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<!DOCTYPE TEI.2 SYSTEM "base.dtd">





<publicationStmt><distributor>BASE and Oxford Text Archive</distributor>


<availability><p>The British Academic Spoken English (BASE) corpus was developed at the

Universities of Warwick and Reading, under the directorship of Hilary Nesi

(Centre for English Language Teacher Education, Warwick) and Paul Thompson

(Department of Applied Linguistics, Reading), with funding from BALEAP,

EURALEX, the British Academy and the Arts and Humanities Research Board. The

original recordings are held at the Universities of Warwick and Reading, and

at the Oxford Text Archive and may be consulted by bona fide researchers

upon written application to any of the holding bodies.

The BASE corpus is freely available to researchers who agree to the

following conditions:</p>

<p>1. The recordings and transcriptions should not be modified in any


<p>2. The recordings and transcriptions should be used for research purposes

only; they should not be reproduced in teaching materials</p>

<p>3. The recordings and transcriptions should not be reproduced in full for

a wider audience/readership, although researchers are free to quote short

passages of text (up to 200 running words from any given speech event)</p>

<p>4. The corpus developers should be informed of all presentations or

publications arising from analysis of the corpus</p><p>

Researchers should acknowledge their use of the corpus using the following

form of words:

The recordings and transcriptions used in this study come from the British

Academic Spoken English (BASE) corpus, which was developed at the

Universities of Warwick and Reading under the directorship of Hilary Nesi

(Warwick) and Paul Thompson (Reading). Corpus development was assisted by

funding from the Universities of Warwick and Reading, BALEAP, EURALEX, the

British Academy and the Arts and Humanities Research Board. </p></availability>




<recording dur="00:52:45" n="12366">


<respStmt><name>BASE team</name>



<langUsage><language id="en">English</language>



<person id="nm1108" role="main speaker" n="n" sex="m"><p>nm1108, main speaker, non-student, male</p></person>

<person id="sf1109" role="participant" n="s" sex="f"><p>sf1109, participant, student, female</p></person>

<person id="sm1110" role="participant" n="s" sex="m"><p>sm1110, participant, student, male</p></person>

<person id="sf1111" role="participant" n="s" sex="f"><p>sf1111, participant, student, female</p></person>

<personGrp id="ss" role="audience" size="m"><p>ss, audience, medium group </p></personGrp>

<personGrp id="sl" role="all" size="m"><p>sl, all, medium group</p></personGrp>

<personGrp role="speakers" size="6"><p>number of speakers: 6</p></personGrp>





<item n="speechevent">Lecture</item>

<item n="acaddept">Construction Management</item>

<item n="acaddiv">ss</item>

<item n="partlevel">UG/PG</item>

<item n="module">The role of construction in economic development</item>




<u who="nm1108"> let me start by telling you two preliminary things # first of all <pause dur="0.4"/> i plan to do this today in one blow in other words <pause dur="0.9"/> no <pause dur="0.2"/> time <pause dur="0.2"/> out <pause dur="0.5"/> i will just speak for roughly <pause dur="0.6"/> one hour and <pause dur="0.2"/> and a half # bit less <pause dur="0.7"/> i have to be at another classroom # <pause dur="0.8"/> at ten-thirty so # <pause dur="0.2"/> i'll kind of finish the whole thing <trunc>w</trunc> in one hour and a half <pause dur="0.9"/> second you see that there is a piece of # equipment here <pause dur="1.0"/> # <gap reason="name" extent="2 words"/> is from the # Language Studies <pause dur="1.1"/> and she is concerned with language used in classrooms one of the # <pause dur="0.3"/> reasons for this is <pause dur="0.2"/> that we <pause dur="0.4"/> have an increasingly large number of international students <pause dur="0.7"/> and this is a perfect class for this you come from at least fifteen different countries to the best of my knowledge <pause dur="0.7"/> # which is really quite wonderful for a group that is not so large <pause dur="0.8"/> and if you take me into account # <pause dur="0.2"/> another non-U-K person then it's really wonderful <pause dur="1.3"/> # <pause dur="1.0"/> so this is a good example that they can use also to help <pause dur="0.3"/> students understand <pause dur="0.4"/> what kind of language is used in classes

and stuff like this <pause dur="0.3"/> so this has nothing to do with B-B-C or anything of that sort it is just an internal research project <pause dur="2.1"/> okay # <pause dur="0.4"/> what i'm going to do today <pause dur="0.7"/> is based on this <pause dur="0.6"/> two-sheet thing that i gave you the first time we met <pause dur="0.7"/> which <pause dur="0.2"/> sets out my four sessions on <pause dur="0.3"/> say macroeconomic aspects <pause dur="0.4"/> of <pause dur="0.2"/> international construction <pause dur="0.5"/> i told you that <gap reason="name" extent="1 word"/> and i <pause dur="0.3"/> divide this job roughly along micro <pause dur="0.6"/> and macroeconomic lines <pause dur="0.2"/> he's dealing with construction projects and firms largely <pause dur="0.2"/> and i'm dealing largely with <pause dur="0.4"/> # issues of countries <pause dur="0.3"/> and <pause dur="0.2"/> the role of the construction sector as a whole <pause dur="0.3"/> in this business <pause dur="1.8"/> in <trunc>con</trunc> in in in you know the the national economy as a whole <pause dur="0.6"/> now <pause dur="2.3"/> by chance # <pause dur="0.7"/> at the beginning of this year i got this book from the publisher and a number of you have purchased it but it's available in the resource room <pause dur="0.3"/> and the library's supposed to have it so you then don't have to buy it <pause dur="0.3"/> but almost everything that i will be saying <pause dur="0.5"/> # in these four sessions <pause dur="0.2"/> is in this book <pause dur="0.8"/> # also

by chance another book came out <pause dur="0.4"/> # which looks like this <pause dur="0.3"/> and it is called The Future of International Construction it's a bit closer to what we are doing here by title <pause dur="0.4"/> but it actually contains only the results of an international survey <pause dur="0.3"/> that i run from year to year <pause dur="0.2"/> okay <pause dur="0.2"/> so this book now <pause dur="0.4"/> # contains <pause dur="0.3"/> summary results from this survey from nineteen-ninety-two <pause dur="0.3"/> to nineteen-ninety-eight <pause dur="0.6"/> year nineteen-ninety-nine will appear <pause dur="0.2"/> in a paper <pause dur="0.3"/> that <pause dur="0.2"/> the same fellow <pause dur="0.2"/> whose name is <gap reason="name" extent="2 words"/> <pause dur="0.5"/> and myself <pause dur="0.2"/> have written <pause dur="0.3"/> and will publish in Building Research and Information <pause dur="0.3"/> one of the key <pause dur="0.2"/> journals in our field <pause dur="0.5"/> though remember <gap reason="name" extent="1 word"/> is my PhD student <pause dur="0.5"/> and we have another PhD student here i'm sorry <gap reason="name" extent="1 word"/> to bring you out like this <pause dur="0.6"/> # <gap reason="name" extent="2 words"/> from Mexico if you add yet another country # <pause dur="0.2"/> # <pause dur="0.3"/> wonderfully to added to our # mix <pause dur="0.3"/> i like # international <pause dur="0.2"/> classes myself <pause dur="0.3"/> so it's really wonderful to <pause dur="0.3"/> see somebody from Mexico as well <pause dur="0.8"/> <gap reason="name" extent="1 word"/> is now working with me on you

know related things having to do with international issues and construction <pause dur="0.5"/> and one day she will probably write a book with me on something of this yeah <pause dur="0.3"/> just like <gap reason="name" extent="1 word"/> </u><pause dur="0.3"/> <u who="sf1109" trans="pause"> <gap reason="inaudible" extent="1 sec"/> </u><pause dur="0.6"/> <u who="nm1108" trans="pause"> now these two books are available for purchase i'm going to # send this around this will tell you a little bit about this new book <pause dur="0.8"/> unfortunately remember i have nothing to do with prices of these things this thing costs forty pounds <pause dur="0.3"/> which is idiotic but that's what they want for this <pause dur="0.4"/> i get it at a discount <pause dur="0.3"/> so <pause dur="0.7"/> we are selling it to you for thirty-two pounds that is the discount <pause dur="0.2"/> you know # nobody's making any money in this <pause dur="0.2"/> and similarly <pause dur="0.2"/> this costs fifty pounds and we are selling you at the discount that i get it at <pause dur="0.3"/> which is forty pounds <pause dur="1.0"/> okay so we bought these books <pause dur="0.2"/> in order to be able to pass them to those of you <pause dur="0.3"/> who actually want to buy them <pause dur="1.2"/> okay <pause dur="0.2"/> now <pause dur="0.5"/> the syllabus doesn't tell you which pages of this book you should go to but it tells you which papers <pause dur="0.4"/> are assigned for

today's readings yeah <pause dur="0.7"/> so # you should # always be able to tell exactly what is assigned reading for a particular day <pause dur="0.7"/> this is not assigned at all but you will notice that i will be talking about the survey on a number of occasions <pause dur="0.2"/> and whenever i talk about the survey this is the relevant book as well <pause dur="1.1"/> okay these are the preliminaries <pause dur="1.4"/> # even though it is relatively difficult to see this # <pause dur="0.4"/> you will see that i will always put <pause dur="1.3"/> on the overhead projector <pause dur="1.1"/><kinesic desc="puts on transparency" iterated="n"/> a transparency telling which paper i'm dealing with or which chapter <pause dur="0.2"/> okay <pause dur="0.2"/> so this is chapter fifteen The Future of International Construction <pause dur="1.2"/> and # that's a paper that is now reproduced in the book <pause dur="0.2"/> but the paper is listed <pause dur="0.7"/> in the syllabus <pause dur="0.2"/> and it also tells you you can see this <pause dur="0.4"/> two-hundred-and-seventy-five there's the page where you will find it in the book <pause dur="0.2"/> okay <pause dur="0.5"/> i'm sorry for being a bit like # you know talking <pause dur="0.3"/> to kids # but <pause dur="0.2"/> i'm just trying to make sure that you understand exactly what i'm trying to do <pause dur="1.6"/> now remember <pause dur="0.6"/> this paper

is something that was originally <pause dur="0.5"/> given <pause dur="0.2"/> in year nineteen-ninety exactly ten years ago <pause dur="0.8"/> and it was something that was originally discussed <pause dur="0.9"/> in <pause dur="0.4"/> draft form in Sydney Australia the big conference on construction <pause dur="0.6"/> # with many people around the world present <pause dur="1.2"/> # that was an attempt at that time for me to generate discussion within <pause dur="0.6"/> a working commission of C-I-B <pause dur="0.6"/> which is the French acronym for <pause dur="0.5"/> International Building Council <pause dur="0.6"/> C-I-B <pause dur="0.3"/> International Building Council is one of the largest institutions in the world dealing with research <pause dur="0.4"/> into all kinds of issues <pause dur="0.3"/> relating to construction <pause dur="1.6"/> now <pause dur="0.2"/> C-I-B working commission <pause dur="0.5"/> W-fifty-five <pause dur="1.2"/> in <pause dur="0.2"/> building economics is one group that i have been a a part of for many years <pause dur="0.5"/> we tried <pause dur="0.2"/> to generate discussion by writing a draft of this particular paper <pause dur="0.2"/> and giving people some ideas of how i perceive <pause dur="0.5"/> the role of construction in national economic <pause dur="0.7"/> <unclear>culture</unclear> <pause dur="0.8"/> how does construction relate to an economy <pause dur="0.3"/> and how does it change <pause dur="0.3"/> over different stages of

economic development so this is what this paper is about <pause dur="0.4"/> but also remember <pause dur="0.6"/> that this paper was finally <pause dur="0.3"/> published in nineteen-ninety-one <pause dur="0.4"/> and it was then the basis for the survey <pause dur="0.6"/> which is published here <pause dur="0.2"/> which was started in nineteen-ninety-two <pause dur="0.7"/> a number of my colleagues <pause dur="0.8"/> from various countries <pause dur="0.3"/> felt a bit uneasy about some of the propositions that i was proposing at that time <pause dur="0.3"/> and i said fine let us try to see <pause dur="0.2"/> what an international survey of these issues will tell us <pause dur="0.8"/> and # then i decided to do it on an annual basis to see <pause dur="0.2"/> to what extent people agreed with some propositions <pause dur="0.2"/> which actually come from this paper <pause dur="0.2"/> and then <pause dur="0.2"/> to see how that agreement or disagreement changed over time <pause dur="0.2"/> so that's basically the story <pause dur="0.2"/> so next time <pause dur="0.2"/> we are going to be talking about the survey and i will present you the results <pause dur="0.5"/> of your <pause dur="0.6"/> responses i i have analysed in some simple way <pause dur="0.2"/> your responses to the survey which i collected the first time we met <pause dur="0.7"/> okay <pause dur="0.3"/> so that's that's that <pause dur="0.2"/> now remember <pause dur="0.2"/> in

general i not only do not mind but i like when i'm interrupted <pause dur="0.3"/> okay <pause dur="0.2"/> i know how to deal with interruptions of any kind <pause dur="0.2"/> express your opinion <pause dur="0.5"/> freely <pause dur="0.3"/> # tell me that you disagree <pause dur="0.3"/> give me arguments <pause dur="0.3"/> don't be rude <pause dur="0.6"/> be nice <pause dur="0.3"/> but say whatever you wish yeah <pause dur="0.3"/> feel free to talk <pause dur="1.3"/><kinesic desc="changes transparency" iterated="y" dur="7"/> # that's a good habit to establish as early as possible <pause dur="0.4"/> in <pause dur="0.8"/> undergraduate or graduate education <pause dur="1.7"/> the first proposition that i would like to put forward <pause dur="0.9"/> in dealing with this question how does construction fit into a national economy <pause dur="0.3"/> and how does that role change over time <pause dur="0.4"/> is one of the main <pause dur="0.4"/> drivers <pause dur="0.3"/> of change <pause dur="0.2"/> in any society <pause dur="1.3"/> at least <pause dur="0.3"/> at our stage of economic development <pause dur="0.6"/> and that is <pause dur="1.0"/> the drive associated with urbanization and industrialization <pause dur="1.7"/> these are things that happened in this country <pause dur="0.4"/> roughly <pause dur="0.3"/> starting <pause dur="0.2"/> two-hundred years ago <pause dur="0.2"/> until <pause dur="0.2"/> roughly <pause dur="0.5"/> hundred years ago <pause dur="1.1"/> # <pause dur="0.7"/> but perhaps you know these numbers are too rough <pause dur="0.3"/> it took something like hundred-fifty years in this country for <pause dur="0.2"/> urbanization and industrialization to

