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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

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.

Discovering Diverse Content Through
Random Scribd Documents

That we are dead and you’ve succeeded us.
In short, suppose whatever state of things
Would offer you the greatest happiness;
Gama. (to Hilarion). You run a risk, my friend; so take good
heed,
For no one knows her temper but myself:
(to King) Since her betrothal, king, until the day
When she abjured all male society,
I was the only man she ever saw!
Hilar. Oh, that explains the mystery at once,
And simplifies our task—come, Florian,
And we will show these maidens what they’ve lost.
[Exeunt Hilarion, Florian, and Cyril.

Scene Second.—The Gates of Castle Adamant.
Enter Gobbo, with ladies’ robes on his arm.
Gobbo. More robes for undergraduates! I suppose
Some students are expected here to-day.
No girl without a robe may pass those gates!
They are so proud of these here caps and gowns,
They hardly like to take ’em off a-night!
They even wear (or so I’ve heard it said)
Night-caps and night-gowns when they go to bed!
[Exit into porter’s lodge.
Enter Hilarion, Cyril, and Florian.
Hilar. So, here’s the Princess Ida’s castle? Well,
They must be lovely girls if it requires
Such walls as these to keep intruders off!
Cyril. To keep men off is only half their charge,
And that the easier half. I much suspect
The object of these walls is not so much
To keep men off as keep the maidens in!
Hilar. Here lives the porter, Cyril. I’ll be bound
He’s quite as learned as the rest of them,
Half Newton and half Bacon! Here he comes.
Enter Gobbo from lodge.
Cyril. Half Bacon? No,—all Bacon I should say!
Gobbo. Now then, what is it?
Hilar. I’m a royal prince;
These gentlemen are followers of mine;
We hold King Gama’s letters, charging you

To bear us safely to the Council Hall,
In which the Princess Ida holds her state.
Gobbo. Ho! ho! ho! ho!
Hilar. How now?—you mock at us? (Draws sword.)
Gobbo. Mock you? Why, bless your heart and soul alive,
No man may place his foot within those walls;
It’s death to disobey our Princess, sir!
Flori. It’s double death to disobey your king! (draws.)
Cyril. It’s treble death to disobey ourselves! (draws.)
Gobbo. But, sirs, I am the only man alive
Who ever enters!
Flori. You?
Gobbo. Yes! Once a year
I am led through their ranks that they may see
What sort of thing’s a man! “See here!” she cries.
“See—this is what you lose in losing man!
This is a courtly knight—well born, well formed!”
(I’m comely, sirs; but, bless you, I’m no knight!)
“Look, girls,” she cries, “this is a courtly knight—
A type of all that’s beautiful in man!”
(aloud) And then they make me gibber, squeak, and mow;
Then, with much deference and mock courtesy,
They bow me to my duty at the gate!
Flor. Are there no males whatever in those walls?
Gobbo. None, gentlemen, excepting letter mails!
And they are driven (as males often are
In other large communities)—by women!

If you’ll believe me, gentlemen, I swear,
She’s so confoundedly particular,
She’ll scarcely suffer Dr. Watts’s hymns;
And all the animals she owns are “hers”!
The ladies rise at cockcrow every morn—
Hilar. Oh, then they have male poultry!
Gobbo. Not at all.
(confidentially.) The crowing’s done by an accomplished hen!
Cyril. And what are these? (Looking at robes in lodge.)
Gobbo. The academic robes,
Worn by the lady undergraduates
When they matriculate.
Hilar. I’ll try one on. (Does so.)
Why, see—I’m covered to the very toes!
Ha! I’ve a proposition!
Flori. State it then.
Hilar. Suppose we dress ourselves as girls, and claim
Admission to this University?
It is a thing we’ve often done at home
In amateur theatricals. You know
How well I play viragos in burlesque!
Flori. My Cleopatra, too—remember that!
Cyril. My Mrs. Bouncer, too, in ‘Box and Cox’!
Hilar. Wilt play the woman, then?
Cyril. Of course! What knight
Would hesitate to “take a woman’s part”?

Quartette.—Hilarion, Cyril, Florian, and Gobbo, as they dress
themselves in women’s clothes.
“Les Trois Cousines” (La Perichole).
Flori.
If we are hailed with any query,
Say we are nice young ladies, three;
Who of the world terribly weary,
Enter a University.
Such lovely girls, ha, ha, ha, ha!
All.
Cyril.
We will declare to them that lately,
We have been bored with suitors stately,
And we prefer young ladies greatly—
Sorry to say that that’s too true!
All.
Sorry to say that that’s too true!
Hilar.
We must take care when we are talking,
Never our manly tastes to show;
Hold up our dresses thus in walking,
Showing an inch of ankle—so!
All.
Showing an inch of ankle—so!

