[BABA3/1ST.] ECON501: Economic Growth and Development

Economics

• The study of how people and societies produce, consume, and exchange wealth to get what they need and want.

• It explains why people, businesses, and governments make the choices they do.

• The science of choices — who gets what, and why.

Economic growth

• Short term quantitative measure of economy

• Increase in output or production

• Can be measured by comparing its GDP at present with the GDP last year

Economic growth

● The rise in value of goods & services produced (GDP)

● A number — measures market output

● Can rise while poverty stays high

Development

• A sustained effort

• A long process involving changes and requiring effort

• No such things as it being instant

Economic development

• Both more output or production and changes in the technical and institutional arrangements by which factors of production are produced and distributed.

• Shaped not only by economic factors but also by non-economic factors like environmental, social, and cultural conditions of the economy.

Economic development

● Long term qualitative and quantitative measure of economy

● A measure of human welfare & quality of life

● Includes health, education, equality, freedom

● Asks: is life actually improving for people?

Economic development

1) Policy action — Deliberate steps by governments & communities

2) People-focused — Improves living standards & wellbeing

3) Many dimensions — Infrastructure, health, education, environment

1. Increases in output or production has to be sustained over a long period of time.

2. Changes in economic structure would spread out in the entire economy.

3. Growth has to be accompanied by an increase in efficiency.

A nation’s economic development can be characterized by…

Big GDP numbers can hide the real picture:

● Income distribution isn't counted — GDP is a total, not a fair share

● A small elite can own most of a country's wealth

● Malls & skylines can sit minutes away from real hardship

● Does growth actually ‘trickle down’ to everyone?

Why doesn’t growth always mean better lives?

• Reliability — How accurate is the data really collected?

• Distribution — Is income spread evenly, or held by few?

• Quality of life — More income ≠ less stress or better health

• Exchange rates — Currency swings distort comparisons

• Informal economy — Barter, subsistence farming go unrecorded

• Unpaid work — Housework & charity add welfare, but no $ value

Issues with GDP as a measure

• Poverty

• Inequality

• Progress

• Freedom

• Self-esteem

• Sustainability

• Sectors of the economy

What does development really mean and what should it include?

Absolute poverty

Can't meet basic needs

Relative poverty

Falling far behind others in your society

Sustainable Development

Development that meets the needs of the present without compromising the ability of future generations to meet their own needs

Other Ways to Measure Welfare

• Doctors per head

• TVs and fridges

• Cars per family

• Disease indicators

• Activity per sector

• Stress and crime levels