take place <pause dur="0.6"/> now what happens in this process <pause dur="0.5"/> # let me first tell you what these things are <pause dur="0.3"/> L-D-Cs are less developed countries <pause dur="0.4"/> N-I-Cs are <pause dur="0.2"/> newly industrialized countries <pause dur="0.3"/> and A-I-Cs are advanced industrial # industrial countries <pause dur="0.2"/> or if you wish post-industrial countries which <pause dur="0.7"/> emphasize services much more than before <pause dur="1.0"/> what we have on the vertical axis of this diagram <pause dur="0.4"/> is <pause dur="0.2"/> the share of urban population in total population <pause dur="0.2"/> that is some simple measure of urbanization <pause dur="0.7"/> this country would be some place in the eighties or nineties <pause dur="0.4"/> in percentage terms <pause dur="0.6"/>

a country like Ghana <pause dur="0.2"/> would be in the fives tens fifteens <pause dur="0.3"/> yeah <pause dur="0.3"/> so you start some place around <pause dur="0.3"/> ten fifteen and end up some place around <pause dur="0.3"/> eighty-five ninety per cent <pause dur="0.3"/> because population never will be fully urbanized <pause dur="0.3"/> some people would be <pause dur="0.3"/> in <pause dur="0.2"/> # areas which are less dense <pause dur="0.2"/> so this process <pause dur="0.2"/> from this point <pause dur="0.3"/> to that point in the case of <pause dur="0.2"/> Great Britain <pause dur="0.5"/> took something like a hundred-fifty years very rough numbers <pause dur="0.3"/> okay <pause dur="0.2"/> but for example in China <pause dur="0.3"/> that process will take <pause dur="0.2"/> roughly fifty years <pause dur="1.1"/> so you can imagine <pause dur="0.3"/> that the same diagram applies <pause dur="0.2"/> but the time <pause dur="0.3"/> dimension shrinks <pause dur="0.4"/> so economic development if you wish is ever faster <pause dur="0.3"/> and one reason for that is that people are copying other people <pause dur="0.3"/> there is no reason for the Chinese to invent <pause dur="0.2"/> an elevator motor <pause dur="0.2"/> it exists copy it <pause dur="0.9"/> as long as you can copy <pause dur="0.2"/> you can develop very quickly <pause dur="0.8"/> because everything exists <pause dur="0.2"/> you see we have to figure out how to make it in Beijing <pause dur="0.3"/> and not <pause dur="0.3"/> in <pause dur="0.2"/> i don't know <pause dur="0.4"/> Idaho <pause dur="2.0"/> so

what happens here is that we have something that is known as a sigmoid <pause dur="0.7"/> or logistic curve <pause dur="0.2"/> an S-shaped furve <pause dur="0.2"/> # curve <pause dur="0.2"/> which says <pause dur="0.2"/> that in early stages <pause dur="0.2"/> of urbanization and industrialization <pause dur="0.5"/> population <pause dur="0.3"/> goes to cities at an increasing rate <pause dur="0.8"/> hits an inflection point <pause dur="0.3"/> and then <pause dur="0.3"/> goes to cities <pause dur="0.3"/> at a decreasing rate <pause dur="0.4"/> and the whole thing evens out at some value <pause dur="0.4"/> yeah <pause dur="0.4"/> so that is one of the main drivers <pause dur="0.3"/> people are coming from rural areas into cities <pause dur="1.3"/> that is not happening any more <pause dur="0.2"/> in the United Kingdom <pause dur="0.5"/> that is happening in a very major way <pause dur="0.2"/> in Malaysia <pause dur="0.8"/> in Thailand <pause dur="1.0"/> in China <pause dur="1.0"/> and it is not yet happening in many parts of Africa <pause dur="0.4"/> people are still in villages <pause dur="0.2"/> they're still not going to <pause dur="0.6"/> cities <pause dur="0.2"/> even though obviously in many countries in Africa you have that process already <pause dur="0.2"/> Nairobi's a big city et cetera <pause dur="1.2"/> so this is one of the main drivers <pause dur="0.2"/> this shift of population <pause dur="0.2"/> shift of <trunc>pop</trunc> of population from <pause dur="0.2"/> rural <pause dur="0.2"/> to urban areas <pause dur="0.2"/> drives <pause dur="0.2"/> the process <pause dur="0.2"/> of <pause dur="0.4"/> # construction <pause dur="0.6"/> okay <pause dur="0.5"/> # it is one of the

main drivers of that process <pause dur="0.3"/> now <pause dur="0.6"/><kinesic desc="changes transparency" iterated="y" dur="6"/> if it is correct to say <pause dur="0.3"/> and i can tell you urban geographers and demographers will tell you that that curve <pause dur="0.3"/> generally speaking <pause dur="0.7"/> holds for any particular country <pause dur="1.6"/> then it stands to reason <pause dur="0.9"/> that the role of construction <pause dur="0.6"/> in a particular country shifts this way over time <pause dur="0.3"/> let me explain what this is <pause dur="1.1"/> now this is a share of construction in G-N-P <pause dur="0.5"/> G-N-P is the <pause dur="0.2"/> total output <pause dur="0.2"/> generated in a country <pause dur="0.2"/> in one year <pause dur="0.9"/> Gross National Product <pause dur="0.7"/> the share of construction in G-N-P is a percentage <pause dur="0.7"/> early on in economic development that percentage is quite low <pause dur="0.3"/> say five per cent <pause dur="2.2"/> at the top <pause dur="0.2"/> of this cycle <pause dur="0.9"/> when a country reaches the newly industrialized country status <pause dur="0.5"/> say Mexico today <pause dur="0.3"/> or Turkey today <pause dur="1.0"/> then <pause dur="0.2"/> you get something like fifteen to twenty twenty-five even per cent of G-N-P <pause dur="0.5"/> is contributed by construction <pause dur="0.9"/> and then it declines again <pause dur="0.4"/> to <pause dur="0.2"/> again something like five per cent so there is no paradox then in a country like Ghana <pause dur="0.2"/> and in a country like United Kingdom <pause dur="0.2"/> you have the

same share of construction <pause dur="0.3"/> in total output <pause dur="0.5"/> because <pause dur="0.3"/> many many things are already in place roads are there <pause dur="0.3"/> buildings are there <pause dur="0.3"/> schools are there <pause dur="0.2"/> ports are there <pause dur="0.7"/> everything is there but you need to maintain it and so on <pause dur="0.3"/> you add a little bit <pause dur="0.2"/> you destroy an old building and put another one in there you take an old bridge down and put another one there <pause dur="0.2"/> but nevertheless most of the stuff is there and people are not moving around any more <pause dur="1.4"/> so <pause dur="0.3"/> in L-D-Cs and A-I-Cs <pause dur="0.4"/> you would expect roughly the same <pause dur="1.1"/> shares of construction in G-N-P <pause dur="0.3"/> whereas <pause dur="0.7"/> newly industrialized countries would have very high share <pause dur="0.2"/> because <pause dur="1.2"/> concrete is being poured right now <pause dur="0.8"/> industrial capacity is being put in place but with it housing schools everything is happening at the same time <pause dur="0.2"/> enormous reconstruction <pause dur="0.4"/> # benefits from that kind of thing <pause dur="0.7"/> now i haven't mentioned so far what is on the horizontal axis <pause dur="0.2"/> i mentioned time <pause dur="0.4"/> but actually the measure that you see there is G-N-P per capita <pause dur="0.5"/> in other words total

output divided by total population of a particular country <pause dur="0.6"/> it is a measure <pause dur="0.3"/> of <pause dur="0.5"/> economic development <pause dur="0.7"/> it is not a measure of economic well-being <pause dur="0.8"/> but <pause dur="0.3"/> it is sometimes <pause dur="0.9"/> taken to be you know economic development is taken to be <pause dur="0.3"/> # a kind of measure <pause dur="0.4"/> of well-being <pause dur="0.4"/> people are better off <pause dur="0.2"/> when <pause dur="0.2"/> G-N-P per capita is high <pause dur="0.4"/> in some countries in the world that number is now <pause dur="0.2"/> six seven eight ten-thousand dollars per <pause dur="0.5"/> inhabitant <pause dur="0.5"/> in some other country it is five six-hundred dollars <pause dur="0.2"/> so there's a huge range <pause dur="0.3"/> in which # countries fall <pause dur="0.7"/> but nevertheless you can expect <pause dur="0.5"/> that if this is so <pause dur="0.6"/> and that's the next # <pause dur="0.7"/> diagram <pause dur="0.7"/><kinesic desc="changes transparency" iterated="y" dur="7"/> that <pause dur="0.3"/> you will actually over time <pause dur="0.2"/> experience a shift <pause dur="0.7"/> in the same direction <pause dur="0.8"/> so <pause dur="0.3"/> i have the same diagram <pause dur="0.2"/> but here i say time and not G-N-P per capita <pause dur="0.4"/> why <pause dur="0.2"/> because under quote unquote normal conditions <pause dur="0.7"/> a country <pause dur="0.3"/> would be <pause dur="0.2"/> developing <pause dur="0.5"/> but there is no guarantee that a country will be developing <pause dur="0.3"/> a country may be stagnating <pause dur="0.2"/> a country may be going backwards <pause dur="0.3"/> in many parts of the world

today we have civil wars <pause dur="0.3"/> and different stages of development <pause dur="0.5"/> you know in ex-Yugoslavia where i originally come from <pause dur="0.2"/> # there is a civil war still <pause dur="0.2"/> kind of simmering in the background <pause dur="0.2"/> and obviously <pause dur="0.4"/> not too many people are building there <pause dur="0.3"/> there are no tourists on the coast even though there is no war there <pause dur="0.3"/> but <pause dur="0.2"/> because there are no tourists there are no new hotels added or not too many <pause dur="0.2"/> et cetera <pause dur="0.4"/> but <pause dur="0.2"/> in some countries civil war is going as we speak Sri Lanka is a good example but the Sudan is another <pause dur="0.3"/> so in many of these countries the process of economic development is moving backwards <pause dur="0.6"/> so you can basically use the same graph <pause dur="0.4"/> but looking backwards you know that is what would happen <pause dur="0.2"/> everything will be sliding down <pause dur="0.3"/> everything will be declining <pause dur="0.2"/> yes </u><pause dur="0.3"/> <u who="sm1110" trans="pause"> just ask like # <pause dur="0.4"/> you say that all the <pause dur="0.2"/> the <pause dur="0.3"/> say all <pause dur="0.6"/> most countries now are <pause dur="0.3"/> or half the countries <pause dur="0.3"/> some of whom are N-I-C and some of whom are A-I-C <pause dur="0.2"/> but what happens when <pause dur="0.4"/> all countries which A-I-C <pause dur="0.7"/> does that mean that the G-N-P <gap reason="inaudible" extent="1 sec"/> <pause dur="0.6"/> will <pause dur="0.3"/> go down </u><pause dur="0.7"/> <u who="nm1108" trans="pause"> okay in other words you are saying <pause dur="0.6"/> what you are talking to us about right now <pause dur="0.2"/> has to do with a particular process which will at some point end <pause dur="0.3"/> yeah <pause dur="0.5"/> and what will happen then <pause dur="0.5"/> # the answer is i have no idea <pause dur="1.8"/> i am and

you know i'm saying # in a number of introductory parts of this paper <pause dur="0.3"/> that i'm actually covering a period of roughly twenty-five years ahead <pause dur="0.8"/> why <pause dur="0.2"/> that's one generation <pause dur="0.5"/> it is still possible to think <pause dur="0.2"/> approximately twenty-five years from now one generation <pause dur="1.4"/> but most of the data that i'm using in order to make these kinds of arguments go back fifty to hundred years <pause dur="0.6"/> two <pause dur="0.2"/> to four generations <pause dur="0.2"/> so it gives me some feeling <pause dur="0.3"/> of how these things may be played out <pause dur="0.7"/> now it is really hard to say <pause dur="0.2"/> what will happen if we assume <pause dur="0.4"/> that the level of development around the globe <pause dur="0.2"/> say fifty years from now hundred years from now <pause dur="0.2"/> will be generally uniform <pause dur="0.8"/> will be generally like the U-K today <pause dur="0.8"/> what will happen then <pause dur="0.8"/> i don't know <pause dur="0.8"/> i understand this particular process <pause dur="0.2"/> because it is still <pause dur="0.3"/> moving <pause dur="0.3"/> i can see what is likely to happen up to some point <pause dur="0.3"/> but after that it's relatively difficult to say <pause dur="0.9"/> however you know many economists would say that the process of economic development will probably never end in that

sense <trunc>th</trunc> there will be always some approximation <pause dur="0.4"/> # to equality in different parts of the world <pause dur="0.3"/> there may be some movements some parts will be going up some down people will be shifting around <pause dur="0.8"/> just like in this country <pause dur="0.3"/> you know for example Manchester Liverpool <pause dur="0.2"/> were very important industrial centres people moved there to find work <pause dur="0.3"/> now they're moving out <pause dur="0.2"/> which doesn't mean that these places are going to hell it simply means that the industrial employment of the type that <pause dur="0.6"/> they had before <pause dur="0.2"/> are simply <pause dur="0.4"/> now being changed <pause dur="0.3"/> and there is a process of transition <pause dur="0.3"/> so we may have things like this <pause dur="0.3"/> but the main forces <pause dur="0.3"/> of urbanization and industrialization <pause dur="0.2"/> will have been played out <pause dur="0.3"/> say <pause dur="0.2"/> by fifty <pause dur="0.2"/> hundred years from now <pause dur="0.6"/> okay <pause dur="0.3"/> and at that point <pause dur="0.2"/> some other theoretical framework will be needed <pause dur="0.2"/> to explain what is going on and why <pause dur="0.7"/> yeah <pause dur="1.6"/> so what i'm saying here is <pause dur="0.6"/> because in a normal situation in which there is no war there is no economic decline due to <pause dur="0.4"/> # earthquake or you know <pause dur="0.2"/> case of Turkey <pause dur="0.3"/> #

