Download The benefits of Economic growth Consumers: • Higher

Survey
yes no Was this document useful for you?
   Thank you for your participation!

* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project

Document related concepts

Ragnar Nurkse's balanced growth theory wikipedia , lookup

Production for use wikipedia , lookup

Business cycle wikipedia , lookup

Economics of fascism wikipedia , lookup

Economic democracy wikipedia , lookup

Long Depression wikipedia , lookup

Chinese economic reform wikipedia , lookup

Economic growth wikipedia , lookup

Rostow's stages of growth wikipedia , lookup

Transformation in economics wikipedia , lookup

Transcript
ThebenefitsofEconomicgrowth
Consumers:
• Higheraverageincomes.Thisenables
consumerstoenjoymoregoodsand
servicesandenjoybetterstandardsofliving
astheyhavemoredisposableincome.
• Improvedpublicservices.Withincreased
taxrevenuesthegovernmentcanspend
moreonpublicservices,suchastheNHS
andeducationetc.
Firms: • Economicgrowthencouragesinvestment
andthereforeencouragesavirtuouscycleof
economicgrowth.
TheGovernment:
• Lowergovernmentborrowing.Economic
growthcreateshighertaxrevenuesand
thereislessneedtospendmoneyon
benefitssuchasunemploymentbenefit.
Thereforeeconomicgrowthhelpstoreduce
governmentborrowing.
• Economicgrowthalsoplaysarolein
reducingdebttoGDPratios.
• Lowerunemployment:withhigheroutput
andpositiveeconomicgrowthfirmstendto
employmoreworkers
Currentandfuturelivingstandards:
• Moneycanbespentonprotectingthe
environment.WithhigherrealGDPasociety
candevotemoreresourcestopromoting
recyclingandtheuseofrenewable
resources
ThecostsofEconomicgrowth
Consumers:
• Inequality:becausegrowthcanbenefitasmall
sectionofsocietymorethanothers.Forexample,
thosewithassetsandwealthwillseea
proportionallybiggerriseinthemarketvalueof
rentsandtheirwealth.Thoseunskilledwithout
wealthmaybenefitmuchlessfromgrowth.
Firms:
• Inflation:Higherpriceswillincreasecostsof
productionforfirms.
TheGovernment:
• Inflation.Itiswhendemandincreasestooquickly
thatwegetapositiveoutputgapandfirmspush
upprices.Highinflationarygrowthmaybe
followedbyarecession.
• Increasedeconomicgrowthtendstocausean
increaseinspendingonimportscausingadeficit
onthecurrentaccount.
Currentandfuturelivingstandards:
• Increasedeconomicgrowthwillleadtoincreased
outputandthereforeincreasedpollutionand
congestion.Thiswillcausehealthproblemssuch
asasthmaandthereforewillreducethequalityof
life.
• Economicgrowthalsomeansgreateruseofraw
materialsandcanspeedupdepletionofnonrenewableresources.
ThelimitationsofusingGDPtocomparelivingstandardsbetweencountriesandovertime
Simplybecauseacountryappearstoberichdoesnotactuallymeanthatitis,andthismeansthatusingnational
incomefigureslikeGDPasameasureoflivingstandardsmaybeinappropriate.AnincreaseinrealGDPdenotesan
increaseintheoutputofgoodsandservicesoftheeconomy,butnotalwaysariseinlivingstandards:
GDPdoesn’tincludecertaineconomicactivitiessuchas:
• Nonmarketactivities
• Negativeexternalities
• Undergroundeconomy
• Qualityoflife
Otherincomeandoutputmeasureinclude:
GNP(GrossNationalProduct)–marketvalueofgoodsandservices
NNP(NetNationalProduct)–totalmarketvalueofallfinalgoodsandservicesminusdepreciation
GNI(GrossNationalIncome)–valueaddedbyallproducerswhoareresidentsplusproducttaxes(exceptsubsidies)
notincludedinoutputplusincomereceivedfromabroad
PI(PersonalIncome)–anindividual’stotalearningsfromwages,investment,enterprises
DPI(DisposablePersonalIndex)–totalamountofmoneyavailableforanindividualorpopulation
Needtolookatacountry’sdemographicstodeterminewhetheracountryhashighlivingstandardsornot,this
includes:
Accesstohealthcare,Infantmortality,Maternalmortality,Lifeexpectancy,Accesstosafewater,Agricultureasa
percentageofGDP,Childmalnutrition,Environmentalmeasures,De-forestationrate,Expenditureonsocialsecurity,
Foodaid,Householdswithelectricity,Transportinfrastructure,Povertyline,Accesstoeducation,Leisure
UKnationalwellbeing
Since1970,theUK'sGDPhasdoubled,butpeople'ssatisfactionwithlifehashardlychanged.81%ofBritons
believethattheGovernmentshouldprioritisecreatingthegreatesthappiness,notthegreatestwealth.TheOffice
forNationalStatisticsdataalsosuggestspeopleinWalesandEnglandarelesssatisfiedthanpeopleinScotland
andNorthernIreland.
Teenagersandthoseaboveretirementagearethehappiest.Thesurveyisanefforttoproduceanalternative
measureofnationalperformancetoGrossDomesticProduct.
Relationshipbetweenrealincomesandsubjectivehappiness/well-being
IncomehasbeenmeasuredagainstSWB(SubjectiveWell-Being)inanumberofways,dependingonthelevelof
comparison.GNPistypicallyusedforbetween/within-nationcomparisonsandforcomparisonsofcountries
