L15._22

Page 1: Introduction to Economic Growth

Overview

• Economic growth is a crucial focus in modern economics.

• Presented by Dr. Ahmad Hassan at Loughborough University.

• Contact information and consultation hours provided.

Page 2: Reading List

Recommended Literature

• L&C Ch. 26: Begg, D., Vernasca, G., Fischer, S., and Dornbusch, R. (2014). Economics, 12th Edition, McGraw Hill.

• Ch. 28: McDowell, M., Thom, R., Pastine, I., Frank, R., and Bernanke, B. (2012). Principles of Economics, 3rd European Edition, McGraw Hill.

• ONS resources regarding the UK economy.

Page 3: Benefits of Economic Growth

Key Advantages

• Living Standards Improvement: Economic growth leads to enhanced living standards, thereby combating poverty effectively.

• Technological Advances: Growth fosters new products and processes, impacting lifestyle, healthcare, and quality of food.

• Income Redistribution: Increased income allows for more generosity towards economically disadvantaged groups without raising taxes on the wealthy.

Page 4: Costs of Economic Growth

Potential Costs

• Opportunity Costs: Investment in growth can lead to consumption sacrifices today.

• Personal and Social Costs: Shifts in resources can adversely affect individuals.

• Time Distribution of Costs: Current sacrifices may benefit future generations.

• Negative Externalities: Growth can adversely impact the environment.

• Growth and Happiness: Economic growth does not necessarily correlate with increased happiness.

Page 5: Opportunity Costs

Understanding Opportunity Costs

• Growth involves sacrificing current consumption for future benefits.

• Investment in capital, education, and health does not yield immediate returns.

• Illustrated through a production possibilities framework.

Page 6: Production Possibility Curve

• Visual representation detailing the trade-offs between capital goods and consumption goods for economic growth.

• Demonstrates economic choices and limits.

Page 7: Personal and Social Costs

Impact on Individuals

• Economic changes can render certain skills obsolete.

• Historical examples include job losses during the industrial revolution and automation.

• Personal costs can be significant for those affected, despite smaller overall societal impact.

Page 8: Distribution Costs

Cost Distributions

• Time Distribution: Today's sacrifices may not benefit current older populations.

• Geographical Distribution: Economic benefits are unevenly spread; differs regionally (e.g., northern vs. southern England).

Page 9: Negative Externalities

Environmental Concerns

• Economic growth contributes to increased pollution and environmental degradation.

• Rising populations and industrial activities strain natural processes for managing pollution.

Page 10: Growth and Happiness

Disconnection Between Growth and Happiness

• Studies in the USA show no increase in happiness despite rising incomes.

• Stressors from competitive environments may lead to mental health issues.

• Longer working hours may further reduce leisure and familial time.

• This disconnect suggests that material wealth does not equate to emotional well-being, indicating the need for a reevaluation of societal values and priorities.

Page 11: Resource Exhaustion

Consumption Trends

• Since 1945, resource consumption has drastically increased alongside population growth.

• population growth from 2 to 6 billion in period increases demand for natural resources.

• Rising living standards are creating unsustainable resource demands.

• increasing wealth means they consume more and continually rising standards are unsustainable

Page 12: Resource Exhaustion and Technology

Technological Solutions

• Innovations can lead to more efficient resource use.

• Challenges include timing and ensuring that advancements can keep pace with demand.

Page 13: Renewable Resources

Sustainability Issues

• Increased demands on resources like fish and rainforests threaten long-term sustainability.

• Problems often stem from inadequate management of resources, undefined property rights or lacking gov jurisdiction

Page 14: Conclusions

Summary of Findings

• Economic growth has significantly improved living conditions in advanced nations but also introduces challenges.

• Sustainable growth is essential and requires innovative policies.

• Present strategies suggest overcoming current sustainability challenges is possible.