possible case of Japan we never know when that will happen but Tokyo is a tremendous risk <pause dur="0.2"/> and not only Tokyo <pause dur="0.2"/> huge concentration of people <pause dur="0.3"/> in California <pause dur="0.2"/> is also continuously at risk and may actually take people <pause dur="0.5"/> back into <pause dur="0.3"/> # previous stages of economic development <pause dur="0.2"/> if something bad happens <pause dur="0.2"/><kinesic desc="changes transparency" iterated="y" dur="5"/> which will happen the question is only when <pause dur="0.9"/> so if that is true <pause dur="0.6"/> then i am arguing <pause dur="0.6"/> it is also possible <pause dur="0.7"/> that not only the share of construction <pause dur="1.0"/> in G-N-P <pause dur="0.4"/> but that the volume of construction <pause dur="0.2"/> actual volume <pause dur="0.4"/> would also peak <pause dur="0.4"/> would reach some point <pause dur="0.7"/> and then start declining <pause dur="0.4"/> in

other words <pause dur="0.2"/> there will really be fewer pounds and yen <pause dur="1.3"/> and dollars spent on a on construction <pause dur="0.5"/> having taken care of inflation <pause dur="0.5"/> and in other words the value of yen <pause dur="0.4"/> dollar <pause dur="0.2"/> and pound <pause dur="0.8"/> yes <gap reason="name" extent="1 word"/> </u><pause dur="0.5"/> <u who="sf1109" trans="pause"> <gap reason="inaudible" extent="1 word"/> <pause dur="0.2"/> # <pause dur="1.1"/> well we couldn't <pause dur="0.2"/> we wouldn't be able to generalize that for all type of # all types of countries <pause dur="0.5"/> both # let's say for less developed countries <pause dur="0.7"/> you still have a lot of population <pause dur="0.6"/> drawing you know <pause dur="0.5"/> height rate of # <pause dur="0.2"/> population growth <pause dur="0.4"/> <gap reason="inaudible" extent="1 sec"/> secondly <pause dur="0.7"/> perhaps the the <pause dur="0.4"/> if <pause dur="0.9"/> if this process of the government stops it could be because of the economic crisis <pause dur="0.5"/> not exactly because of the <pause dur="1.1"/> of the process of <pause dur="0.9"/> a lot of people <pause dur="0.2"/> going to the cities and <pause dur="0.2"/> things already being built there </u><u who="nm1108" trans="overlap"> mm </u><pause dur="0.2"/> <u who="sf1109" trans="pause"> and # no no need for building more <pause dur="0.7"/> so <pause dur="0.3"/> # </u><u who="nm1108" trans="overlap"> no i i agree i agree with what you're saying but i would also say that you know what i have in mind in this particular case <pause dur="0.4"/> are countries like # the U-K like # Holland like Denmark </u><pause dur="0.2"/> <u who="sf1109" trans="pause"> yeah </u><pause dur="0.3"/> <u who="nm1108" trans="pause"> # <pause dur="0.2"/> by the way the U-K

# was America hundred years ago <pause dur="0.2"/> this was the most developed part of the world # <pause dur="0.2"/> hundred years ago <pause dur="0.6"/> # this was the place where people would go to do anything not just to build obviously <pause dur="0.7"/> # but <pause dur="0.2"/> you know at some point <pause dur="0.2"/> # because this country started the process of industrial development first <pause dur="0.8"/> that <pause dur="0.4"/> process kind of played itself out </u><pause dur="0.3"/> <u who="sf1109" trans="pause"> mm </u><u who="nm1108" trans="latching"> to a great extent <pause dur="0.3"/> now the economy's based on completely different things <pause dur="0.2"/> you all know about e-commerce and things like this it's based on something quite different <pause dur="0.4"/> # this is a typical post-industrial <pause dur="0.3"/> # if you wish economy <pause dur="0.4"/> but Denmark is even farther ahead you know there are even fewer <pause dur="0.3"/> reasons to expect that Denmark will change very much from <pause dur="0.6"/> now <pause dur="0.7"/> to i don't know twenty-five years from now so <pause dur="0.2"/> some of the economists who agree with me <pause dur="0.2"/> that even volume may decline would be coming from countries like Denmark <pause dur="0.7"/> okay <pause dur="0.2"/> where they don't expect <pause dur="0.3"/> significant <pause dur="0.2"/> change any more <pause dur="0.2"/> and they expect the volume to be coming down <pause dur="0.5"/> now obviously i'm

talking about so-called secular or long term threats <pause dur="0.2"/> i'm not talking about cyclical behaviour of the construction industry <pause dur="0.2"/> that follows the business cycle <pause dur="0.7"/> business cycles <pause dur="0.3"/> depending <pause dur="0.4"/> on many circumstances <pause dur="0.2"/> would be between <pause dur="0.2"/> traditionally <pause dur="0.2"/> three-and-a-half and five years <pause dur="1.1"/> now <pause dur="0.2"/> the last two business cycles were <pause dur="0.2"/> a bit longer <pause dur="1.7"/> but nevertheless business cycles are short term <pause dur="0.4"/> you have everything <pause dur="0.2"/> or almost everything going up then collapsing then going up again <pause dur="0.2"/> so i'm not talking about that cyclical behaviour <pause dur="0.2"/> that will be going around this thing <pause dur="0.3"/> yeah <pause dur="0.2"/> i'm talking about <pause dur="0.3"/> the average <pause dur="0.4"/> that is moving in some smooth way <pause dur="0.5"/> it is very difficult to actually demonstrate that anything like this is going on statistically <pause dur="0.3"/> because we don't possess good enough data <pause dur="0.2"/> for many countries <pause dur="0.3"/> to make such claims <pause dur="0.3"/> but you will find if you look into this book <pause dur="0.2"/> # <pause dur="0.2"/> you will find diagrams which actually suggest these kinds of things <pause dur="0.4"/> i cannot find it right now <pause dur="0.5"/> or i will <pause dur="0.7"/> # there is a

diagram on page thirty-one by the way <pause dur="0.3"/> you cannot see it terribly well but there is a curve that looks like this and there are many countries plotted <pause dur="0.4"/> # less developed <pause dur="0.2"/> newly industrialized <pause dur="0.2"/> and advanced industrial countries <pause dur="0.4"/> but statistical evidence for anything like this <pause dur="0.2"/> is hard to agree with people because you <pause dur="0.2"/> you are talking about <pause dur="0.2"/> a statistical cloud of points <pause dur="0.2"/> which can be interpreted many different ways <pause dur="0.8"/> at any rate <pause dur="0.5"/> # <pause dur="0.9"/> i personally believe that if we have a long term decline of the share of construction in G-N-P <pause dur="0.2"/> you would ultimately have <pause dur="0.2"/> a volume decline it cannot just go on for a very long period of time <pause dur="0.2"/> and this is something that i will try to argue right now <pause dur="0.6"/> it is in the text i don't have any pictures so let me # try to do it <pause dur="0.3"/> by just talking to you about this <pause dur="2.2"/> people <pause dur="1.1"/> typically <pause dur="0.2"/> will tell you <pause dur="0.5"/> that <pause dur="0.3"/> those sectors of the economy <pause dur="0.4"/> where employment is dropping <pause dur="0.8"/> do not necessarily produce less output <pause dur="0.2"/> because employment is dropping because productivity is going down <pause dur="0.6"/>

let me show you # <pause dur="0.4"/> then i'll skip # the the next # <pause dur="0.2"/> diagram for the time being <pause dur="0.7"/><kinesic desc="changes transparency" iterated="y" dur="5"/> # here is a diagram that shows # employment share <pause dur="0.2"/> of agriculture <pause dur="0.2"/> services in industry <pause dur="0.5"/> according to a number of serious economists who have looked over one-hundred years to see <pause dur="0.3"/> how employment for example <pause dur="0.3"/> shapes up <pause dur="0.3"/> for <pause dur="0.3"/> these broad categories of economic sector <pause dur="1.5"/> in agriculture the drop <pause dur="0.3"/> corresponds to <pause dur="0.2"/> an incredible increase in productivity <pause dur="1.3"/> by the way <pause dur="0.4"/> the construction sector around the globe but especially the United States which is still the most productive society on this planet <pause dur="0.7"/> way more productive than Japan <pause dur="0.7"/> which is catching up with United States but still <pause dur="0.8"/> the productivity <pause dur="0.3"/> not the rate of change of productivity <pause dur="0.4"/> of most American workers is tremendous by comparison with most <pause dur="0.2"/> Japanese workers <pause dur="0.7"/> # <pause dur="0.2"/> the change is <trunc>sli</trunc> somewhat different but in the last couple of years <pause dur="0.5"/> the productivity increases in United States have also increased unbelievably <pause dur="0.6"/> so that <pause dur="0.2"/> we have an incredibly productive society <pause dur="0.2"/>

still <pause dur="0.3"/> agriculture <pause dur="0.4"/> is the <trunc>soci</trunc> is the sector of the national economy in the United States <pause dur="0.2"/> that has shown <pause dur="0.2"/> greatest improvements in productivity since the war <pause dur="0.5"/> # by the war i mean the Second World War <pause dur="1.2"/> # <pause dur="0.8"/> now <pause dur="0.3"/> i can tell you <pause dur="0.4"/> in this particular diagram <pause dur="0.3"/> which comes from the work of one great economist whose name is # <pause dur="2.2"/> # Angus Madison Madison he's mentioned in the in the text <pause dur="0.5"/> this <pause dur="0.2"/> bit which is called industry actually combines manufacturing and construction <pause dur="1.4"/> he sees a very tight relationship between manufacturing and construction <pause dur="0.2"/> and i agree with that particular <trunc>po</trunc> # position and we will <pause dur="0.2"/> talk about these things later on in this course <pause dur="0.8"/> he says <pause dur="0.2"/> that industry experiences <pause dur="0.2"/> this kind of growth up to a point of employment in industry and construction <pause dur="0.2"/> and then it starts declining <pause dur="0.5"/> we know we know that manufacturing is the second major <pause dur="0.7"/> beneficiary <pause dur="0.2"/> of <pause dur="0.3"/> productivity increases in United States and in other parts of the world <pause dur="0.3"/> agriculture and then manufacturing tremendous increases <pause dur="0.8"/> now i can tell

you one thing <pause dur="1.5"/> the construction sector <pause dur="0.5"/> in most countries according to all serious studies and especially in United States <pause dur="0.4"/> shows no productivity increases since Second World War <pause dur="1.0"/> no productivity increases <pause dur="1.9"/> it is staggering <pause dur="1.0"/> and normally you know many of us who analyse the construction sector <pause dur="0.3"/> would say <pause dur="0.6"/> that <pause dur="0.2"/> that doesn't take into account the quality of buildings and so on we don't do things this way any more <pause dur="0.5"/> we spend much more money on various kinds of electrical mechanical <pause dur="0.2"/> and electronic systems <pause dur="0.3"/> we don't just take <pause dur="0.3"/> bricks and <trunc>morta</trunc> mortar <trunc>bus</trunc> # buildings like this one <pause dur="0.8"/> but nevertheless <pause dur="0.3"/> anybody dealing with any other industries say I-T-related industries will tell you <pause dur="0.4"/> that <pause dur="0.2"/> quality changes there are staggering by comparison with construction <pause dur="0.5"/> so construction is one of the sectors that <pause dur="0.3"/> typically <pause dur="0.2"/> in any serious study comparative or just for one country <pause dur="0.2"/> comparing different sectors and industries <pause dur="0.3"/> shows no productivity increases or slight negative <pause dur="0.3"/> productivity

increases <pause dur="0.3"/> in other words <pause dur="0.2"/> drop in productivity <pause dur="1.5"/> these are facts <pause dur="0.5"/> so <pause dur="1.1"/> it is also a fact <pause dur="0.4"/> that the number of people working in construction <pause dur="0.3"/> in advanced industrialized countries <pause dur="0.5"/> is dropping <pause dur="1.0"/> we have very strong data about that <pause dur="0.3"/> the more developed the economy <pause dur="0.3"/> the less people work in construction <pause dur="0.7"/> from one point to another however you compare it over time <pause dur="0.8"/> it is dropping <pause dur="0.8"/> if productivity is not increasing <pause dur="0.4"/> where is the volume of construction going to come from </u><pause dur="0.9"/> <u who="sf1111" trans="pause"> maintenance and repair </u><pause dur="0.4"/> <u who="nm1108" trans="pause"> i'm sorry </u><pause dur="0.4"/> <u who="sf1111" trans="pause"> maintenance and repair </u><pause dur="0.3"/> <u who="nm1108" trans="pause"> yes possibly and <kinesic desc="changes transparency" iterated="y" dur="8"/> that's why i had this # diagram here <pause dur="1.0"/> on the previous page <pause dur="0.8"/> you know saying that <pause dur="1.2"/> subsectoral share <pause dur="0.5"/> in total construction which will be new construction and then maintenance and repair <pause dur="0.3"/> is changing over time <pause dur="1.0"/> so new construction may be dropping <pause dur="0.6"/> but maintenance and repair is increasing <pause dur="0.8"/> again i will be talking to you about this again but <pause dur="0.6"/> # <pause dur="0.3"/> # i have studied together with a colleague from the United States i have studied maintenance and repair

vis-à-vis <pause dur="0.2"/> new construction in United States <pause dur="0.6"/> it is still a very small proportion of # total construction there <pause dur="0.2"/> it is something like thirty per cent <pause dur="0.6"/> in this country it is believed to be something like <pause dur="0.5"/> forty to fifty per cent <pause dur="1.5"/> # maintenance and repair <pause dur="0.4"/> out of total <pause dur="0.8"/> but <pause dur="0.3"/> we see <pause dur="0.3"/> that maintenance and repair construction is actually much less capable <pause dur="0.2"/> of moving the rest of the national economy <pause dur="0.3"/> than <pause dur="0.2"/> new construction <pause dur="0.6"/> so i like to say that maintenance and repair construction <pause dur="0.3"/> can provide a lower bound on the drop of construction ability <pause dur="1.3"/> you know you will always have <pause dur="0.2"/> replacement of some facilities <pause dur="0.2"/> you will always have an increasing amount of maintenance and repair <pause dur="0.3"/> but that is a declining <pause dur="0.7"/> thing nevertheless <pause dur="0.2"/> in most of the economies we have studied <pause dur="0.4"/> this economy in particular <pause dur="0.2"/> but <pause dur="0.3"/> again <pause dur="0.2"/> countries like Denmark and so on would show <pause dur="0.4"/> in very high <pause dur="0.9"/> # # development <pause dur="0.2"/> # # environments <pause dur="0.3"/> that construction is basically a declining sector <pause dur="0.3"/> in volume terms as well <pause dur="1.0"/> now i am

