Economic growth is an increase in market value adjusted for the inflation of goods and services generated by the economy over time. This is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP.
Growth is usually calculated in real terms - that is, the inflation-adjusted term - to eliminate the effect of inflationary distortions on the price of manufactured goods. Measurement of economic growth using national income accounting. Since economic growth is measured as an annual percentage change in gross domestic product (GDP), it has all the advantages and disadvantages of that measure. The economic growth rate of countries is generally compared using the ratio of GDP to population or income per capita.
"The rate of economic growth" refers to the rate of geometric annual growth in GDP between the first year and the last year over a given period of time. Implicitly, this growth rate is a trend in the average rate of GDP during that period, which implicitly ignores the fluctuations in GDP around this trend.
Increased economic growth caused by the use of more efficient inputs (such as labor productivity, physical capital, energy or material) is referred to as intensive growth. GDP growth is only caused by an increase in the number of inputs available for use (an increase in population, new territory) called extensive growth .
The development of new goods and services also creates economic growth.
Video Economic growth
Measuring economic growth
The rate of economic growth is calculated from the GDP data estimated by state statistical institutions. GDP/capita growth rates are calculated from GDP and people data for the initial and final periods included in analyst analysis.
Maps Economic growth
Determinants of GDP growth per capita
In national income accounting, output per capita can be calculated using the following factors: output per unit of labor input (labor productivity), working hours (intensity), percentage of working age population actually working (participation rate) and proportion of working age population to the total population (demographics). "The rate of change of GDP/population is the sum of the rate of change of these four variables plus the cross product."
Productivity
Increased labor productivity (the ratio of output value to labor input) has historically been the most important source of real per capita economic growth. "In a famous estimate, MIT Professor Robert Solow concluded that technological advances have accounted for 80 percent of the long-term increase in US per capita income, with an increase in capital investment explaining only the remaining 20 percent."
Increased productivity lowers the cost of real goods. During the 20th century the real price of many goods fell by more than 90%.
Historical sources of productivity growth
Economic growth has traditionally been linked to the accumulation of human and physical capital and increased productivity and the creation of new goods arising from technological innovation. A further division of labor (specialization) is also important to increase productivity.
Prior to the advancement of industrialization technology resulted in an increase in population, which was continuously checked by the supply of food and other resources, acting to limit per capita income, a condition known as Malthus's trap. The rapid economic growth that occurred during the Industrial Revolution was remarkable because of the excessive population growth, providing a way out of Malthus's trap. The industrialized countries are finally seeing their population growth slow down, a phenomenon known as demographic transition.
Increased productivity is the main factor responsible for per capita economic growth - this has been especially evident since the mid-19th century. Most economic growth in the 20th century was due to an increase in output per unit of labor, material, energy, and land (less input per widget). The balance of output growth comes from using more inputs. Both of these changes increase output. Increased output includes more of the same goods that produce new and old goods and services.
During the Industrial Revolution, mechanization began to replace hand methods in manufacturing, and new processes simplified the production of chemicals, iron, steel, and other products. Machine tools make the production of economical metal parts possible, so that parts can be interchangeable. View: Interchangeable sections.
During the Second Industrial Revolution, the main factor of productivity growth was the substitution of death forces for human and animal workers. There is also a large increase in electricity when the steam and internal combustion power plants replace the limited wind and water power. Since the replacement, the large expansion of total power is driven by continuous improvements in energy conversion efficiency. Other major historical sources of productivity are automation, transport infrastructure (canals, railroads and roads), new materials (steel) and power, which include steam and internal combustion engines and electricity. Other productivity improvements include mechanical agriculture and scientific farming including chemical fertilizers and animal husbandry and poultry management, and the Green Revolution. The interchangeable parts made with machine tools powered by electric motors evolved into mass production, which is universally used today.
Major sources of increased productivity by the end of the nineteenth century were railroads, steamers, horse-drawn harvester and combine harvests, and steam-powered factories. The discovery of a process for making cheap steel is essential for many forms of mechanization and transportation. At the end of the 19th century, weekly prices and hours fell due to the less labor, materials, and energy needed to produce and transport goods. However, real wages rise, allowing workers to improve their diet, buying consumer goods and buying better housing.
Mass production in 1920 created overproduction, one of the few causes of the Great Depression of the 1930s. After the Great Depression, economic growth returned, helped in part by increased demand for existing goods and services, such as cars, telephones, radios, electricity and home appliances. New goods and services including television, air conditioning and commercial flights (after 1950), create enough new demand to stabilize the working week. The development of road infrastructure also contributes to the growth of World War II, as well as capital investments in manufacturing and chemical industries. The post-World War II economy also benefited from the discovery of large amounts of oil worldwide, especially in the Middle East. According to John W. Kendrick's estimates, three-quarters of the increase in US per capita GDP from 1889 to 1957 is due to increased productivity.
