural inland villages, or even a woman of
Kiriwina. Of course, if he has no relatives-in-law in one of these villages, he will
have friends or distant relatives, and he will make the string for one or the other of
them. Or else he will produce one for himself, and launch it into the Kula. But the
most typical and interesting case is, when the necklace is produced to order for a
man who repays it according to a remarkable economic system, a system similar to
the payments in instalments, which I have mentioned with regard to canoe making. I
shall give here, following closely the native text, a translation of an account of the
payments for kaloma making.

Account of the Kaloma Making
Supposing some man from inland lives in Kiriwina or in Luba or in one of the villages
nearby; he wants a katudababile. He would request an expert fisherman who knows how to
dive for kaloma. This man agrees; he dives, he dives … till it is sufficient; his vataga
(large folding basket) is already full, this man (the inlander) hears the rumour; he, the
master of the kaloma (that is, the man for whom the necklace will be made) says: “Good! I
shall just have a look!” He would come, he would see, he would not give any vakapula
payment. He (here the Sinaketan diver is meant) would say: “Go, tomorrow, I shall break
the shell, come here, give me vakapula.” Next day, he (the inlander) would cook food, he
would bring, he would give vakapula; he (the diver) would break the shell. Next day, the
same. He (the inlander) would give the vakapula, he (the diver) would break the shell.
Supposing the breaking is already finished, he (the diver) would say: “Good! already the
breaking is finished, I shall polish.” Next day, he (the inlander) would cook food, would
bring bananas, coco-nut, betel-nut, sugar cane, would give it as vakapula; this man (the
diver) polishes. The polishing already finished, he would speak: “Good! To-morrow I shall
drill.” This man (the inlander) would bring food, bananas, coco-nuts, sugar cane, he would
give it as vakapula: it would be abundant, for soon already the necklace will be finished.
The same, he would give a big vakapula on the occasion of the rounding up of the
cylinder, for soon everything will be finished. When finished, we thread it on a string, we
wash it. (Note the change from the third singular into the first plural). We give it to our
wife, we blow the conch shell; she would go, she would carry his valuable to this man, our
relative-in-law. Next day, he would yomelu; he would catch a pig, he would break off a
bunch of betel-nut, he would cut sugar cane, bananas, he would fill the baskets with food,
and spike the coco-nut on a multi-forked piece of wood. By-and-by he would bring it. Our
house would be filled up. Later on we would make a distribution of the bananas, of the
sugar cane, of the betel-nut. We give it to our helpers. We sit, we sit (i.e., we wait); at
harvest time he brings yams, he karibudaboda (he gives the payment of that name), the
necklace. He would bring the food and fill out our yam house.
This narrative, like many pieces of native information, needs certain corrections of
perspective. In the first place, events here succeed one another with a rapidity quite
foreign to the extremely leisurely way in which natives usually accomplish such a
lengthy process as the making of a katudababile. The amount of food which, in the
usual manner, is enumerated over and over again in this narrative would probably
not be exaggerated, for—such is native economy—a man who makes a necklace to
order would get about twice as much or even more for it than it would fetch in any
other transaction. On the other hand, it must be remembered that what is represented
here as the final payment, the karibudaboda, is nothing else but the normal filling
up of the yam house, always done by a man’s relations-in-law. None the less, in a
year in which a katudababile would be made, the ordinary yearly harvest gift would

be styled the ‘karibudaboda payment for the necklace.’ The giving of the necklace
to the wife, who afterwards carries it to her brother or kinsman, is also characteristic
of the relation between relatives-in-law.
In Sinaketa and Vakuta only the necklaces made of bigger shell and tapering
towards the end are made. The real Kula article, in which the discs are much
thinner, smaller in diameter and even in size from one end of the necklace to the
other, these were introduced into the Kula at other points, and I shall speak about
this subject in one of the following chapters (Chapter XXI), where the other
branches of the Kula are described.
IV
Now, having come to an end of this digression on kaloma, let us return for another
short while to our Sinaketan party, whom we have left on the Lagoon of Sanaroa.
Having obtained a sufficient amount of the shells, they set sail, and re-visiting
Tewara and Gumasila, stopping perhaps for a night on one of the sandbanks of
Pilolu, they arrive at last in their home Lagoon. But before rejoining their people in
their villages, they stop for the last halt on Muwa. Here they make what is called
tanarere, a comparison and display of the valuables obtained on this trip. From each
canoe, a mat or two are spread on the sand beach, and the men put their necklaces
on the mat. Thus a long row of valuables lies on the beach, and the members of the
expedition walk up and down, admire, and count them. The chiefs would, of course,
have always the greatest haul, more especially the one who has been the
toli’uvalaku on that expedition.
After this is over, they return to the village. Each canoe blows its conch shell, a blast
for each valuable that it contains. When a canoe has obtained no vaygu’a at all, this
means great shame and distress for its members, and especially for the toliwaga.
Such a canoe is said to bisikureya, which means literally ‘to keep a fast.’
On the beach all the villagers are astir. The women, who have put on their new grass
petticoats (sevata’i) specially made for this occasion, enter the water and approach
the canoes to unload them. No special greetings pass between them and their
husbands. They are interested in the food brought from Dobu, more especially in the
sago.

People from other villages assemble also in great numbers to greet the incoming
party. Those who have supplied their friends or relatives with provisions for their
journey, receive now sago, betel-nuts and coco-nuts in repayment. Some of the
welcoming crowd have come in order to make Kula. Even from the distant districts
of Luba and Kiriwina natives will travel to Sinaketa, having a fair idea of the date of
the arrival of the Kula party from Dobu. The expedition will be talked over, the
yield counted, the recent history of the important valuables described. But this stage
leads us already into the subject of inland Kula, which will form the subject of one
of the following chapters.

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