stressing all this because many of my colleagues construction economists disagree with this proposition <pause dur="0.8"/> they agree with the <trunc>pr</trunc> # the previous one <pause dur="0.6"/> that <pause dur="0.6"/> the share of construction in G-N-P first goes up and then comes down <pause dur="0.4"/> but that volume first comes down and then comes down <pause dur="0.2"/> later on <pause dur="1.2"/> most of my colleagues disagree <pause dur="0.3"/> about <pause dur="1.0"/> and that is therefore something that we will see you know that is a proposition <pause dur="0.3"/> that i am putting my name behind <pause dur="0.5"/> and one day it will be the proven <pause dur="0.2"/> # <pause dur="0.3"/> correct or incorrect <pause dur="0.3"/> but for the time being <pause dur="0.3"/> i don't see any strong reasons <pause dur="0.2"/> to believe that these things would not continue <pause dur="0.2"/> to look like they do <pause dur="1.9"/><kinesic desc="changes transparency" iterated="y" dur="4"/> the survey which i will discuss with you next time indicates <pause dur="0.2"/> that people disagree with that proposition and that's interesting <pause dur="0.4"/> you know that's interesting and normally i have to listen to this <pause dur="0.2"/> i have to listen to <pause dur="0.4"/> the <pause dur="0.3"/> common sense <pause dur="0.7"/> within my own professional <pause dur="0.2"/> group <pause dur="1.6"/> now <pause dur="0.2"/> this diagram is a kind of a <pause dur="1.6"/> taking on taking on of the previous one <pause dur="0.2"/> saying <pause dur="0.4"/> that <pause dur="0.3"/> if i'm

correct about what i am saying right now we would expect something like this with countries <pause dur="0.3"/> which <pause dur="0.2"/> today <pause dur="0.3"/> today have the status of <pause dur="0.3"/> less developed <pause dur="0.6"/> newly industrialized <pause dur="0.3"/> or advanced industrial countries <pause dur="0.9"/> in other words <pause dur="0.2"/> that we can expect to that today's L-D-Cs will <pause dur="0.4"/> continue <pause dur="0.2"/> increasing their volume <pause dur="0.6"/> of

# construction <pause dur="0.2"/> volume not share only <pause dur="1.1"/> that NICs <pause dur="0.6"/> would at some point reach <pause dur="0.5"/> some kind of peak and then decline <pause dur="1.1"/> in volume <pause dur="0.2"/> as well <pause dur="0.8"/> and that today's A-I-Cs <pause dur="0.4"/> will <pause dur="0.3"/> at some point start experiencing this kind of growth <pause dur="1.5"/> so <pause dur="0.4"/> # that is a kind of summary of all these diagrams <pause dur="0.3"/> now let me tell you something about these diagrams which i didn't mention before <pause dur="0.3"/> they are obviously not meant to show any mathematical relationship <pause dur="0.8"/> they are <pause dur="0.3"/> ideograms <pause dur="0.3"/> something goes up and comes down so i call <pause dur="0.3"/> this kind of curve <pause dur="0.2"/> i call it simply <pause dur="0.2"/> U-shaped <pause dur="1.1"/> that curve i call S-shaped <pause dur="0.7"/> # <pause dur="0.2"/> et cetera <pause dur="0.2"/> in order to show <pause dur="0.2"/> the basic relationships <pause dur="0.3"/> if you would actually want to draw these things more correctly <pause dur="0.3"/> you would probably

have <pause dur="0.4"/> # something like an incline here and a <pause dur="0.4"/> you know some kind of <pause dur="0.3"/> # ramp <pause dur="0.3"/> taking you down to some kind of value <pause dur="0.2"/> obviously doesn't go from zero up and then down to zero <pause dur="0.2"/> it comes to some asymptotic value <pause dur="0.3"/> what was some value that it approximates in the long run <pause dur="0.6"/> but this is simply <pause dur="0.2"/> a simplification <pause dur="0.3"/> to give people a clear picture of what's going on <pause dur="0.5"/> these things would <pause dur="0.2"/> make the whole thing <pause dur="0.2"/> # # too complicated <pause dur="0.2"/> to understand <pause dur="1.5"/> the next point in my argument is <pause dur="0.2"/> like this and this directly relates to the whole <kinesic desc="changes transparency" iterated="y" dur="6"/> question of international trade <pause dur="0.4"/> in construction activity <pause dur="1.7"/> in other words international construction as such <pause dur="0.7"/> i'm saying that present <pause dur="0.2"/> patterns of international trade <pause dur="0.4"/> in construction services <pause dur="1.4"/> to a great extent construction materials as well <pause dur="0.3"/> but mainly construction services <pause dur="0.2"/> looks like this <pause dur="0.4"/> the L-D-Cs are recipients of trade from <pause dur="0.2"/> advanced industrial countries <pause dur="0.5"/> but also from <pause dur="0.4"/> newly industrialized countries <pause dur="0.7"/> # <pause dur="0.3"/> even ten years ago this was very difficult for people to understand <pause dur="0.6"/> even

ten years ago <pause dur="0.4"/> you know i had to strain <pause dur="0.2"/> to explain to people that remember <pause dur="0.2"/> only ten to fifteen years ago we would think about Japan as a NIC <pause dur="0.8"/> and not as an advanced industrial <pause dur="0.5"/> country <pause dur="0.6"/> which it is recognized to be today <pause dur="1.2"/> i now don't have to strain so much because <pause dur="0.3"/> it is a fact that many Japanese <pause dur="0.3"/> companies have done extremely well <pause dur="0.2"/> in the United States and Europe <pause dur="0.2"/> and basically left <pause dur="0.2"/> many of these people are not as interested as they used to be <pause dur="0.2"/> in these kinds of markets <pause dur="0.4"/> they are <pause dur="0.5"/> interested in some niche markets but basically they are not <pause dur="0.5"/> at a stage of economic development where that is very interesting for them <pause dur="0.8"/> however <pause dur="0.4"/> we have here we have China here which ten years ago nobody would imagine <pause dur="0.4"/> that Chinese construction companies would be <pause dur="0.2"/> building <pause dur="0.2"/> relatively far from home very complex projects <pause dur="1.6"/> at that time <pause dur="0.2"/> ten years ago it would be surprising that Pakistani companies are building these kinds of things <pause dur="0.2"/> not just Italian companies <pause dur="0.3"/> you know building dams <pause dur="0.2"/> in their region but

nevertheless quite far from home <pause dur="1.1"/> Turkish companies are building in Moscow <pause dur="0.3"/> i mean there are many things of that sort which are quite different today and i don't have to explain as much <pause dur="0.4"/> what i expect to see in the future <pause dur="0.7"/> so <pause dur="0.6"/> this is the situation that we have right now <pause dur="1.3"/> that actually there is some trade cross-trade going between NICs A-I-Cs <pause dur="0.9"/> # remember South Korea is still classified as a NIC <pause dur="0.8"/> and not as an advanced industrialized country <pause dur="1.0"/> Japan is <pause dur="1.2"/> and China is a NIC only <pause dur="0.5"/> on the two seaboards <pause dur="0.3"/> but inside it's an L-D-C <pause dur="1.0"/> if you go to China you'll see <pause dur="1.0"/> totally rural pastoral areas in the middle of the country <pause dur="0.4"/> there are people <pause dur="0.4"/> you know carrying things like this in buckets <pause dur="0.7"/> on construction sites <pause dur="1.9"/> # and you can actually see just humans building no machinery no nothing <pause dur="0.3"/> in very large part of China <pause dur="0.4"/> on the seaboards obviously it's exactly the same as in Canada there is no difference really <pause dur="1.5"/> now i'm saying <pause dur="0.2"/> if i take this part of the picture to correspond with the

beginning of my diagram that i just showed you <pause dur="0.4"/> in other words those curve <pause dur="0.3"/> A-I-Cs going down NICs going like this in volume <pause dur="0.3"/> and L-D-Cs going up <pause dur="0.3"/> and i now that's the beginning of that diagram <pause dur="0.2"/> and now this is the end of the diagram <pause dur="0.6"/> i'm saying <pause dur="0.3"/> today's today's L-D-Cs <pause dur="0.2"/> they will not be L-D-Cs that <pause dur="0.2"/> well you know they'll be in the future <pause dur="0.3"/> but today's L-D-Cs <pause dur="0.4"/> will be <pause dur="0.4"/> building in A-I-Cs <pause dur="1.8"/> they will and and <pause dur="0.3"/> <trunc>t</trunc> <pause dur="0.2"/> today's NICs will still be building in <trunc>a</trunc> A-I-Cs <pause dur="0.2"/> there will be trade between these </u><pause dur="1.1"/> <u who="sf1111" trans="pause"> what is it what would be the <trunc>ou</trunc> <pause dur="0.2"/> the output of A-<pause dur="0.4"/>I-C </u><pause dur="0.7"/> <u who="nm1108" trans="pause"> well <pause dur="0.3"/> some niche markets obviously you know nuclear reactors # it is not that easy to actually think up that kind of technology <pause dur="0.4"/> and it depends on very special equipment <pause dur="0.2"/> because a nuclear reactor is not a building a nuclear reactor is a piece of equipment <pause dur="0.5"/> in a shroud <pause dur="0.6"/> yeah <pause dur="0.4"/> and you know modern reactors are like this they they just have a little bit of concrete around them <pause dur="0.6"/> # but generally speaking <pause dur="0.3"/> it is equipment that you are selling <pause dur="0.3"/> and the shroud is relatively simple to

build <pause dur="0.4"/> so <pause dur="0.5"/> # i would expect <pause dur="0.3"/> much of this much of this to be internal <pause dur="0.7"/> i would expect much of this to be internal and some niche markets do actually exist <pause dur="0.3"/> yes </u><pause dur="0.3"/> <u who="sm1110" trans="pause"> like # <pause dur="0.6"/> it's <pause dur="0.3"/> <gap reason="inaudible" extent="2 secs"/> <pause dur="0.5"/> L-D-Cs <pause dur="0.3"/> A-I-Cs economy stabilized and <pause dur="0.3"/> probably <gap reason="inaudible" extent="1 sec"/> then <pause dur="0.2"/> L-D-Cs <pause dur="0.5"/> then <pause dur="0.2"/> how can an L-D-C <pause dur="0.3"/> actually <gap reason="inaudible" extent="4 secs"/> doesn't seem to make much sense </u><u who="nm1108" trans="latching"> no no no but but this is this is not Sri Lanka today <pause dur="0.6"/> you know this is # say # <pause dur="0.3"/> you know Sri Lanka # <pause dur="0.2"/> twenty-five years from now </u><pause dur="0.6"/><u who="sm1110" trans="pause"> <gap reason="inaudible" extent="1 sec"/> </u><u who="nm1108" trans="overlap"> yes so it's <trunc>L-D-C</trunc> today's L-D-Cs so many years later <pause dur="0.2"/> at the end of the diagram <pause dur="0.2"/> which is roughly twenty-five years from now </u><pause dur="0.3"/> <u who="sm1110" trans="pause"> so # </u><u who="nm1108" trans="overlap"> and you know how it happens # <pause dur="0.5"/> you know <trunc>the</trunc> these these questions # <pause dur="0.7"/> you know at the beginning of this kind of trade what you # had <pause dur="0.3"/> for example you will have in Saudi Arabia <pause dur="0.3"/> you will have Pakistani <pause dur="0.3"/> # labour <pause dur="0.2"/> groups <pause dur="0.5"/> organized by one guy <pause dur="0.3"/> brought there <pause dur="0.2"/> and then they would be working under supervision <pause dur="0.2"/> of a Canadian firm <pause dur="1.1"/> but now what is happening is that these Pakistanis are working for a Pakistani company because they can build a road as well as Canadians <pause dur="0.9"/> and Canadians don't want to spend so much time in Saudi

