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‘First industrial revolution’
transition to industrial society - laid foundations for modern economic growth through increased productivity of labour and radical shifts in society
National income per capita
measure of a country’s standard of living - calculated by dividing total national income by population → indicates avg income earned by each resident of a country
National output per capita
AKA GDP per capita
measure of country’s avg income - calculated by dividing country’s GDP by population → indicator of standard of living + often used to compare living standards btwn diff countries (or over time)
GDP
gross domestic product - indicator that measures total monetary value of all final goods/services produced within a country’s borders in a specific time period
reflects the size + health of a country’s economy
productivity
measure of how efficiently resources (e.g. labour/capital) = used to produce goods + services
key aspects: output/input, efficiency, importance, determinants, types of productivity (e.g. measured at diff scales)
benefits of productivity growth = economic growth, higher living standards, increased income (for workers/businesses)
demographic transition
shift in population patterns from high birth + death rates to low birth + death rates
linked to development, impacts resource allocation, labour force participation, + overall economic output
key economic impacts: reduced dilution of capital (more resources per capita available = potentially boosting economic growth), inc investment in human capital (inc quality > quantity of children - education + skills), shifts in age structure
agriculture revolution
increase in amt of grain that can be produced from a given area of land sown w a particular crop
largely driven by technological (e.g. seed drill) + organisational (e.g.crop rotation system) changes
industrial enlightenment
refers to close relationship btwn scientific knowledge + technological innovation during IR
highlights how scientific understanding was applied to develop practical technologies - leading to rise of industrialisation
Joel Mokyr
‘useful knowledge’
(mokyr) - describes the body of scientific + practical knowledge that drives economic + technological advancement → encompasses both theoretical and practical aspects
according to mokyre this is essential for understanding + manipulatng the natural world)
energy revolution
wrigley
transition from wood etc to coal as an energy source - broke energy barrier of limited ‘energy budget’
argued organic (pre-industrial) economies could only capture tiny amt of sun’s energy - this inc w the enrgy revolution → source of energy
organic economy
pre-industrial economy, according to wrigley
impressionist vs revisionist
impressionist - focuses on subjective/nuanced/incomplete nature of hisotrical economic events
revisionist - more critical/analytical approach seeking to challenge established narratives/understandings
geometric growth
AKA exponential growth
compounding effect of growth
arithmetic growth
increase that occurs at a constant rate over time
little divergence
evidence of NW Europe (e.g. England/hollan) diverging from rest of Europe pre-IR
Suggests LT inc in living standards → IR as a continuation of trends already in place?
great divergence
Pomeranz
Global divergence after 1800 - superior growth in W Eur - pulled away from other regions (Africa/Asia/etc)
the ‘Great Moderation’
Period of unusually stable macroeconomic activity, primarily in the US from mid-1980s to ~2007
Characterised by low + stable inflation, steady econ growth + reduced volatility in key macroeconomic variables
general purpose technologies
transformative technologies w wides[read + lasting impacts on entire economies
charaterised by ability to be applied across various industries/sectors - lead to new innovations/changes in how people live + work
e.g. steam engine, electricity, information technology
technology waves (Kondratieff waves)
LT econ cycles driven by tech innovation - leading to periods of prosperity + disruption
cycles lasting ~50-60 yrs = hypothesised to be caused by the bunching of basic innovations that create new industrial sectors
each wave characterised by specific technological mode that transforms the economy - impacts production methods, energy consumption + various aspects of society
radical vs incremental innovation
radical - fundamentally new products/processes etc
incremental - small + continuous improvements to existing ones (building upon existing foundations)
innovation rents
early profits from introducing/adopting new technology/innovation
patents
legal document that grants an inventor exclusive rights to an invention for a specific period (usually around 20 years) - prevents others from making/using/selling invention without their permission
rival goods
those where consumption by one person prevents another person from consuming it at the same time
e.g. food/clothes/car
if one person eats an apple, the other can’t
excludable goods
one where a producer can prevent individuals from consuming it if they don’t pay for it
e.g. tickets (payment for entry) or products w price tags
e.g. can only have apple if buy it
complementary investments
when spread of one technology can foster the spread of another
e.g. use of steam engines for looms in the textile industry
limited liability
legal structure where the owners of a business/project are only responsible for debts/liabilities up to the amount they have invested → protects personal assets from business losses
isocost lines
represents all possible combinations of two inputs (e.g. labour/capital) that a firm can purchase with a given total budget
codified knowledge
explicit, formal + readily transferable - often found in documents/systems
tacit knowledge
personal, intuitive + difficult to articulate/share, requiring experience + interaction
endogenous growth
suggests econ growth stems from internal factors within a system rather than external ones like technological advancements
emphasises role of human capital/innovation/knowledge as key drivers of growth