Gobbo. (in terror). But, gentlemen, observe—if you do this,
What’s to become of me?
Hilar. I do not know
What will become of you if we do this;
But I can read the fate in store for you
If you presume to interfere with us.
Now, porter, say to whom we should apply
To gain admission.
Gobbo. (in tears). Why, to Lady Blanche
Or Lady Psyche.
Flori. Which is prettier?
Gobbo. Well, I like Lady Blanche by far the best.
Flori. Then we declare for Lady Blanche at once.
Gobbo. You see, she’s more my age—the other one
Is young and pretty! (contemptuously).
Cyril. Bah! Then I retract;
We will be Psyche’s interesting charge!
So go and summon her. (Gobbo rings and then exit.)
Flori. But stop a bit,
What will your father think of such a scheme?
Cyril. Oh, he be—dashed!
Hilar. Extremely shocked I am!
Cyril. I meant my sire—

Hilar. I thought you meant your “dam”!
Enter Lady Psyche from gate, attended.
Psyche. Who summons us?
Hilar. Three would-be students, ma’am—
Three noble ladies, ma’am, of good estate,
Who wish to join this University (they courtesy).
Psyche. If, as you say, you wish to join our ranks,
And will conform with all our rules, ’tis well;
But understand—you must adapt yourselves
To all the regulations now in force,
In Princess Ida’s University.
Hilar. To all its rules, we cheerfully subscribe.
Flori. (aside to Hilarion). Here’s a catastrophe, Hilarion!
This is my sister! She’ll remember me,
Though years have passed since she and I have met!
Hilar. No matter, hide your face—she’ll know you not.
Psyche. You say you’re noblewomen—well, you’ll find
No sham degrees for noblewomen, here—
Or other cruel contrivances to draw
An arbitrary line ’twixt rich and poor,
No butteries, or other institutes,
To make poor students feed rich cooks—no tufts
To mark nobility; except such tufts
As indicate nobility of brain.
As to your fellow-students, mark me well—
There are five hundred maidens in these walls
All good, all learned, and all beautiful.
You must select your intimates from these;
They are prepared to love you; will you swear

You’ll do your best to love them in return?
Flori. Upon our words and honors, ma’am, we will!
Psyche. And will you swear that if, by any chance,
You’re thrown into a man’s society,
You’ll not allow your thoughts to stray from us,
But, at the earliest opportunity,
You’ll give up his society for ours?
Cyril. All this, dear madam, cheerfully we swear.
Psyche. But we go further: will you undertake
That you will never marry any man?
Flori. Indeed we never will!
Psyche. Consider well,—
You must prefer our maids to all mankind!
Hilar. To all mankind we much prefer your maids!
Cyril. We should be dolts, indeed, if we did not,
Seeing how fair—
Hilar. (aside to Cyril). Take care, that’s rather strong!
(aloud) We have seen men of wealth—ay, princes too—
Whose beauty has been so remarkable,
That half the maidens in our monarch’s court
Have pined away and died for love of them!
These men—Apollos in their manly grace,
Indeed in every thing (except in that
They wore a proper quantity of clothes)—
We think of with profound indifference,
But, when we see a woman who excels
In virtue, scholarship, and loveliness,
We long to lay our heads upon her breast,

And join our lives with hers!
Psyche. Why, that’s well said.
But have you left no lovers at your home,
Who may pursue you here?
Hilar. No, madam, none—
We’re homely ladies, as no doubt you see,
And we have never fished for lover’s love—
We smile at girls who deck themselves with gems,
False hair, and meretricious ornaments,
To chain the fleeting fancy of a man;
But do not imitate them. What we have
Of hair is all our own—our color, too,
Unladylike, but not unwomanly,
Is but the glow of rugged, boisterous health;
Our gait, untrammeled by the influence
Of high heeled boots, small waists, and Grecian bends,
May seem undignified—but then we walk
As Nature meant us to—and man has learnt
To reckon Nature an impertinence!
Psyche. I know how coldly men regard a girl,
Whose beauty is her poorest excellence;
But beauty goes for nothing in these walls.
You’ll find yourselves appreciated here:
If what you say is true, you’ll spend with us
A happy, happy time!
Cyril. If, as you say,
Five hundred lovely maidens wait within
To welcome us with smiles and open arms,
I think there’s very little doubt we shall!
[Exeunt into Castle.