Arabia <pause dur="1.0"/> so there are many reasons for this but nevertheless <pause dur="0.3"/> Pakistanis are capable of doing it <pause dur="0.3"/> and they're now doing much more than just providing labour <pause dur="0.4"/> the same thing with Turks <pause dur="0.4"/> you know <pause dur="0.2"/> at some point you had Turkish <pause dur="0.5"/> crews <pause dur="0.2"/> working in a number of different countries in the broader region <pause dur="0.2"/> but now <pause dur="0.3"/> they are run by Turkish construction companies they're not big construction company run by somebody else <pause dur="0.7"/> yeah <pause dur="1.0"/> so you have many things of that nature which are now happening <pause dur="0.3"/> # in Eastern Europe # or <pause dur="0.2"/> closer to Central Europe you would have Polish companies now building in <pause dur="0.2"/> Germany <pause dur="0.3"/> originally it was simply Polish crews <pause dur="0.2"/> run by a German company <pause dur="1.6"/> so there are many changes of that sort i know that for example there there you know similar things <pause dur="0.8"/> in the fringe countries <pause dur="0.2"/> that used to be called <pause dur="0.3"/> Eastern European countries now they like to call themselves Central European countries <pause dur="0.3"/> but all of these countries Poland <pause dur="0.4"/> # Czechland Slovakia and so on are providing many of these

kinds of things <pause dur="0.5"/> now remember <pause dur="1.1"/> i'm not saying <pause dur="0.5"/> that <pause dur="0.2"/> one day in the future nobody in the U-K or Denmark will be building <pause dur="0.8"/> i'm saying that the international trade would probably not go out that much because people would prefer to do something else <pause dur="0.4"/> why be a mason <pause dur="1.0"/> who wants to be a mason <pause dur="0.5"/> which is similar to saying who wants to be working on some assembly line <pause dur="0.5"/> in a Japanese plant <pause dur="1.9"/> if the Japanese want to do it fine but most likely Malaysians will want to do it one day the Japanese will not want to do it <pause dur="0.2"/> yeah <pause dur="0.3"/> i don't want to do it <pause dur="0.2"/> you don't want to do it <pause dur="0.4"/> why do you imagine somebody else will want to do it <pause dur="0.9"/> these are not jobs which are really that grand <pause dur="1.6"/> we here will probably make movies and <pause dur="0.5"/> educational services and you know <pause dur="0.5"/> will make dances <gap reason="inaudible" extent="1 sec"/> <vocal desc="laughter" iterated="y" dur="1"/></u><pause dur="1.1"/> <u who="sf1109" trans="pause"> can't you perhaps i mean <trunc>i</trunc> industrialized <pause dur="0.2"/> countries will be building <pause dur="0.4"/> or focusing on different things <pause dur="0.3"/> you know <pause dur="0.5"/> it would be different things that will </u><u who="nm1108" trans="overlap"> well <pause dur="0.7"/> advanced industrial countries are <pause dur="0.4"/> very much stressing economies are very much stressing <pause dur="0.5"/> that <pause dur="0.4"/> economic growth in places like Malaysia <trunc>chain</trunc> China and so on <pause dur="0.3"/> is so-called intensive economic growth <pause dur="0.2"/> where you

add capacity and thus you grow <pause dur="1.2"/> but the in advanced industrial countries <pause dur="0.2"/> the ideal is actually to add nothing but to improve the efficiency of <pause dur="0.6"/> what you already have <pause dur="0.4"/> intensive <pause dur="0.9"/> economic growth <pause dur="1.1"/>

so extensive <pause dur="0.6"/> intensive growth <pause dur="0.4"/> and economists since long time ago and i'm quoting them in this book like Kuznets <pause dur="1.3"/> visualized <pause dur="0.2"/> you know many years ago <pause dur="0.8"/> but that was science fiction back then <pause dur="0.4"/> that you could actually have very rapid economic growth without really any addition to your capital stock <pause dur="0.9"/> what you would be adding <pause dur="0.3"/> obviously would be wires and <pause dur="0.3"/> you know <pause dur="0.2"/> pieces of gadgetry and you know things like this <pause dur="0.3"/> electronic <pause dur="0.2"/> components <pause dur="0.4"/> # <pause dur="0.3"/> and that all of a sudden <pause dur="0.6"/> is actually driving the <trunc>e</trunc> American economy today <pause dur="0.2"/> you don't need more buildings in New York or more bridges <pause dur="0.3"/> you can use all of that <pause dur="0.2"/> with very little bit that you add in terms of physical equipment <pause dur="1.3"/> and make it so much more productive <pause dur="0.3"/> you know with information technology and so on <pause dur="0.4"/> so <pause dur="0.3"/> many of these propositions that they

started with ten years ago <pause dur="0.2"/> when the internet was not around and so on <pause dur="0.2"/> sound <pause dur="1.0"/> a bit more plausible <pause dur="0.4"/> and a bit more boring because you know way then people say hey you're crazy <pause dur="0.2"/> now they're saying okay why are you boring us with something which is <pause dur="0.4"/> probably going to happen <pause dur="0.3"/> because it's not real science fiction <pause dur="0.8"/> so remember <pause dur="0.2"/> # i had that kind of situation with # i don't know stories about China <pause dur="0.8"/> # before ninety-three <pause dur="0.3"/> when most of the world's realized that China existed and was extremely important <pause dur="0.5"/> when i would speak to <pause dur="0.3"/> you know many of you here from the M-S-C programme <pause dur="0.3"/> are actually <pause dur="0.2"/> professional people who know what construction is <pause dur="0.5"/> # <pause dur="0.3"/> you know i would talk to professionals in construction and they would look at me and they would say <pause dur="1.0"/> where did you get this thing about China <pause dur="0.2"/> # what are you reading that we are not reading <pause dur="1.2"/> now business people very often in my experience behave like <pause dur="0.2"/> idiots you know <pause dur="0.2"/> before they understand <pause dur="0.5"/> before it is written in Time <pause dur="0.2"/> and Newsweek <pause dur="0.2"/> and places

like this that something is true <pause dur="0.2"/> it's not true <pause dur="0.3"/> and they don't want to even listen <pause dur="0.6"/> but then <pause dur="0.2"/> once they learn it and they learned it in March nineteen-ninety-three <pause dur="0.5"/> after March nineteen-ninety-three they say okay okay what else is new <pause dur="0.6"/> so there is an enormous kind of shift <pause dur="0.4"/> in public opinion <pause dur="0.4"/> in especially in the business circles <pause dur="0.4"/> and business people are very given to fashion <pause dur="0.6"/> okay <pause dur="0.4"/> so <pause dur="0.5"/> you know for example starting to say today that Africa one day will be a great construction market people will say ergh you know <pause dur="0.3"/> you must be crazy <pause dur="1.5"/> and obviously if we deal to some extent with civil war there and so on <pause dur="0.3"/> Africa may become a wonderful market for Europeans <pause dur="0.8"/> Africa and Europe have always been extremely close since # Greek and Roman times <pause dur="0.8"/> and there is no reason why Africa should be a separate continent in that sense that we <pause dur="0.2"/> see it like some place far away where people are black not like us over there <pause dur="0.4"/> yeah <pause dur="0.2"/> exactly the same people we can make kids together <pause dur="0.2"/> so why we shouldn't <pause dur="0.4"/> do

other things together <pause dur="1.5"/> # <pause dur="0.6"/> so in that sense you know i would say that there is very great closedness of mind <pause dur="0.3"/> in many # professional circles about these kinds of questions <pause dur="0.2"/> of where these things are likely to be in twenty-five years <pause dur="0.4"/> now obviously <pause dur="0.2"/> you know business people will tell you <pause dur="0.3"/> if your story doesn't affect me on Monday <pause dur="0.7"/> it's not very interesting because it talks about some kind of long term future <pause dur="0.5"/> obviously that's a correct point <pause dur="1.0"/> but # it is as i said to you the first time we met it is important for a reflective <pause dur="0.4"/> practitioner <pause dur="0.4"/> to have some notion <pause dur="0.5"/> where we came from <pause dur="0.2"/> with the construction industry <pause dur="0.9"/> in our different countries in the world <pause dur="0.3"/> and where that is likely to go over so many years <pause dur="0.2"/> yeah <pause dur="0.2"/> it is important to have some notion of how that <pause dur="0.3"/> works <pause dur="0.3"/> and that is what i am trying to <pause dur="0.2"/> do <pause dur="0.3"/> by one <pause dur="0.3"/> bringing you this particular paper that brings the concepts <pause dur="0.2"/> having to do with my notion of the future of international construction together <pause dur="0.3"/> and two <pause dur="0.2"/> the survey <pause dur="0.2"/> which we will

discuss next time yes </u><u who="sm1110" trans="latching"> how does this # <pause dur="0.3"/> contrast sort of <trunc>pr</trunc> practice towards # globalization in construction and <pause dur="0.5"/> # <pause dur="0.2"/> to larger companies looking to <pause dur="0.2"/> move into <pause dur="0.2"/> foreign markets and increase their margins and opportunites <pause dur="0.5"/> but if you're suggesting that <pause dur="0.3"/> construction <gap reason="inaudible" extent="4 secs"/> see to move away from that </u><pause dur="1.2"/> <u who="nm1108" trans="pause"> i would say very large proportion of firms will not you know <trunc>th</trunc> <trunc>th</trunc> they # a construction firm of <trunc>s</trunc> say medium size <pause dur="0.5"/> needs a funny jolt <pause dur="0.3"/> to start being interested in <pause dur="0.2"/> Belgium even though Belgium is just across <pause dur="0.3"/> the Channel <pause dur="1.0"/> # the jolt would be for example <pause dur="0.3"/> that the old guy who started the firm in nineteen-fifty-eight <pause dur="0.8"/> is passing <pause dur="0.9"/> the # baton to his son or daughter who is now <pause dur="0.4"/> becoming the C-E-O of this organization <pause dur="0.5"/> and this youngster <pause dur="0.2"/> happens to have learned French <pause dur="0.6"/> which <pause dur="0.4"/> the father <pause dur="0.2"/> will never even dream learning <pause dur="1.1"/> it's a <trunc>fr</trunc> <trunc>ene</trunc> you know enemy's language <pause dur="1.3"/> so all of a sudden <pause dur="0.2"/> young people are perfectly open to the notion of going

to work in Germany <pause dur="0.5"/> and that kind of person will <pause dur="0.2"/> produce a job that people would say <pause dur="0.3"/> well <pause dur="0.2"/> what the heck is wrong with us why cannot we take this particular job <pause dur="0.2"/> you know <pause dur="0.5"/> # in in a different country <pause dur="0.9"/> if you have a couple of friends there <pause dur="0.2"/> you have some kind of understanding to the company <pause dur="0.3"/> that can help you understand the rules the law and so on <pause dur="0.4"/> you can <pause dur="0.2"/> obviously build things in Belgium as well <pause dur="0.6"/> so # <pause dur="0.2"/> small firms especially are quite <pause dur="0.4"/> set in their ways <pause dur="0.3"/> they're in Essex and that's it <pause dur="0.9"/> now when a firm becomes dead <pause dur="0.6"/> you know people start thinking about large projects which are abroad <pause dur="0.9"/> but generally speaking i again find # like with any fashion you know one year black is in fashion the other it's like blue whatever <pause dur="0.7"/> # <pause dur="0.5"/> these fashions shift quite interestingly from year to year my survey's very much about fashion <pause dur="0.5"/> it is not about <pause dur="0.3"/> what really will happen in the future <pause dur="0.3"/> but how fashions change <pause dur="0.4"/> so for example <pause dur="0.7"/> there was a period <pause dur="0.2"/> when <pause dur="0.6"/> Russia <pause dur="0.5"/> # <pause dur="0.3"/> and you know Eastern Europe was extremely popular <pause dur="1.2"/> then

there was a period when they kind of vanished from the picture because there was too much crime there <pause dur="0.2"/> anybody who went there <pause dur="0.3"/> experienced so much trouble <pause dur="0.4"/> that they didn't want to stay <pause dur="0.3"/> # i mean only Turks and Yugoslavs stayed <pause dur="1.0"/> because they would # they would know how to pull out a pistol if <pause dur="0.3"/> the Russian guy pulls out a pistol <pause dur="0.8"/><vocal desc="laughter" n="ss" iterated="y" dur="1"/> and it's as simple as that you know <pause dur="0.2"/> you protect your perimeter and you say don't come in because we'll shoot you <pause dur="0.2"/> you know <pause dur="0.5"/><vocal desc="laughter" iterated="y" dur="1"/> and the Russians understand that perfectly so there is you know the two crews understand each other and that's it <pause dur="0.6"/> everybody else moved out <pause dur="1.1"/><vocal desc="laughter" iterated="y" dur="1"/> but now Swedes are buying <pause dur="0.5"/> Finns <pause dur="0.2"/> to go <pause dur="0.3"/> to Russia <pause dur="1.2"/> and when you talk to Finns <pause dur="0.2"/> they all just think about Eastern Europe you you ask them about other markets <pause dur="0.2"/> yeah <pause dur="0.2"/> you know <pause dur="0.2"/> we just love Russia <pause dur="1.9"/> but they're acting as how to say <pause dur="0.3"/> not exactly champions but they're really working for Swedes <pause dur="1.7"/> so Skanska will buy one company another third <pause dur="0.8"/> organizations with

expertise where people speak Russian <pause dur="0.8"/> don't mind being with Russians <pause dur="0.5"/> which is important and sometimes quite difficult <pause dur="0.9"/><vocal desc="laughter" n="ss" iterated="y" dur="1"/> you know you for example have to <pause dur="0.2"/> drink like a fish <pause dur="1.8"/><vocal desc="laughter" n="ss" iterated="y" dur="2"/> if you have a glass like this of vodka you know i can tell you <pause dur="0.2"/> # <pause dur="0.2"/> you are out <pause dur="0.9"/><vocal desc="laughter" iterated="y" dur="1"/> you may think that you drink a lot of beer but beer is nothing that's like water but you know when you have a glass like this of vodka you are out <pause dur="0.9"/><vocal desc="laughter" n="ss" iterated="y" dur="1"/> and Russians are not <pause dur="0.2"/> it's fine <pause dur="0.7"/><vocal desc="laughter" n="ss" iterated="y" dur="1"/> they can drink five <pause dur="0.2"/> you know <pause dur="0.2"/> they can all collapse behind the table <pause dur="0.3"/> but tomorrow they are at work <pause dur="1.8"/><vocal desc="laughter" n="ss" iterated="y" dur="1"/> and if you don't have a habit like this Swedes are nice people <pause dur="0.3"/> Finns are a bit tougher <pause dur="0.2"/> yeah so <pause dur="0.5"/> they have the experience and they're now being <trunc>sell</trunc> # sold <pause dur="0.6"/> to various kinds of Russian projects and <pause dur="0.4"/> you know there is a certain <pause dur="0.3"/> orientation <pause dur="0.5"/> that particular part of the world is recognized as important so Finns are not looking toward Belgium at

all they couldn't care less <pause dur="0.9"/> so that's interesting you know how <pause dur="0.3"/> people train their vision in some direction <pause dur="0.5"/> the British construction companies have <pause dur="0.4"/> because of the British Commonwealth <pause dur="0.2"/> and because of the British Empire <pause dur="0.3"/> an interest <pause dur="0.3"/> in <pause dur="1.2"/> for example South East Asia <pause dur="1.2"/> you know a Briton is not going to feel very uneasy in Kuala Lumpur <pause dur="0.7"/> like <trunc>wh</trunc> <pause dur="0.4"/> where am i <pause dur="0.5"/> you know how do you eat this <pause dur="0.4"/> they've been there <pause dur="1.1"/> so there is no problem <pause dur="1.5"/> in that sense that's an enormous advantage <pause dur="1.4"/> every country has these kinds of <pause dur="1.3"/><kinesic desc="moves hands to side of face demonstrating blinkers" iterated="n"/> you know <pause dur="0.6"/> blinkers <pause dur="0.7"/> so Portugal will be looking toward Brazil <pause dur="0.5"/> or Mozambique <pause dur="0.7"/> but Ghana <pause dur="0.2"/> mm they don't know about Ghana <pause dur="1.5"/> the Finns will be looking toward Poland and <pause dur="0.5"/> Russia <pause dur="1.1"/> the Germans will be looking that way as well and correctly because huge markets are going to be there <pause dur="0.3"/> once we deal with <pause dur="0.3"/> organized crime that goes all the way to Putin <pause dur="0.5"/> you know or or # <pause dur="0.5"/> Yeltsin there is no question <pause dur="0.4"/> but that organized crime goes all the way to <pause dur="0.4"/> the top of society <pause dur="1.7"/> how do you deal with it <pause dur="0.6"/> most of us are