contrasts w neoclassical models which treat tech progress as exogenous
colonialism
‘domination of a people/area by a foreign state/nation’ - ‘practice of extending + maintaining a nation’s political + economic control over another people/area’
imperialism
‘the policy, practice, or advocacy off extending the power + domination of a nation’
settler colonialism
large No. of people settle in a region, displacing/subjugating/exterminating indigenous people + build own schools/churches etc
exploitation colonialism
small No. of colonisers exploit the region’s natural resources OR labour - often use indigenous people as slaves or pressure them to work
surrogate colonialism
colonial power supports the settlement of a non-native group in a region with an indigenous population
internal colonialism
one part of a country controls/subjugates another part of the same country
preferential trade agreements (PTAs)
grant certain countries/regions special treatment (e.g. lower tariffs/reduced trade barriers) for imports from specific partners
differs from MFN (most favoured nation) principle which requires all trading partners to be treated equally
labour productivity
measures output per unit of labour input - e.g. output per worker/per hour worked
multifactor productivity (MFP)
measures output per unit of combined inputs, by accounting for both labour + capital
Catch-up industrialisation
idea that developing countries have higher growth rates bc of factors like readily available technologies (don’t have to pinoeer themselves) and investment opportunities
inelastic/elastic demand
inelastic demand - a product’s quantity demanded doesn’t change much, regardless of price changes
elastic demand - demand means the quantity demanded is highly sensitive to price changes
structural transformation
transition from africultureal to manufacturing/service sectors
light vs heavy industries
light - smaller-scale operations requiring less capital, produce goods for consumer markets → e.g. electronics, textiles, packaging
heavy = large-scale production w high capital investment, goods produced are often used as inputs for other industries → e/g/ construction, steel, energy
isolationism
(as an economic polocy) - a nation’s stance of minimising international economic interactions + seeking self-reliance
limiting foreign trade/investment/other economic engagements to protect domestic industries + create a self-sufficient closed economy
(opposite of globalisation + internationalism)
‘Gun Boat Diplomacy’
foreign policy that is supported by the use or threat of military force
marginal product (MP)
the change in ouput as a result of one additional unit of input being added to production
feudal economy
system where economic activities were heavily influenced by the lord’s estate with the landlord holding a monopoly on land etc
very hierarchical with hereditary status
autarky
aka economic self-sufficiency - country aims to be self-sufficient in all/most aspects of its economy (including trade)
focus on producing goods/services within its own borders
market integration
process of connecting previously separate markets for a particular product or service inco a single, larger market
removing barriers e.g. tariffs/quotas/other restrictions which previouslt limited trade btwn markets
goal = to create a more efficient + competitive environment by allowing for greater flow of goods/services
gravity model of trade
nations close to eachother trade more + bigger economies also trade more
think: when trade costs decrease, then trade increases
gold standard
system of defining domestic currency to a fixed amount of gold
exchange rate stability helps trade - less price uncertainty
total factor productivity (TFP)
measure of productive/operational efficiency - measures how much output can be produced from a certain amount of inputs
economic concept that describes the portion of a company’s increased output that cannot be explained by increased capital/labor inputs
GATT
General agreement on tariffs and trade
containerisation
system of freight transport used in sea shipping which has reduced transport costs of moving thousands of goods across the globe → standardised container system
import substitution
economic policy where a country encourages the domestic production of goods that were previously imported, aiming to reduce reliance on foreign goods and promote local industries
‘place premium’
wage premium for comparable job in 2 different countries
PPP
purchasing poower parity
measure of price of specific goods in different countries - used to compare absolute purchasing power
chain migration
migration process where immigrants from a specific area follow others from that same area to a particular destination
few pioneers, then others follow if succesful → have contacts/help/jobs upon arrival bc of connections
opportunity cost
the value of the next best alternative that is forgone when a choice is made → what you give up to get something else
e.g. if a company chooses to invest in a new manufacturing plant, the opportunity cost is the profit they could have earned by investing in a different project, like a research + development initiative
foregone earnings
represent the difference between an investment’s actual earnings and the earnings that could have been realised had there been no fees
so, they are the investment capital that the investor spent on investment fees
variable cost
expenses that change directly with the level of production or sales of a business → costs that change as the volume changes
unlike fixed costs which remain constant regardless of output
economies of scale
cost advantages a business gains by increasing its production while lowering per-unit production costs → when production becomes more efficient
leapfrog technologies
idea that countries which have poorly-developed technology/economic bases can move themselves forward rapidly through the adoption of modern systems without going through the intermediary steps
LLR
lender of last resort ?? - has the responsibility of preventing panic-induced collapses of the money stock