Scene Third.—Grounds of Castle Adamant; Waterfall and
Stream, crossed by rustic bridge; Girl-Students discovered
grouped about the stage, occupied with philosophical
instruments, &c.
Ada. I shall be quite alone, dear, in my rooms,
So come and spend a long, long evening—do!
And bring your steam-engine!
Chloe. Oh, that I will!
And you shall show me all your nice new things—
That quadrant—and the anemometer;
And oh, that darling, darling dumpy-level
I’ve heard so much about!
Lydia. My love, I see
You’ve got another new theodolite.
(aside to Chloe) That’s the fifteenth this month! The one I use
Went out of fashion half a year ago!
Oh, I’ve a bit of scandal! What d’you think?
Melissa found a billet-doux, concealed
In that Egyptian mummy we unrolled
Last night. Just think of that!
Enter Melissa, from, bridge, running.
Melissa. I say, my dear,
I have such news for you! I’ve just been shown
The robe for doctors of divinity.
Oh, it’s the sweetest thing!—Magenta silk,
Trimmed with chinchilla, bouillonné behind,
Gored to the figure though; and on the skirt,
Two rows of Cluny lace as deep as that!
Chloe. Oh my! how lovely!

Melissa. Then the trencher cap
Is amber satin, trimmed with Cluny lace
And rows of pearls; and round the outer edge
The tiniest, tiniest rosebuds in the world!
Ada. (to Chloe). It’s much more lovely than the legal gown—
Green grenadine, with rûchings down the front,
That we shall wear.
Chloe. (pouting). I shall give up the law
And go into the church! I’ve always felt
A serious longing for a pastor’s life;
Besides, I’m dark, and look a fright in green!
Sacha. Take care, here’s Lady Blanche. How stern she looks!
Enter Lady Blanche, l., Girls study vigorously.
Blanche. Attention, ladies, while I read to you
The Princess Ida’s list of punishments:
The first is Sacharissa. She’s expelled.
All. Expelled!
Blanche. Expelled—because, although she knew
No man of any kind may see these halls,
She dared to bring a set of chessmen here!
Sacha. (in tears).
I meant no harm—they’re only men of wood!
Blanche. They’re men with whom you give each other mate—
And that’s enough! The next is Sylvia—
Sylvia. Oh!
Blanche. Sylvia is rusticated for a month

Because, in spite of all our college rules
Upon the point, she dared to put three rows
Of lace insertion round her graduate’s gown!
Phyllis will lose three terms, for yesterday,
When, looking through her drawing book, I found
A sketch of a perambulator!
All. (shocked). Oh!
Blanche. Double perambulator, shameless girl!
That’s all at present. Now, attention please,
Your principal, the Princess, comes to give
Her usual inaugural address,
To those young ladies who joined yesterday.
(March.—Enter the Princess, over bridge, attended by eight
“daughters of the plow.” All courtesy profoundly.)
Princess. Women of Adamant—fair neophytes,
Who pant for the instruction we can give,
Attend, while I unfold a parable:
The elephant is stronger than the man,
Yet man subdues him. Why? The elephant
Is elephantine everywhere but here (tapping forehead),
And Man, who’s brain is to the elephant’s
As Woman’s brain to Man’s—that’s rule of three—
Conquers the foolish giant of the woods,
As Woman, in her turn, shall conquer Man.
In mathematics Woman leads the way!
The narrow-minded pedant still believes
That two and two make four! Why, we can prove—
We women, household drudges as we are—
That two and two make five—or three—or seven—
Or five-and-twenty, as the case demands!
Finance? Why, I’ve heard clever men declare,
Their bankers’ balance being overdrawn,