not used to you know for example if <pause dur="0.5"/> you know <trunc>y</trunc> some of you may # # feel easier than others <pause dur="0.3"/> paying somebody two-hundred dollars to <pause dur="0.2"/> take your mother into hospital <pause dur="0.6"/> i cannot do that <pause dur="0.5"/> i'm not used to that <pause dur="2.0"/> but it's still a bit different <pause dur="0.3"/> to say <pause dur="0.2"/> okay you know <pause dur="0.4"/> two-million dollars <pause dur="0.4"/> let's build this dam for you <pause dur="0.5"/> their minister <pause dur="1.8"/> that's a bit more difficult who is going to do that kind of stuff many people don't know it in <trunc>a</trunc> in America that's so illegal <pause dur="0.3"/> that business schools have a huge problem <pause dur="0.5"/> how do you have an American organization some place in Pakistan <pause dur="0.5"/> how do you deal with that situation <pause dur="0.9"/> and it's normal in Pakistan to deal that way <pause dur="1.4"/> so either you exclude yourself completely from that world <pause dur="0.3"/> or <pause dur="0.2"/> you learn to do it even though it's not exactly something that you like doing <pause dur="0.4"/> because

it's a bit <pause dur="0.2"/> unusual <pause dur="0.2"/> you know <pause dur="0.6"/> it's not something that you read in books <pause dur="1.8"/> so there are many questions of that sort which are quite interesting <pause dur="0.5"/> and # one of the things that i like to do with my survey is to look at <pause dur="0.7"/> for example <pause dur="0.2"/> Japanese opinion about their part of the world i don't publish these things because it becomes too desegregated this kind of information <pause dur="0.4"/> but i'm interested in these questions <pause dur="0.3"/> how do <pause dur="0.2"/> Indians look at this if i have a couple of Indians in my survey <pause dur="0.5"/> or how do the Britons look at things <trunc>vis</trunc> vis-à-vis Germans <pause dur="0.4"/> and everybody has different blinkers and they're quite interesting <pause dur="0.7"/> British <trunc>blink</trunc> blinkers <pause dur="0.4"/> and that's good for us and that's reflected here are quite wide because of the British Commonwealth <pause dur="0.9"/> but many Britons don't look toward Germany Germany doesn't exist you look <pause dur="0.3"/> past Germany <pause dur="0.7"/> yeah <pause dur="0.5"/> younger people are different <pause dur="1.2"/> anyway that's the broad answer to your <pause dur="0.7"/> question <pause dur="0.5"/> now let

me see how are we doing <pause dur="0.5"/> # i would like to <pause dur="0.2"/> # now shift gears and to introduce you to the <pause dur="0.4"/> methodology or technique <pause dur="0.3"/> that i will be using <pause dur="0.6"/> in <pause dur="0.2"/> # <pause dur="0.3"/> most of my papers that i will be showing you <pause dur="0.4"/> # these <pause dur="0.9"/> three types we meet <pause dur="2.1"/> # the methodology comes from something that is known as input-output analysis <pause dur="0.7"/> # that particular term exists in many fields but in economics it has a very specific meaning <pause dur="0.9"/> input-output models <pause dur="0.7"/> were invented by a Russian fellow <pause dur="0.2"/> whose name is <pause dur="0.4"/> Wassily Leontief <pause dur="1.4"/> who published in nineteen-thirty-six an important paper while he was a professor at Harvard <pause dur="2.0"/> and he remained professor at Harvard # <trunc>througho</trunc> throughout most of his life <pause dur="1.3"/> and for that paper <pause dur="0.2"/> Leontief got <pause dur="0.4"/> in nineteen-seventy-three <pause dur="1.4"/> quarter of a century ago <pause dur="0.3"/> got his Nobel prize <pause dur="0.5"/> in other words <pause dur="0.2"/> it is a bit of work <pause dur="0.4"/> that is quite important in analysis of national economies <pause dur="1.1"/> is now based on reasonably good data <pause dur="0.3"/> and one can compare different countries with this kind of data so that's what i am doing <pause dur="0.2"/> # <pause dur="0.5"/> this book is <pause dur="0.9"/>

almost all <pause dur="0.5"/> almost hundred per cent about <pause dur="0.4"/> input-output analysis <pause dur="0.5"/> many parts <pause dur="1.0"/> are kind of hairy and mathematical and i would tell you not to touch them so for example part one <pause dur="0.3"/> contains four papers <pause dur="0.2"/> that you should avoid <pause dur="0.2"/> if you want to preserve your eyesight <pause dur="0.3"/> # <pause dur="2.6"/><vocal desc="laughter" iterated="y" dur="2"/> # if you like # matrix algebra enjoy but # more likely than not you will find it appalling <pause dur="1.2"/> # and that's okay <pause dur="0.4"/> # i don't want you to <pause dur="0.2"/> learn matrix algebra i want you to learn <pause dur="0.3"/> the basic logic of input-output analysis so that's what i'm trying to do <pause dur="0.9"/> now the paper from which <pause dur="0.7"/> i think you should learn about this is this one <pause dur="0.6"/><kinesic desc="changes transparency" iterated="y" dur="6"/> it's called Direct and Indirect Resource Utilization by the Construction Sector <pause dur="1.3"/> in the U-S <pause dur="1.6"/> now <pause dur="0.3"/> you have all these some key words in this long and boring title <pause dur="2.9"/> one of the reasons why i'm using input-output <trunc>ana</trunc> analysis is that <pause dur="1.1"/> if you go to a construction site <pause dur="0.4"/> and you ask a question <pause dur="0.4"/> what is passing <pause dur="0.2"/> through the gate <pause dur="1.4"/> # you will learn that # <pause dur="0.7"/> cement is passing through in

trucks <pause dur="0.4"/> which either <gap reason="inaudible" extent="1 sec"/> or don't <pause dur="0.6"/> you will learn that # rebars are going through you will learn that steel beams are passing through <pause dur="0.2"/> labourers <pause dur="0.3"/> you will see cement you will see <pause dur="0.2"/> # <pause dur="0.7"/> various bits and pieces of buildings bricks and so on <pause dur="1.5"/> and if you sat at the gate <pause dur="0.3"/> from <pause dur="0.5"/> day zero <pause dur="0.3"/> to the last day of construction <pause dur="0.4"/> you will get a pretty good picture <pause dur="0.2"/> of what was used in the building <pause dur="0.4"/> if you at the same time look at the plans <pause dur="0.2"/> financial <pause dur="0.9"/> deals made with the company that build this <pause dur="0.6"/> # i don't know loans they got <pause dur="0.4"/> # various kinds of professional advice about <pause dur="0.2"/> foundations and God knows what <pause dur="0.4"/> you will get a pretty good picture of <pause dur="0.3"/> direct inputs into the construction process <pause dur="0.3"/> these are called direct inputs <pause dur="0.2"/> that is going into the site <pause dur="0.4"/> either <pause dur="0.4"/> literally directly <pause dur="0.2"/> or <pause dur="0.2"/> via the construction company in the form of plans and you know things of that sort <pause dur="1.0"/> today <pause dur="0.3"/> much of the plans and <pause dur="0.9"/> # <pause dur="1.0"/> intangible things <pause dur="0.2"/> would be coming via a wire into a computer <pause dur="0.3"/> on the site <pause dur="0.3"/> so you could even measure that <pause dur="0.5"/> you

can have a little meter <pause dur="0.3"/> to tell you <pause dur="0.4"/> what went in <pause dur="0.3"/> and you could also learn <pause dur="0.2"/> how much that cost <pause dur="0.7"/><vocal desc="cough" iterated="n"/><pause dur="2.1"/> direct inputs are a very small part of what actually happens when you build something <pause dur="1.1"/> # <pause dur="0.3"/> let me give you a hypothetical example <pause dur="0.3"/> let's imagine <pause dur="0.3"/> that you don't have a small project because it's a bit difficult to stretch your mind like this <pause dur="0.2"/> but you have a very large project you are building a university <pause dur="1.7"/> new university someplace in the United Kingdom for example <pause dur="1.2"/> well there's a lot of concrete there many new things that you will have to bring to that particular location <pause dur="0.7"/> so you can imagine <pause dur="0.3"/> if there is such an increase <pause dur="0.9"/> of input <pause dur="0.2"/> at a particular location that somebody will build a <pause dur="0.4"/> warehouse relatively close to the site <pause dur="0.7"/> in which <pause dur="0.5"/> various things will be stored before they go to the site <pause dur="0.5"/> there will be someplace close to the site a small plant <pause dur="0.3"/> making <trunc>prefab</trunc> <trunc>b</trunc> prefabricated beams <pause dur="0.6"/> that are required in construction <pause dur="1.6"/> et cetera <pause dur="0.9"/> these would be secondary <pause dur="0.8"/> inputs they come <pause dur="0.9"/> off-site <pause dur="0.9"/> are worked in some

fashion you use cement and rebars and all that you make the beams and then you ship them <pause dur="0.4"/> to the site itself it's not done on the site because <pause dur="0.2"/> the site is for example not big enough <pause dur="0.2"/> to have <pause dur="0.2"/> a plant that makes rebars or beams or whatever <pause dur="0.9"/> but then <pause dur="0.7"/> you can understand that these rebars come from some <pause dur="0.5"/> foundry <pause dur="0.2"/> which makes various products they make shovels as well <pause dur="0.9"/> so <pause dur="0.3"/> that's one step back that's a third step back <pause dur="1.2"/> but then <pause dur="0.2"/> if you <pause dur="0.2"/> take a chain like this you will realize that someplace along this thing <pause dur="0.2"/> somebody had to buy a new truck because they didn't have enough trucks <pause dur="0.2"/> to build <pause dur="0.3"/> this particular thing so the car industry's affect <pause dur="1.6"/> the car industry <pause dur="0.3"/> if a number of cars <pause dur="0.2"/> are required <pause dur="0.2"/> would all of a sudden say well we need new <pause dur="0.6"/> i don't know metal-bending machinery <pause dur="0.2"/> to produce more cars for this particular project <pause dur="0.5"/> and all these are actually inputs into the construction process but they are just <pause dur="0.2"/> further and further back <pause dur="0.3"/> a very long chain <pause dur="0.8"/> well <pause dur="0.2"/> input-output analysis is about <pause dur="1.2"/> direct

but also all the indirect <pause dur="0.2"/> effects of a particular purchase <pause dur="1.4"/> so we would say <pause dur="0.2"/> if you increase <pause dur="0.5"/> demand for construction by one pound <pause dur="1.7"/> by how many P will all other industries benefit <pause dur="0.6"/> and i can tell you <pause dur="0.6"/> all other industries will benefit <pause dur="1.9"/> only in the very primitive economy some industries wouldn't benefit <pause dur="0.3"/> for example fishing will <pause dur="1.1"/> be left out <pause dur="0.5"/> because people don't like fish in that country <pause dur="0.3"/> but if people like fish <pause dur="0.6"/> more labourers means more fish for lunches et cetera et cetera <pause dur="2.0"/> so <pause dur="0.7"/> almost everybody's affected by any change even by just one pound <pause dur="0.4"/> but it's difficult to conceptualize <pause dur="0.7"/> in economic analysis these things are <pause dur="0.2"/> known as multipliers <pause dur="0.3"/> so you say <pause dur="0.3"/> one pound spent on construction <pause dur="0.4"/> multiplies into something like <pause dur="0.3"/> two pounds spent on everything <pause dur="0.3"/> including construction but that everything else that you require <pause dur="0.2"/> in order to <pause dur="0.3"/> have <pause dur="0.2"/><kinesic desc="changes transparency" iterated="y" dur="8"/> construction services <pause dur="0.3"/> and <pause dur="0.4"/> # <pause dur="1.0"/> ultimately a building <pause dur="1.4"/> so <pause dur="0.6"/> input-output analysis is based on <pause dur="0.8"/> input-output <pause dur="0.2"/> tables <pause dur="0.2"/> and an input-output table looks like this <pause dur="2.8"/>

it has <pause dur="2.5"/> by column <pause dur="0.5"/> a number of industries <pause dur="1.1"/> or industrial sectors <pause dur="0.3"/> and it has by row <pause dur="0.2"/> a number of these sectors <pause dur="0.6"/> we would look at each sector like this we will say <pause dur="0.3"/> sector one <pause dur="1.0"/> say construction <pause dur="0.7"/> produces a certain amount of stuff <pause dur="1.3"/> by using inputs from all the other sectors including itself because construction may be building that shed <pause dur="0.9"/> in which <pause dur="0.2"/> there will be some materials and equipment <pause dur="0.3"/> for the building itself <pause dur="0.8"/> okay <pause dur="0.3"/> or secondary structures or things like this <pause dur="0.4"/> so construction produces a certain amount of <trunc>thi</trunc> # # certain amount of stuff <pause dur="0.3"/> which is <pause dur="0.2"/> here in this particular box <pause dur="0.9"/> it will be <pause dur="1.0"/> appearing in this box as output of the construction sector <pause dur="0.3"/> but a portion of that output goes to intermediate use <pause dur="0.3"/> and a portion goes to <pause dur="0.2"/> final use <pause dur="0.7"/> in the case of construction actually <pause dur="0.5"/> very little goes to <pause dur="0.4"/> intermediate use it is only maintenance and repair <pause dur="0.5"/> that goes to different sectors <pause dur="0.6"/> everything <pause dur="0.6"/> that construction produces is considered to be a capital <pause dur="0.4"/> or <pause dur="0.2"/> investment good <pause dur="0.9"/> which is