Economic growth in the United States slowed after 1973. Conversely growth in Asia has been strong ever since, starting with Japan and spreading to Korea, China, Indian subcontinent and other parts of Asia. In 1957, South Korea had a lower per capita GDP than Ghana, and in 2008 it was 17 times higher than Ghana. Japan's economic growth has dropped dramatically since the late 1980s.
Productivity in the United States grew at an increasing rate throughout the 19th century and most rapidly in the early to mid decades of the 20th century. US productivity growth soared towards the end of the century in 1996-2004, due to the acceleration in the rate of technological innovation known as Moore's law. After 2004, US productivity growth returned to low levels from 1972-96.
Intensity (working hours)
Week of work greatly decreased during the 19th century. In 1920, the average working week in the US was 49 hours, but the workweek was reduced to 40 hours (after which overtime premium was applied) as part of the National Industrial Recovery Act of 1933.
Demographic changes
Demographic factors can affect growth by changing the ratio of jobs to the population and the labor force participation rate. Industrialization creates a demographic transition in which the birth rate decreases and the average age of the population increases.
Women with fewer children and better access to jobs in the market tend to join the labor force in a higher percentage. There is a fall in demand for child labor and children spend more years at school. Increasing the percentage of women in the labor force in the US contribute to economic growth, as well as the entrance of the baby boomers in the workforce. View: Spent the wave
Other factors that affect the growth
Political institutions, property rights, and the rule of law
"Because institutions affect behavior and incentives in real life, they forge the success or failure of nations."
In economic and economic history, the transition to capitalism from the former economic system was made possible by the adoption of government policies that facilitated trade and gave individuals more personal and economic freedom. This includes new legislation favorable to business establishment, including contract law and legislation governing the protection of private property, and the removal of the usury laws. When property rights are less certain, transaction costs may increase, hampering economic development. Enforcement of contractual rights is necessary for economic development because it determines the level and direction of investment. When the rule of law is absent or weak, the enforcement of property rights depends on the threat of violence, which causes bias against new companies because they can not show reliability to their customers.
Much of this literature builds on the success story of the British state that after the Great Revolution of 1688, combining a high fiscal capacity with restrictions on the king's power produced some respect for the rule of law. Others, however, question that this institutional formula is not easily imitated elsewhere as a change in the Constitution - and the kind of institution created by that change - does not necessarily create a change in political power if the economic power of society is not aligned with a new set of legal rules. In the UK, the dramatic increase in the country's fiscal capacity follows the creation of restrictions on the crown, but elsewhere in Europe, capacity building of the state occurs before major rule-of-law reforms.
There are many different ways in which countries achieve this state (fiscal) and different capacity capacity to accelerate or impede their economic development. Thanks to the homogeneity underlying the land and its people, Britain was able to achieve an integrated medieval legal and fiscal system that enabled it to substantially increase the taxes it raised after 1689. On the other hand, the French development experience faced a much stronger resistance than the local feudal forces which safeguarded it legally and fiscally fragmented until the French Revolution despite a significant increase in the capacity of the country during the seventeenth century. Furthermore, Prussia and the Habsburg empire - a country much more heterogeneous than the British - were able to increase the capacity of the country during the 18th century without limiting the executive power. However, it is unlikely that a country will produce institutions that respect property rights and the rule of law without having a fiscal and junior secondary institution creating incentives for elites to support them. Many of these middle-level institutions rely on informal private order arrangements that are combined with public order agencies linked to the states, to lay the groundwork of the state of the rule of modern law.
In many poor and developing countries much of the land and housing are held outside the formal or legal property ownership registration system. In many urban areas, the poor "invade" private land or government to build their homes, so they have no property rights to these properties. Many unregistered properties are held in informal form through various property associations and other arrangements. The reasons for extra-legal ownership include excessive bureaucratic tapes in buying property and buildings. In some countries, it takes more than 200 steps and up to 14 years to build government land. Another cause of the extra-legal property is the failure to document the transaction document or have the document notarized but fail to record it with an authorized agent.
Not having a clear legal right to property limits its potential to be used as collateral for lending, depriving many poor countries as one of the most important sources of potential capital. Unlisted businesses and the lack of accepted accounting methods are other factors that limit potential capital.
Businesses and individuals who participate in unreported business activity and owners of unlisted property costs such as bribes and payments that offset most of the avoidable taxes.
"Democracy Causes Growth", according to Acemoglu et al. In particular, "democracy increases future GDP by encouraging investment, improving schools, promoting economic reforms, improving public goods supply, and reducing social unrest."