They don’t know where to turn for ready cash,
Yet willfully ignoring all the while
That remedy unfailing—draw a check!
Diplomacy? The wily diplomate
Is absolutely helpless in our hands:
He wheedles monarchs—Woman wheedles him!
Logic? Why, tyrant man himself admits
It’s waste of time to argue with a woman!
Then we excel in social qualities—
Though man professes that he holds our sex
In utter scorn, I’ll undertake to say
If you could read the secrets of his heart,
He’d rather be alone with one of you
Than with five hundred of his fellow-men!
In all things we excel. Believing this,
Five hundred maidens here have sworn to place
Their foot upon his neck. If we succeed,
We’ll treat him better than he treated us,
But if we fail—oh then let hope fail too!
Let no one care one penny how she looks!
Let red be worn with yellow—blue with green,
Crimson with scarlet—violet with blue!
Let all your things misfit, and you yourselves
At inconvenient moments come undone!
Let hair-pins lose their virtue; let the hook
Disdain the fascination of the eye,—
The bashful button modestly evade
The soft embraces of the button hole!
Let old associations all dissolve,
Let Swan secede from Edgar—Grant from Gask,
Sewell from Cross—Lewis from Allenby—
In other words, let Chaos come again!
Who lectures in the Upper Hall to-day?
Blanche. I, madam, on Abstract Philosophy.
There, I propose considering at length

Three points—the Is, the Might Be, and the Must.
Whether the Is, from being actual fact,
Is more important than the vague Might Be,
Or the Might Be, from taking wider scope,
Is, for that reason, greater than the Is,
And lastly, how the Is and Might Be stand
Compared with the inevitable Must.
Prin. The subject’s deep—how do you treat it, pray?
Blanche. Madam, I take three Possibilities,
And strike a balance then between the three,
As thus—the Princess Ida Is our head—
The Lady Psyche Might Be—Lady Blanche—
Neglected Blanche—inevitably Must.
Given these three hypotheses—to find
The actual betting against each of them!
Come, girls!
[Exeunt Lady Blanche and Students.
Prin. (looking after her).
Ambitious fool. And do you think you can
Provide this college with a head. Go, go!
Provide yourself with one—you want it more!
Enter Lady Psyche, over bridge, conducting Hilarion, Florian,
and Cyril.
Lady P. Here is the Princess Ida’s favorite grove,
And here’s the Princess. (To Princess.) These are ladies three
Who join our College.
Hilar. (aside to Cyril). Gods! how beautiful!
Prin. What special study do you seek, my friend?
Hilar. (enraptured). Madam, I come that I may learn to live,

For, if I come not here, I die!
Prin. (laughing). Indeed?
Your case is desperate! We welcome you.
We meet at luncheon—until then, farewell!
[Exit Princess.
Flori. (aside to Hilarion).
When Psyche sees my face, I’m confident
She’ll recognize her brother Florian.
Let’s make a virtue of necessity,
And trust our secret to her gentle care. (Hilarion assents.)
(aloud) Psyche! Why don’t you know me——Florian?
(Psyche amazed.)
Psyche. Why, Florian!
Flori. My sister!
Psyche. Oh, my dear,
What are you doing here—and who are these?
Hilar. I am that Prince Hilarion to whom
Your Princess is betrothed—I come to claim
Her promised love—your brother Florian, here,
And Cyril—come to see me safely through.
Psyche. The Prince Hilarion!—Cyril too! How strange!
My earliest playfellows!
Hilar. (astonished). Why let me look!
Are you that learned little Psyche who
At school alarmed her mates because she called
A buttercup “ranunculus bulbosus”?
Cyril. Are you indeed that Lady Psyche, who
At children’s parties drove the conjurer wild,

Explaining all his tricks before he did them?
Hilar. Are you that learned little Psyche, who
At dinner parties brought into dessert
Would tackle visitors with “you don’t know
Who first determined longitude—I do—
Hipparchus ’twas, B.C. one sixty three!”
Are you indeed that little Psyche then?
Psyche. That small phenomenon in truth am I!
But gentlemen, ’tis death to enter here—
My vow will make me speak. What shall I do?
This palace is a rat trap—we the bait—
And you the foolish victims!
Cyril. Be it so—
A prisoned rat, before he dies the death,
Has liberty to nibble at the bait! (kisses her).
Psyche. Forbear, sir—pray—you know not what you do!
We have all promised to renounce mankind.
Hilar. But on what grounds do you, fair Psyche, base
This senseless resolution?
Psyche. Senseless? No!
It’s based upon the grand hypothesis
That as the Ape is undeveloped Man,
So Man is undeveloped Woman.
Hilar. Then,
This, of all others, is the place for us!
Enter Melissa unperceived, at back; she listens in
astonishment.
If Man is only undeveloped Woman,