produced whole <pause dur="0.2"/> to be used by other sectors <pause dur="0.2"/> in the next round <pause dur="0.2"/> the of economic production in other words <pause dur="0.2"/> you do not use up a building as you produce something <pause dur="0.5"/> you <pause dur="0.3"/> perhaps <pause dur="0.2"/> depreciate it <pause dur="1.0"/> so a building like this <pause dur="0.5"/> is not used like cement is used <pause dur="0.2"/> you have a bunch of cement and a bunch of sand <pause dur="0.4"/> and water and then you mix them <pause dur="0.6"/> and then <pause dur="0.2"/> cement is kind of lost in concrete <pause dur="0.7"/> well a building is not lost because you set here <pause dur="0.3"/> it is perhaps used a bit more <pause dur="0.3"/> so <pause dur="0.2"/> we will have to paint it a bit <pause dur="0.6"/> sooner <pause dur="0.5"/>

okay <pause dur="0.3"/> so remember <pause dur="0.3"/> all construction goods are final goods <pause dur="0.7"/> except maintenance and repair services <pause dur="1.5"/> so final goods are then used as capital goods to produce something else with them <pause dur="2.1"/> but <pause dur="0.5"/> something like sand <pause dur="0.6"/> is used by various sectors for various reasons glass manufacturing uses it <pause dur="0.2"/> in order to make glass <pause dur="0.2"/> we use it to make concrete et cetera et cetera <pause dur="1.2"/> so <pause dur="0.3"/> if we look at any one sector <pause dur="0.3"/> we will see <pause dur="0.2"/> by row <pause dur="0.6"/> the output of that sector and we will see where pieces of it are would actually go <pause dur="0.2"/> in the production <pause dur="0.9"/> or

in the industrial scheme in which everybody uses a little bit of something to make something else <pause dur="1.1"/> if you are making a car you need a little bit of steel you need a little bit of this and that <pause dur="0.4"/> and then you <pause dur="0.4"/> put all of that into a car <pause dur="0.3"/> you assemble <pause dur="0.9"/> construction is an assembly industry <pause dur="0.4"/> and if you look into all the inputs into construction so this is output <pause dur="0.3"/> these are all the inputs into construction <pause dur="0.3"/> you will see which sectors <pause dur="0.2"/> the construction sector buys from <pause dur="0.6"/> it buys from agriculture <pause dur="0.2"/> for example <pause dur="0.2"/> materials for roofing <pause dur="0.4"/> # in Sri Lanka palm trees or whatever <pause dur="0.6"/> that is purchased directly from <pause dur="0.3"/> agriculture <pause dur="0.4"/> in this country obviously <pause dur="0.3"/> fewer such things are purchased directly from agriculture <pause dur="0.6"/> but they are purchased from various materials producers <pause dur="1.4"/> which purchase <pause dur="0.4"/> the basic materials <pause dur="0.2"/> from those who made them <pause dur="0.3"/> say steel <pause dur="0.9"/> say plastic materials in bulk <pause dur="0.6"/> then you shape all of that into something like this and you sell it <pause dur="0.3"/> to <pause dur="0.2"/> the construction sector <pause dur="0.3"/> to store in a building <pause dur="0.8"/> so

if you look in a particular column <pause dur="0.4"/> you will find <pause dur="0.2"/> where the construction sector buys its products <pause dur="1.4"/> this way you will say you will see where it sells its products in this particular case <pause dur="0.2"/> maintenance and repair services <pause dur="0.7"/> but by looking <pause dur="0.3"/> at the column you will also see <pause dur="0.4"/> the value added component <pause dur="0.7"/> of so-called primary inputs <pause dur="0.7"/> primarily labour <pause dur="1.4"/> but also many other things <pause dur="0.8"/> capital <pause dur="0.6"/> for example <pause dur="0.8"/> also land <pause dur="0.3"/> because this construction company will need land for <pause dur="0.2"/> its equipment and things like this <pause dur="0.9"/> so <pause dur="0.4"/> primary inputs include a number of different things <pause dur="0.3"/> but primarily <pause dur="0.2"/> labour <pause dur="0.6"/> so if you look at the column <pause dur="0.2"/> that corresponds to the construction sector <pause dur="0.3"/> you will see <pause dur="0.2"/> total input down here <pause dur="0.7"/> then you will see various amounts of primary inputs <pause dur="0.2"/> primarily labour <pause dur="0.4"/> you will see all the other industrial inputs that come from other industries <pause dur="0.6"/> and that would form the global input <pause dur="1.1"/> so <pause dur="0.4"/> a table like this <pause dur="0.5"/> is divided into a number of quadrants <pause dur="0.3"/> the first quadrant <pause dur="0.5"/> shows intersectoral demand <pause dur="0.4"/> how different industries buy from

each other <pause dur="1.8"/> quadrant two shows buying on demand <pause dur="0.7"/> which is <pause dur="0.6"/> # <pause dur="0.2"/> going by row for each sector <pause dur="0.2"/> or each industry <pause dur="0.4"/> but by column it would each would include <pause dur="0.3"/> consumption <pause dur="1.1"/> it would include investment <pause dur="0.5"/> it would include government expenditures government would be buying i don't know <pause dur="0.3"/> # a building to put a tank in <pause dur="1.7"/> or they would buying a <pause dur="0.2"/> building to put some kind of <pause dur="0.3"/> water <trunc>resou</trunc> resources <pause dur="0.2"/> unit <pause dur="0.3"/> which is a part of governmental <pause dur="0.4"/> # <pause dur="0.7"/> organization <pause dur="1.3"/> and <pause dur="0.2"/> it would also include exports <pause dur="0.2"/> exports of <pause dur="0.2"/> construction <pause dur="0.2"/> services in this case <pause dur="0.3"/> not construction goods <pause dur="0.4"/> this building <pause dur="0.7"/> or any other bulding can never be exported <pause dur="0.3"/> it is here <pause dur="0.2"/> and that's it <pause dur="1.2"/> if a building is demountable <pause dur="0.8"/> the thing that is transported according to national economic accounts is materials <pause dur="1.6"/> the act of tying the building to a particular plot of land is construction <pause dur="2.2"/> okay <pause dur="1.8"/> now <pause dur="0.2"/> in this sector here quadrant tree <pause dur="0.2"/> three you have value added <pause dur="0.7"/> value added <pause dur="0.3"/> there are various primary inputs <pause dur="0.2"/> that go into a production of <unclear>anything</unclear> <pause dur="0.5"/> it will be <pause dur="0.5"/>

labour <pause dur="0.4"/> capital <pause dur="0.4"/> land <pause dur="0.9"/> but also imports <pause dur="0.6"/> products coming from other countries <pause dur="1.1"/> so we have exports going out and imports coming in <pause dur="1.7"/> finally quadrant four <pause dur="0.2"/> includes something that is called <pause dur="0.4"/> direct <pause dur="0.2"/> factor purchases <pause dur="0.3"/> for example <pause dur="0.4"/> when government employees are paid for their work <pause dur="0.5"/> in the tax office <pause dur="0.3"/> these are <pause dur="0.2"/> direct <pause dur="0.4"/> purchases of their labour services <pause dur="0.2"/> by the government <pause dur="0.5"/> they're not a part of the <pause dur="0.2"/> industrial companies <pause dur="1.8"/> a table like this has many features first of all it is square <pause dur="1.3"/> it is square <pause dur="0.2"/> it has an equal number <pause dur="0.8"/> of columns as rows <pause dur="0.2"/> N <pause dur="0.2"/> for <pause dur="0.3"/> intersectoral demand <pause dur="0.2"/> and M for final use but also M <pause dur="0.2"/> for primary inputs <pause dur="0.6"/> so each input-output table is square <pause dur="1.4"/> second <pause dur="1.3"/> each term down here for example <pause dur="0.5"/> total input of one particular industry <pause dur="0.2"/> must be equal to total output of that industry <pause dur="0.2"/> because profits are included <pause dur="1.1"/> so total output is for example this building there's the total output of a firm in one year <pause dur="2.0"/> let's imagine that the construction firm <pause dur="0.3"/> built it from January first <pause dur="0.5"/> to December thirty-first <pause dur="0.3"/>

of nineteen-seventy-six when this was built <pause dur="1.2"/> that firm <pause dur="0.7"/> would give this building to the university it would be say one-million <pause dur="1.5"/> the firm will have paid various <pause dur="0.8"/> suppliers of materials and services say <pause dur="0.2"/> nine-hundred-thousand and kept <pause dur="1.2"/> hundred-thousand <pause dur="0.8"/> that profit is accounted in the picture <pause dur="0.3"/> because their profit is <pause dur="0.3"/> renumeration for what the company did <pause dur="1.8"/> so output <pause dur="0.5"/> must always be equal to input <pause dur="0.7"/> and when i add all of this up <pause dur="0.5"/> this sum <pause dur="0.2"/> must be equal to this sum <pause dur="0.5"/> this sum must be equal to this sum <pause dur="0.4"/><vocal desc="cough" iterated="n"/><pause dur="1.5"/> so <pause dur="0.2"/> an input-output table is squared <pause dur="0.3"/> and it's also squared away <pause dur="0.2"/> it is made consistent <pause dur="1.0"/> now <pause dur="0.2"/> you can imagine when national income accounts are collected <pause dur="0.3"/> when numbers are collected by statistical office <pause dur="0.5"/> these figures and these figures don't tally up <pause dur="1.3"/> there are all kinds of mistakes <pause dur="0.3"/> in statistical <pause dur="0.2"/> procedures like this <pause dur="0.7"/> and an input-output table is squared away by various mathematical tricks <pause dur="0.3"/> you say for example <pause dur="0.6"/> i believe more <pause dur="0.9"/> in say input figures <pause dur="0.5"/> in Italy <pause dur="0.3"/> than in output figures <pause dur="0.5"/>

because everybody is cheating in construction <pause dur="0.9"/> not only in Italy <pause dur="0.3"/> but they're a bit more than in other European countries <pause dur="0.6"/> yeah <pause dur="0.4"/> so <pause dur="0.2"/> if you are building something <pause dur="0.6"/> you get paid in cash <pause dur="0.2"/> do you report the cash of course not <pause dur="1.1"/> many Italian builders especially small builders would never <pause dur="0.2"/> look at <pause dur="0.6"/> the a cheque <pause dur="0.7"/> they're not interested <pause dur="2.9"/> if you are paid only in cash <pause dur="0.2"/> you will clearly report something to the government because it would be suspiscious that you actually lost money all year long <pause dur="0.7"/> so you report something but you report <pause dur="0.3"/> just enough <pause dur="0.2"/> so that you are not suspiscious by comparison with another builder <pause dur="1.0"/> he reported twelve <pause dur="0.2"/> per cent so you report <pause dur="0.5"/> twelve-and-a-half because you're a nice guy <pause dur="2.2"/><vocal desc="laughter" n="ss" iterated="y" dur="1"/> but <pause dur="0.2"/> if you look at inputs of the construction industry you see an enormous amount of paint and <pause dur="0.6"/> bricks and everything you know much much more than output <pause dur="0.3"/> so <pause dur="0.6"/> then you adjust <pause dur="1.5"/> output <pause dur="0.3"/> by the input figures <pause dur="0.4"/> yeah <pause dur="0.5"/> and these are statistical procedures which are not necessarily

easy <pause dur="2.2"/><kinesic desc="changes transparency" iterated="y" dur="6"/> now another table which relates to this whole story <pause dur="2.4"/> it is the same thing <pause dur="0.5"/> but <pause dur="0.2"/> now they're broken up <pause dur="0.4"/> this is the the interindustry point this is quadrant one <pause dur="1.4"/> quadrant one <pause dur="0.7"/> and it says <pause dur="0.3"/> sector I <pause dur="0.7"/> produces some kind of <pause dur="0.5"/> output <pause dur="0.4"/> which is called X-sub-I <pause dur="0.5"/> which stands for output of sector I <pause dur="0.9"/> here is a sector J <pause dur="0.5"/> and here is the <pause dur="0.2"/> total input into sector <pause dur="0.2"/> J <pause dur="0.3"/> which is called X-sub-J <pause dur="2.9"/> here is a flow <pause dur="0.4"/> and that's expressed actually in pounds or yen or dollars <pause dur="0.5"/> between I and J sectors <pause dur="0.4"/> and it's called <pause dur="0.2"/> X-sub-I-J <pause dur="0.6"/> X-sub-I-J <pause dur="0.2"/> that's the flow between two sectors expressed in value </u><gap reason="break in recording" extent="uncertain"/> <u who="nm1108" trans="pause">

says sector I <pause dur="1.2"/> sells many things to other sectors <pause dur="0.2"/> sector J means any receiving sector <pause dur="0.7"/> when you add it up <pause dur="0.2"/> that's the total <pause dur="0.3"/> it sells to final demand <pause dur="1.5"/> and the total output is equal to that <pause dur="0.3"/> now <pause dur="0.4"/> going back to Leontief <pause dur="0.2"/> the basic thing that Leontief said <pause dur="0.4"/> which was a revelation in nineteen-thirty-six <pause dur="0.3"/> is that <pause dur="0.2"/> every sector produces not only for final demand <pause dur="0.7"/> but also for other industrial sectors <pause dur="0.3"/> so a large portion of what

you produce is not visible <pause dur="1.2"/> the best example is if you have a <pause dur="0.2"/> pump <pause dur="1.4"/> going down into the earth <pause dur="0.9"/> going to the aquifer <pause dur="1.1"/> where water is <pause dur="1.1"/> and you start doing this <pause dur="0.5"/> and all of a sudden water starts coming up <pause dur="0.2"/> and you want one glass of water <pause dur="0.7"/> you got one glass but the whole pipe is full <pause dur="1.7"/> for you to get one car <pause dur="0.5"/> millions of cars must be on the line for that car to come out <pause dur="0.9"/> so an enormous amount of stuff is always elsewhere being produced <pause dur="0.4"/> being mixed in some fashion <pause dur="0.4"/> we make something we sell it to these guys <pause dur="0.4"/> they do something to it <pause dur="0.3"/> add something to it <pause dur="0.3"/> and then <pause dur="0.2"/> they sell it to another guy <pause dur="0.3"/> and <pause dur="0.2"/> something travels through the national economy for a long time before it finally becomes a car <pause dur="1.1"/> just think about you know <pause dur="0.2"/> dashboard <pause dur="0.3"/> how many things go into a dashboard <pause dur="0.4"/> and there are special manufacturers that make dashboards <pause dur="0.3"/> but that are made from thousands of pieces that come from someplace <pause dur="0.4"/> yeah <pause dur="0.6"/> until they finally come to Mazda <pause dur="0.4"/> and <pause dur="0.2"/> the whole thing is slotted into <pause dur="0.3"/> a chassis <pause dur="2.3"/> so we can also say

