Luddites was a name given to a group of skilled textile workers (known as croppers) who, in the early 1800s in England, would break into textile mills and smash the new mechanized textile looms they feared would put them out of work. Since that time, the term Luddites has often been applied to any group that tries to halt technological advances. Using the neoclassical growth model, show the effect of a technological advance that increases productivity.
a. Show how the technological advance affects living standards both immediately and after the economy adjusts to a new steady state.
b. How can the concerns of the Luddites be represented in a diagram?
c. During the adjustment to the new steady state, is the rate of growth in output greater than, less than, or equal to the rate of growth experienced in the steady state? Explain.