We men, if we work very hard indeed,
And do our utmost to improve ourselves—
May in good time be women! Though I own
Up to this point (as far as I’m aware)
The metamorphosis has not commenced.
Melissa. (coming down). Oh, Lady Psyche!—
Psyche. (startled). What—you heard us, then?
Oh, all is lost!
Melissa. Not so; I’ll breathe no word.
(Advancing in astonishment to Florian.)
How marvelously strange! And are you then,
Indeed, young men?
Flori. Well, yes—just now we are;
But hope, by dint of study, to become,
In course of time, young women!
Melissa. (eagerly). No! no! no!
Oh, don’t do that! Is this indeed a man?
I’ve often heard of them, but till this day
Never set eyes on one. They told me men
Were hideous, idiotic, and deformed!
They’re quite as beautiful as women are!
(patting Florian’s cheek)
Their cheeks have not that pulpy softness which
One gets so weary of in womankind!
Their features are more marked,—and oh! their chins
(feeling his chin)
How curious!
Flori. I fear it’s rather rough.
Melissa. Oh, don’t apologize—I like it so!
But I forgot; my mother, Lady Blanche,

Is coming—and her eyes are very keen—
She will detect you, sir!
Hilar. Oh, never fear!
We saw her ladyship an hour ago;
She seemed to have suspicions of our sex,
And showed us robes, and gave us needlework,
As though to test us. Well, we did the work
Like seamstresses—and named the various stuffs,
As if we’d spent a full apprenticeship
At Swan and Edgar’s!
Enter Lady Blanche. Exeunt the three Gentlemen with Lady
Psyche.
Blanche. (aside to Melissa). Here, Melissa—hush!
Those are the three new students?
Melissa. (confused). Yes, they are—
They’re charming girls!
Blanche. (sarcastically). Particularly so!
So graceful, and so very womanly;
So skilled in all a girl’s accomplishments!
Melissa. (confused). Yes very skilled!
Blanche. You stupid little fool!
Awhile ago, I placed before their eyes,
Some Cluny lace—they called it Valenciennes—
Hemming is stitching—so at least they say—
A gusset is a gore—a tuck’s a flounce—
Merino’s cotton—linen’s calico—
Poplin is silk, and rep is corduroy!
I bade them hem a pocket handkerchief—
They placed their thimbles on their forefingers!
And set about their work as clumsily

As if they had been men, in girls’ disguise!
Melissa. (trembling).
You surely wrong them, Mother dear, for see—
(picking up a case from floor)
Here is an étui dropped by one of them—
Containing scissors, needles, and—
Blanche. (taking it from her, and opening it). Cigars!!!
Why these are men! And you knew this, you cat!
Melissa. Oh, spare them—they are gentlemen, indeed,
The Prince Hilarion—betrothed long since
To Princess Ida—with two trusted friends!
Consider, Mother, he’s her husband now!
And has been, twenty years! Consider, too, (insidiously)
You’re only second here—you should be first—
Assist the Prince’s plan, and when he gains
The Princess Ida’s hand, you will be first!
You will design the fashions—think of that!
And always serve out all the punishments!
The scheme is harmless, Mother—wink at it!
Blanche. The prospect’s tempting! Well, well, well, I’ll try—
Though I’ve not winked at any thing for years!
’Tis but one step towards my destiny—
The mighty Must! Inevitable Shall!
[Exit Lady Blanche.
Melissa. Saved for a while, at least!
Enter Florian.
Flori. Melissa here?
Melissa. Oh, sir, you must away from this at once,
My mother guessed your sex—it was my fault,

I blushed and stammered so, that she exclaimed:
“Can these be men” (then seeing this) “Why these—”
“Are men!” she would have added, but “are men”
Stuck in her throat! She keeps your secret, sir,
For reasons of her own; but fly from this,
And take me with you—that is—no, not that!
Flori. I’ll go—but not without you. (Bell.) Why, what’s that?
Melissa. The luncheon bell.
Flori. I’ll wait for luncheon, then.
See, here’s Hilarion with the stern Princess,
And Cyril with my sister Psyche, too.
Enter Cyril with Psyche, and Hilarion with Princess, Lady
Blanche, also all the other Girls, over bridge, bearing
luncheon, which is spread. They all sit down and eat, Cyril
drinking freely.
Prin. You say you know the Court of Hildebrand?
There is a prince there—I forget his name.
Hilar. Hilarion?
Prin. Exactly. Is he well?
Hilar. If it is well to droop and pine and mope—
To sigh, “Oh, Ida! Ida!” all day long—
“Ida! my love! my life! Oh, come to me!”—
If it is well, I say, to do all this,
Then Prince Hilarion is very well.
Prin. He breathes our name? Well, it’s a common one!
And is the booby comely?
Hilar. Pretty well.