overtime,andpersonalincomeorwindfallsaretypicallyusedinstudiesofindividuals,throughbothself-report
andmoreobjectivemeasurement.
ApositivecorrelationbetweenincomeandSWBmakesintuitivesense.Higherincomewouldallowpeopleto
morecomfortablymeettheirbasicphysicalneedsandwouldconferstatusadvantages.Beyondthis,thegreater
freedomofactionandconsumptionthatincomeprovidescouldallowforgreaterself-actualisationandmore
successfulgoalpursuits.Thisarticlewillreviewtheextantresearchontheincome-SWBrelationshipateachof
theabovelevels,anddiscussthelimitationsandfuturedirectionsofthislineofinquiry.
Peoplelivinginbuilt-uporformerindustrialareas,suchasSouthWales,theWestMidlandsorLondon,tendedto
belesshappy,whileruralareas,suchasOrkneyandShetland,andRutland,intheEastMidlands,werethe
happiest.
Whenbrokendownbymaritalstatus,marriedpeoplewerethemostsatisfiedwiththeirlives,followedby
cohabitees,thensinglepeople,widows/widowersandpeoplewhoweredivorced.
Beinghealthywasalsoanimportantfactorbutdoesnotguaranteehappiness,thesurveysuggests,with18%of
thosewhoreportedgoodorverygoodhealthreportinglowsatisfactionwithlifeoverall,while38%ofthose
withbadhealthreportedhighormediumlevelsofsatisfactionwithlife.
Some45%ofunemployedpeopleratedtheir"lifesatisfaction"asbelow7outof10.Amongemployedpeoplethe
figurewas20%.
Glossary
EconomicGrowth:anincreaseintheamountofgoodsandservicesproducedperheadofthepopulationovera
periodoftime.
Consumers:apersonwhopurchasesgoodsandservicesforpersonaluse
Firms:Afirmisabusinessorganizationthatsellsgoodsorservicestomakeaprofit.
Livingstandards:Standardoflivingreferstothelevelofwealth,comfort,materialgoodsandnecessities
availabletoacertainsocioeconomicclassinacertaingeographicarea
1. Inflation:ageneralincreaseinpricesandfallinthepurchasingvalueofmoney.
1. Investment:theactionorprocessofinvestingmoneyforprofit
GDP:GDPrepresentsthemonetaryvalueofallgoodsandservicesproducedwithinanation'sgeographic
bordersoveraspecifiedperiodoftime.
Currentaccountdeficit:Ameasurementofacountry'stradeinwhichthevalueofgoodsandservicesitimports
exceedsthevalueofgoodsandservicesitexports.
Negativeexternalities:acostthatissufferedbyathirdpartyasaresultofaneconomictransaction
Undergroundeconomy:Americantermforblackeconomy–illegalgoodsandservices,orunderthetable
wages.
1. Qualityoflife:thestandardofhealth,comfort,andhappinessexperiencedbyanindividualorgroup.
Subjectivewellbeing:Subjectivewell-being(SWB)referstohowpeopleexperiencethequalityoftheirlivesand
includesbothemotionalreactionsandcognitivejudgments.Psychologistshavedefinedhappinessasa
combinationoflifesatisfactionandtherelativefrequencyofpositiveandnegativeaffect.
Discusstheextenttowhicheconomicgrowthmaybenefitaneconomy(18)
Economicgrowthwillresultinanincreaseintheoutputofgoodsandservices,raisetaxrevenue,may
lowerunemploymentandsoreducegovernmentspendingonunemploymentrelatedbenefits.Economic
growthcanraiselivingstandardsbyproducingmoregoodsandservicesandincreasingemployment
opportunities.Theremayalsobedisadvantagesofeconomicgrowthincludinganopportunitycostinthe
shortrun,pollution,depletionofnon-renewableresourcesandstress.Theeffectsofeconomicgrowthwill
beinfluencedbythetypeofextraproductsproduced.Forexample,ifmoreconsumergoodsandservices
aremade,livingstandardswillrisenow.Ifmorecapitalgoodsaremade,itmaytakealittlewhilefor
livingstandardstoincrease.Ifmoreweaponsaremade,peoplemaynotfeelbetteroff.Resourceswill
havetobeshiftedfromproducingconsumergoodstoproducingcapitalgoods.Ifaneconomyis
producingatfullcapacity,therewillbeanopportunitycostinvolvedinachievingeconomicgrowth.
Anotherdisadvantagecouldbeifincomeisunevenlydistributed,onlyasmallproportionofthe
populationmaybenefitforeconomicgrowth.Themoresustainableeconomicgrowthis,themore
beneficialitislikelytobe.Avoidingdepletingnon-renewableresourcesandpollution,ismorelikelyto
enableeconomicgrowthtocontinueforfuturegenerationsandthereforemakeitmoresustainable.
Outcomewilldependonthenatureofeconomicgrowthi.e.whetheritisshortorlongrun.Economic
growthresultingfromashiftoftheaggregatedemandcurvetotherightmaybeassociatedwithinflation
whilstpotentialeconomicgrowthresultingfromashifttotherightoftheaggregatesupplycurvemay
reduceinflationarypressure.EconomicgrowthcausedbyshiftsofboththeADandAScurveswilllastfor
longerthaneconomicgrowthresultingfromjustashiftinonecurve.Aseconomicgrowthisa
macroeconomicobjectiveformostgovernmentsthissuggestsmostcountriesregardeconomicgrowthas
beneficial.
Revisionexercise
LimitationsofGDPisthatitdoesn’tincludecertaineconomicactivities,giveafewexamples
Whatarebenefitsofeconomicgrowthforconsumers?
Whatarecostsofeconomicgrowthforthegovernment?
Whatisthecorrelationbetweenincomeandsubjectivewellbeing?