ABSTRACT
The assumption that the New World has yielded unusually high returns to the factors of production has been a part of our thinking from the time of Adam Smith and before. It is a congenial assumption, suggesting as one might wish that the right to life, liberty and the pursuit of happiness had material as well as moral advantages. The evidence for it, however, has been collected somewhat casually. In the nineteenth century Anglo-American comparisons were made with scattered data on real wages, that is, data on labour’s marginal product. After the first British census of production in 1907 they were made with data on labour’s average product. In either case the comparisons reflected the productivity of one factor of production alone, although, to be sure, the excess of American over British labour productivity was so large that it appeared that no reasonable allowance for larger inputs of other factors could account for it. The findings for the 1920s of A. W. Flux, the director of the British census, that real value-added per worker in British manufacturing was half the American average was confirmed in later studies by L. Rostas for the late 1930s, by M. Frankel for the late 1940s and, most thoroughly, by a series of studies by the Organization for European Economic Co-operation and the Cambridge Department of Applied Economics on real national income in Europe and America for the early 1950s [ 1 ]. The OEEC-Cambridge studies, which were based on careful international comparisons of price levels rather than on the par exchange rate and included all sectors of the economy rather than manufacturing alone, found that British gross national product per worker was about half the American level and value-added per worker in manufacturing alone was still lower [ 2 ].