Capital
Capital in the economy typically refers to the physical capital, which consists of the structure (the largest component of physical capital) and the equipment used in the business (machinery, plant equipment, computers and office equipment, construction equipment, business vehicles, medical equipment, etc.). Up to a point increase in the amount of capital per worker is an important cause of economic output growth. Capital is subject to diminishing returns due to the amount that can be invested effectively and due to the ever-increasing depreciation expense.
In the development of the economic theory of income distribution is considered between labor and landowners and capital.
In the last few decades there have been several Asian countries with high economic growth rates driven by capital investment.
New products and services
Another major cause of economic growth is the introduction of new products and services and improvements to existing products. New products create demand, necessary to offset the decline in employment that occurs through labor-saving technologies (and to a lesser extent, the decline in jobs due to energy and material savings). In the US around 2013 about 60% of consumer spending is for goods and services that did not exist in 1869. In addition, the creation of new services is more important than the invention of new goods.
Economic growth in the US and other developed countries is experiencing a phase that affects growth through changes in labor force participation rates and relative size of the economic sector. The transition from agricultural to manufacturing economies increases the size of the sector with high hourly output (high productivity manufacturing sector), while reducing the sector size with lower hourly output (lower productivity agriculture sector). High productivity growth in manufacturing reduces sector size, as prices fall and employment shrinks relative to other sectors. The service and government sectors, where output per hour and low productivity growth, saw an increase in their economic and work divisions during the 1990s. The public sector has contracted, while the service economy expanded in the 2000s.
Theory and model
Classical growth theory
In the classical economy (Ricardian), the theory of production and growth theory is based on the theory or law of variable proportions, where raising one of the factors of production (labor or capital), while holding the other constant and assuming no technology changes, , but at a diminishing rate that will eventually close to zero. These concepts come from Thomas Malthus's theory of agriculture. Malthus examples include the number of seeds harvested relative to the number of seeds planted (capital) on a piece of land and the harvest size of a plot of land versus the number of workers employed. See also Reduce returns.
Critics of the classical growth theory is that technology, an important factor in economic growth, is maintained constant and economies of scale are neglected.
Natural growth rate
According to Harrod, the natural growth rate is the maximum growth rate allowed by such variable increases as population growth, technological improvement and natural resource growth.
In fact, the natural rate of growth is the highest attainable growth rate that will generate optimum employment from the existing resources in the economy.
Solar model
Robert Solow and Trevor Swan developed what eventually became the main model used in economic growth in the 1950s. This model assumes that there is a reduced return on capital and labor. Capital accumulates through investment, but the level or stock continues to decline due to depreciation. Due to the decrease in capital, with increased capital/workers and technological advances that are absent, output/economic workers eventually reach the point where capital per worker and output/worker economy remains constant because annual investments in equity are equivalent to annual depreciation. This condition is called 'steady state'.
In the Solow-Swan model if productivity increases through technological advances, the output/worker increases even when the economy is in steady state. If productivity increases at a constant rate, output/workers also increase at the corresponding steady-state level. As a result, growth in the model can occur either by increasing the share of GDP invested or through technological advances. But whichever part of GDP is invested, capital/workers eventually converge on the steady state, leaving the output/worker growth rate determined only by the rate of technological progress. As a result, with world technology available to all and growing at a constant level, all countries have the same fixed rate of growth. Each country has different GDP/worker rates determined by the share of GDP invested, but all countries have the same rate of economic growth. Implicitly in this model rich countries are countries that have invested high share of GDP for a long time. Poor countries can become rich by increasing the share of GDP they invest. One important predictor of the model, largely borne by the data, is that of conditional convergence ; the idea that poor countries will grow faster and pursue rich countries as long as they have the same level of investment (and savings) and access to the same technology.
The Solow-Swan model is considered an "exogenous" growth model because it does not explain why the state invests various parts of GDP in capital or why technology increases over time. In contrast, the rate of investment and the rate of technological progress are exogenous. The value of the model is that it predicts the pattern of economic growth after these two levels are determined. His failure to explain the determinants of this level is one of his limitations.
Although the level of investment in the model is exogenous, under certain conditions the model implicitly predicts convergence in the level of investment in various countries. In the global economy with global financial capital markets, the flow of financial capital flows to countries with the highest return on investment. In the Solow-Swan model countries with fewer capital/workers (poorer countries) have a higher return on investment due to reduced capital payback. As a result, capital/workers and output/workers in global financial capital markets must coalesce to the same level in all countries. Because historically financial capital has not yet flowed into countries with fewer capital/workers, the Solow-Swan base model has conceptual flaws. Beginning in the 1990s, this defect has been overcome by adding additional variables to the model that may explain why some countries are less productive than others and, therefore, do not attract the flow of global financial capital even if they have insufficient (physical) capital/workers.