that input <pause dur="1.0"/> is like this this is all intermediate inputs <pause dur="0.7"/> X-sub-dot-J simply means that you are summing all of this up <pause dur="0.6"/> but also what you are putting in there is value added <pause dur="0.8"/> primarily labour but here it's sum <pause dur="0.2"/> into one term <pause dur="0.3"/> V-sub-J <pause dur="1.2"/> and then the total input into an industry's called X-sub-J so it says <pause dur="1.3"/> we in making anything buy a lot from other industries <pause dur="0.2"/> but we also buy <pause dur="0.5"/> value added <pause dur="0.3"/> we contribute to national income by doing that by the way <pause dur="1.6"/> every time you hire any primary input like labour <pause dur="0.8"/> you pay wages and salaries <pause dur="1.1"/> for capital you pay interest <pause dur="0.8"/> for land you pay rents <pause dur="0.2"/> these are sources of income <pause dur="0.4"/> so when you add all of this up <pause dur="0.9"/> this by the way <pause dur="1.4"/> when you add all this up is contribution of this sector to national income <pause dur="0.8"/> and this is contribution of this sector to <pause dur="0.5"/> G-N-P <pause dur="0.9"/> to output <pause dur="0.3"/> gross <pause dur="1.2"/> national product <pause dur="1.8"/> and this is what this says <pause dur="0.2"/> it says when i add all of this up <pause dur="0.2"/> it will be called V <pause dur="0.4"/> it will be national income <pause dur="0.3"/> that must be equal to adding all of this up <pause dur="0.5"/> which is called <pause dur="0.9"/>

gross national product or total output <pause dur="1.7"/> so these are the kinds of things that are <pause dur="0.2"/> there <pause dur="0.3"/> now i don't want to # <pause dur="0.2"/> <event desc="takes off transparency" iterated="n"/> drag you through all of this <pause dur="0.4"/> right now <pause dur="0.2"/> i'll do it some other time it'll be fun <pause dur="0.7"/><vocal desc="laughter" iterated="y" dur="1"/> # <pause dur="0.7"/> i'm showing you that all of these terms <pause dur="0.5"/> you know have names <pause dur="1.7"/> we'll talk about some of these things <pause dur="0.3"/> but then <pause dur="0.2"/> i can start combining these things i can start forming ratios <pause dur="0.9"/><kinesic desc="puts on transparency" iterated="n"/> which are interesting to study which look like this <pause dur="0.4"/> i can take one term for example X-sub-I-dot <pause dur="0.2"/> divided by Y-<pause dur="0.2"/>sub-I <pause dur="0.3"/> and <pause dur="0.2"/> i call that intermediate output to final demand ratio for sector I <pause dur="0.2"/> and i can then plot these things <pause dur="0.3"/> and understand what's happening <pause dur="0.3"/> with a particular <pause dur="0.3"/> sector <pause dur="0.6"/> anyway <pause dur="0.4"/> i'm not going to do that now i'll do it some other time <pause dur="1.4"/><kinesic desc="changes transparency" iterated="y" dur="3"/> but please look into this because it's boring to talk about it <pause dur="0.2"/> see it's much better for you to read it <pause dur="0.2"/> and for me to refer to it <pause dur="0.4"/> easier on me easier on you <pause dur="2.3"/> now i'd like to # focus your attention briefly <pause dur="0.6"/> on <pause dur="0.2"/> this <pause dur="0.5"/> series of appendices there are two appendices

here <pause dur="0.3"/> and i would like you to read them <pause dur="0.7"/> # it was supposed to be read for today but i would still like to <pause dur="0.8"/> point out that this is something that i consider important <pause dur="1.5"/> this is written in so-called matrix notation <pause dur="1.5"/> some of you had some matrix algebra many of you had none <pause dur="0.6"/> but a matrix is basically a table of numbers <pause dur="0.5"/> so <pause dur="0.2"/> a matrix of the kind that you will see in a second <pause dur="0.2"/> which has four numbers <pause dur="0.3"/> has two rows and two columns <pause dur="0.4"/> that <pause dur="0.2"/> thing we call a matrix can be operated on <pause dur="0.3"/> just like you can operate on any standard number <pause dur="0.3"/> which in mathematics is called a scalar <pause dur="0.6"/> a scalar is just a number <pause dur="0.4"/> you can add numbers and so on <pause dur="0.6"/> in matrix algebra you can add matrices <pause dur="0.2"/> you can <pause dur="0.2"/> divide them <pause dur="0.3"/> sort of <pause dur="0.5"/> you can subtract them you can multiply matrices you can operate on them <pause dur="0.4"/> in other words you can operate on tables that look like input-output tables <pause dur="0.5"/> so you can have a table that has <pause dur="0.2"/> five-thousand rows <pause dur="0.3"/> and five-thousand columns but you just write <pause dur="0.2"/> A <pause dur="0.5"/> which means <pause dur="0.4"/> technical coefficient matrix in this case <pause dur="0.2"/> so

it's wonderfully <pause dur="0.7"/> easy <pause dur="0.4"/> to manipulate things <pause dur="0.2"/> and not drag five-thousand things by five-thousand things around <pause dur="0.2"/> yeah <pause dur="1.0"/> now <pause dur="0.8"/> this is what this says and i'm not going to talk about the second equation but just the first one <pause dur="0.2"/> it basically says that's the basic set of equations <pause dur="0.3"/> that Leontief set up <pause dur="0.3"/> he said <pause dur="0.7"/> output <pause dur="1.1"/> is equal to intermediate output <pause dur="0.8"/> and final demand <pause dur="1.3"/> every <pause dur="0.7"/> economy <pause dur="0.2"/> must produce to satisfy final demand <pause dur="0.2"/> must produce many other things <pause dur="0.9"/> if you dear <pause dur="0.3"/> folks want <pause dur="1.0"/> three cars <pause dur="0.2"/> we'll have to make fifty <pause dur="1.7"/> for the production process to be possible <pause dur="0.2"/> for you to get three cars <pause dur="1.1"/> or if you want three-million <pause dur="0.2"/> well we'll have to make five-million <pause dur="1.2"/> and they will be in process <pause dur="0.3"/> moving toward you <pause dur="0.6"/> obviously if you don't want them any more we have a big problem <pause dur="0.2"/> because there are many things in the pipeline <pause dur="2.4"/> now <pause dur="0.2"/> this is called an output vector <pause dur="0.2"/> and you will see how it looks but it's basically <pause dur="0.4"/> in <pause dur="0.2"/> my simple example just two numbers one on on top of the other <pause dur="0.5"/> this matrix says well <pause dur="0.2"/> technology

matrix <pause dur="0.3"/> and i'll explain to you <pause dur="0.2"/> # when we meet again <pause dur="0.2"/> or when we start talking about things <pause dur="0.6"/> # in a bit more detail how that matrix is constructed <pause dur="0.7"/> this is as you can see exactly the same vector again <pause dur="1.1"/> and this is the <pause dur="0.3"/> vector of final <pause dur="0.2"/> demand <pause dur="0.4"/> i'll just show you <pause dur="0.3"/> # how that looks in actual numbers <pause dur="0.3"/> to give you a <kinesic desc="changes transparency" iterated="y" dur="9"/> feeling of # how this topic will look <pause dur="0.7"/> i have a very simple system <pause dur="2.2"/> in which i have some matrix which i have not introduced yet called Z <pause dur="0.4"/> which simply says or Z in English <pause dur="0.3"/> English <pause dur="0.9"/> # <pause dur="0.9"/> these are all the flows <pause dur="0.2"/> between different <pause dur="0.4"/> sectors of the national economy <pause dur="0.4"/> this is for example flow from industry <pause dur="0.4"/> two <pause dur="0.2"/> to industry <pause dur="0.2"/> one <pause dur="0.5"/> and it's <pause dur="0.3"/> in pounds let's say <pause dur="1.4"/> so this is how it looks <pause dur="1.2"/> this is final demand <pause dur="0.7"/> in pounds again it says <pause dur="0.4"/> people want <pause dur="0.4"/> for one year <pause dur="0.2"/> six-hundred <pause dur="0.2"/> say billion <pause dur="0.5"/> worth of construction goods <pause dur="0.8"/> and they want <pause dur="0.2"/> say <pause dur="0.5"/> fifteen-<pause dur="0.7"/>hundred-<pause dur="0.3"/>billion <pause dur="2.2"/> worth of <pause dur="0.2"/> non-construction goods <pause dur="2.3"/> so that's what that would say <pause dur="0.5"/> this also this is a <pause dur="0.2"/> vector V which <pause dur="0.2"/> is horizontal which says <pause dur="0.9"/> we have for

purposes of production <pause dur="0.4"/> six-hundred-fifty-billion <pause dur="1.5"/> worth of money to spend on income of people who will be contributing primary inputs to construction <pause dur="0.9"/> primary inputs mainly labour <pause dur="0.8"/> and this is <pause dur="0.3"/> one-thousand-four-hundred-<pause dur="1.1"/>billion pounds worth of primary inputs for <pause dur="0.2"/> all the other <pause dur="0.7"/> sectors of the national economy <pause dur="2.0"/> so # <pause dur="0.3"/> X is in this particular case output <pause dur="1.0"/> and <pause dur="0.4"/> you know output happens to look like this <pause dur="0.2"/> now <pause dur="0.2"/> matrix A <pause dur="0.2"/> as you can see from this is this matrix transformed in a particular way <pause dur="0.4"/> you first add these two numbers <pause dur="0.3"/> and call that X-sub-one <pause dur="0.3"/> that's total input <pause dur="0.5"/> and then you <pause dur="0.2"/> divide that into this and into that <pause dur="0.5"/> sounds complicated but basically <pause dur="0.2"/> this simply becomes a proportion <pause dur="0.3"/> you say out of one pound <pause dur="0.9"/> of total inputs <pause dur="0.6"/> twenty-five P <pause dur="0.6"/> come from here <pause dur="0.4"/> and the rest that's seventy-five P come from there that's basically all <pause dur="0.4"/> it's the simply <pause dur="0.2"/> coefficients that tell you <pause dur="0.3"/> out of one pound <pause dur="0.2"/> or out of hundred per cent <pause dur="0.2"/> how much comes from a particular place <pause dur="1.4"/> so <pause dur="0.2"/> that matrix which is <pause dur="0.2"/> what i just

explained that means fifteen P this means twenty P <pause dur="1.1"/> this tells you <pause dur="0.6"/> how <pause dur="0.3"/> things are actually mixed in terms of some kind of basic <pause dur="0.5"/> not technology really <pause dur="0.2"/> but <pause dur="0.2"/> basic recipe <pause dur="0.3"/> you know <pause dur="0.2"/> out of <pause dur="0.2"/> one kilo <pause dur="0.2"/> how much is in eggs <pause dur="0.2"/> and how much is in flour <pause dur="2.8"/><kinesic desc="changes transparency" iterated="y" dur="5"/> then you do a few more operations which i will not drag you through right now <pause dur="0.5"/> and why this is so et cetera et cetera then you come up with this thingy <pause dur="0.9"/> this is a matrix it has <pause dur="0.5"/> two <pause dur="0.3"/> rows and two columns <pause dur="0.6"/> but this matrix which we have computed in some mirculous way <pause dur="0.6"/> tells us very interesting things <pause dur="0.5"/> for example <pause dur="0.7"/> this number here <pause dur="0.3"/> tells us <pause dur="0.4"/> something <pause dur="0.2"/> miraculous <pause dur="0.2"/> it says <pause dur="0.7"/> if you increase <pause dur="2.3"/> final demand <pause dur="0.2"/> for non-construction goods in this economy <pause dur="0.7"/> by one pound <pause dur="1.0"/> or one-zillion pounds doesn't make any difference but you know one pound <pause dur="2.1"/> the <pause dur="0.4"/> final demand <trunc>wh</trunc> sorry the total output of construction industry will go up by <pause dur="0.3"/> point-twenty-six <pause dur="0.2"/> and so on <pause dur="0.2"/> in other words <pause dur="0.2"/> twenty-six P <pause dur="1.2"/> so even though you didn't want any more new construction <pause dur="0.5"/> by wanting more

non-construction goods <pause dur="0.2"/> construction goods will be required <pause dur="0.3"/> because <pause dur="0.2"/> these guys that make different things <pause dur="0.2"/> will have to be selling to each other and they will have to be building new plants and things like this and that would involve construction <pause dur="0.2"/> so even if you don't want any construction goods <pause dur="0.2"/> you will get them <pause dur="0.3"/> because construction goods are involved in production of other goods <pause dur="0.8"/> yeah <pause dur="0.6"/> but this is the literal meaning of this <pause dur="0.7"/> if you increase final demand <pause dur="0.3"/> of good two <pause dur="1.1"/> by one pound <pause dur="1.1"/> the output <pause dur="0.4"/> of good one in this economy will go up by <pause dur="0.2"/> twenty-six P <pause dur="0.2"/> even though you don't want it <pause dur="0.2"/> but this is what will happen because things are mixed in that way <pause dur="0.5"/> so this is <pause dur="1.0"/> in economic parlance <pause dur="0.2"/> the sensitivity of output of one industry <pause dur="0.2"/> to changes in final demand <pause dur="1.4"/> of another industry <pause dur="1.5"/> yeah <pause dur="0.5"/> that's what input-output is about so that table <pause dur="0.2"/> is an interesting table it tells us something interesting about <pause dur="0.2"/> how different industries are connected <pause dur="1.0"/> amen <pause dur="0.6"/> finished <vocal desc="laughter" n="ss" iterated="y" dur="1"/>