I’ve heard it said that if I dressed myself
In Prince Hilarion’s clothes (supposing this
Consorted with my maiden modesty),
I might be taken for Hilarion’s self.
But what is this to you or me, who think
Of all mankind with unconcealed contempt?
Prin. Contempt? Why, damsel, when I think of man,
Contempt is not the word!
Cyril. (getting tipsy). I’m sure of that;
Or, if it is, it surely should not be!
Hilar. (to Cyril). Be quiet, idiot, or they’ll find us out!
Cyril. The Prince Hilarion’s a goodly lad!
Prin. You know him, then?
Cyril. I rather think I do!
We were inseparables.
Prin. Why, what’s this?
You loved him then? (horrified).
Cyril. We did—and do—all three!
And he loves us sincerely in return!
Hilar. (confused). Madam, she jests—
(aside to Cyril.) Remember where you are!
Cyril. Jests? Not at all—why, bless my heart alive,
You and Hilarion, when at the Court,
Rode the same horse!
Prin. Astride?
Cyril. Of course—why not?

Wore the same clothes—and once or twice, I think
Got tipsy in the same good company!
Prin. Well, these are nice young ladies, on my word—
Cyril. (to Florian). Don’t you remember that old laughing song,
That he and we would troll in unison,
At the Three Pigeons—just when daylight broke?
I’ll give it you!
Song, Cyril, Air—Laughing Song from “Manon Lescaut.”
A young and earnest reader,
Once with a special pleader,
Was reading for the bar,
Ha! ha! ha! ha!
A budding luminary,
Particularly wary,
As lovers often are,
Ha! ha! ha! ha!
He met a lady bright, ha! ha!
’Twas very late at night, ha! ha!
There shone no moon nor star,
Ha! ha! ha! ha!
Her head lay on his shoulder,
And what d’you think he told her?—
You’ll never guess, I know.
I scarcely like to tell you,
For fear it should repel you—
Come, whisper, whisper low!
No! no! no! no! no! no! no! no!
Ha! ha! ha! ha! ha! ha! ha! ha!
They threaded many mazes,
Of buttercups and daisies,
They wandered very far,

Ha! ha! ha! ha!
So amiable he found her,
He put his arms around her,
And she opposed no bar,
Ha! ha! ha! ha!
He squeezed her little fin, ha! ha!
He chucked her little chin, ha! ha!
And christened her his star,
Ha! ha! ha! ha!
Her head lay on his shoulder,
And what d’you think he told her?
You’ll never guess, I know—
I’ll hazard it and tell you,
Although it may repel you—
Come, whisper, whisper low!
No! no! no! no! no! no! no! no!
Ha! ha! ha! ha! ha! ha! ha! ha!
(After song he lights a cigarette.)
Prin. Infamous creature—get you hence away!
Hilar. Dog! Here is something more to sing about! (Strikes him.)
Cyril. (sobered). Hilarion—are you mad?
Prin. (astonished). Hilarion? Help!
Why these are men! Lost! Lost! betrayed! undone!
(running on to bridge).
Girls, get you hence—man-monsters, if you dare
Approach one step—I—ah! (loses balance and falls.)
Psyche. Oh! save her, sir!
Blanche. It’s useless, sir, you’ll only catch your death.
(Hilarion springs in.)
Sacha. He catches her—

Melissa. And now he lets her go—
Again she’s in his grasp—
Psyche. And now she’s not!
He seizes her back hair—
Blanche. And it comes off!
Psyche. No—no—she’s saved! She’s saved!
She’s saved! She’s saved!
(Hilarion is seen swimming with the Princess in one arm—he
swims to a bank and the Princess and he are brought to
land.)
Prin. You’ve saved our lives and so have saved your own,
But leave this palace—men in women’s clothes!
Enter Lydia, running.
Why, what’s the matter now?
Lydia. King Hildebrand,
Holding your father captive, sends to say
That if Hilarion suffers any harm,
Your father’s life will pay the penalty,
Moreover—if you do not yield yourself,
According to the tenor of your oath,
He will attack you ere to-morrow’s dawn—
And force compliance!
Prin. Will he so, indeed?
We’ll teach these men a lesson. (To Hilarion.) Get you gone!
You saved our lives—we thank you for it—go!
Arm, Amazons! We’ll show these gentlemen,
How nobly Woman vindicates her claim
To equal individuality!

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