Endogenous growth theory
Dissatisfied with the assumption of exogenous technological advances in the Solow-Swan model, economists work for "endogenization" (ie, explaining "from within" models) productivity growth in the 1980s; the resulting endogenous growth theory, especially those proposed by Robert Lucas, Jr. and his disciple Paul Romer, includes a mathematical explanation of technological progress. This model also incorporates new concepts of human capital, skills and knowledge that make workers productive. Unlike physical capital, human capital has an increasing rate of return. Research conducted in this field focuses on what increases human capital (eg education) or technological change (eg innovation).
Integrated growth theory
The theory of integrated growth was developed by Oded Galor and his co-authors to address the inability of the endogenous growth theory to explain the key empirical order in the process of individual economic growth and the world economy as a whole. Endogenous growth theory is satisfied with accounting for empirical regularity in the process of advanced economic growth over the past hundred years. As a result, it is unable to explain the qualitatively different empirical order that marks the growth process over a longer time horizon in both developed and less developed countries. The theory of integrated growth is an endogenous growth theory that is consistent with the entire development process, and in particular the transition from the Malthus stagnation era that has characterized most of the development process into a contemporary era of sustainable economic growth.
Big push
One popular theory of the 1940s was the big push model, which suggested that countries need to jump from one stage of development to another through a good cycle, where large investments in infrastructure and education coupled with private investment would drive the economy to more many productive stages, freeing themselves from the right economic paradigm for lower productivity stages. The idea was revived and formulated strictly, in the late 1980s by Kevin Murphy, Andrei Shleifer and Robert Vishny.
Schumpeterian Growth
Schumpeterian growth is an economic theory named after the 20th century Austrian economist Joseph Schumpeter. This approach explains growth as a consequence of innovation and creative destruction processes that capture the dual nature of technological advancement: in the case of creation, entrepreneurs introduce new products or processes in the hope that they will enjoy temporary monopoly gains when they capture the market. Thus, they make old technology or products become obsolete. This can be seen as a cancellation of previous technology, which makes them obsolete, and "destroys the rent generated by previous innovations." The main model describing the growth of Schumpeter is the Aghion-Howitt model.
Institution and growth
According to Daron Acemoglu, Simon Johnson and James Robinson, a positive correlation between high income and cold climate is a by-product of history. Europeans adopted very different colonization policies in different colonies, with different related institutions. In places where these colonialists face high mortality rates (eg, because of tropical diseases), they can not remain permanently, and they are thus more likely to establish extractive institutions, which persist after independence; in places where they can settle permanently (eg those with moderate climates), they establish institutions with this purpose and model them after them in their European homeland. In these better 'neo-Europes' institutions in turn produce better development outcomes. Thus, although other economists focus on the identity or type of colonial legal system to explain the institution, this author looks at the environmental conditions in the colony to explain the institution. For example, former colonies have inherited corrupt governments and geo-political borders (set by colonizers) not placed appropriately about the geographic location of different ethnic groups, creating internal strife and conflict that impede development. In other instances, peoples emerging in colonies without solid indigenous peoples established property rights and better incentives for long-term investments than those with large indigenous populations.
Human capital and growth
Many theoretical and empirical analyzes of economic growth attribute a major role to the level of a country's human capital, which is defined as the skills of the population or labor force. Human capital has been included in neoclassical and endogenous growth models.
The human capital level of a country is difficult to measure, because it is made at home, at school, and at work. Economists have attempted to measure human capital by using many proxies, including literacy rates, numeracy levels, book/capita production levels, average formal school rate, average test scores on international tests, and cumulative depreciation of investment in schools formal. The most commonly used measure of human capital is the rate (average year) of school attainment in a country, based on the development of Robert Barro and Jong-Wha Lee data. This measure is widely used because Barro and Lee provide data for different countries in five-year intervals for long periods of time.
One problem with school attainment measures is that the amount of human capital gained in one school year is not the same across all school levels and not the same across all countries. This measure also assumes that human capital is only developed in formal schools, contrary to the widespread evidence that family, environment, peers, and health also contribute to the development of human resources. Despite these potential limitations, Theodore Breton has shown that these measures can represent human capital in log-linear growth models because across the GDP/mature countries have a log-linear relationship with the average school year, which is consistent with the log-linear relationship between income personal workers and years of schooling in the Mincer model.
Eric Hanushek and Dennis Kimko introduced measurements of students' math and science skills from international assessment into growth analysis. They found that the size of human resources is strongly linked to economic growth. Eric Hanushek and Ludger WÃÆ'¶ÃÆ'Ÿmann have expanded this analysis. Theodore Breton shows that the correlation between economic growth and the average test scores of students in the analysis of Hanushek and WÃÆ'¶ÃÆ'Ÿmann is actually due to relationships in countries with less than eight years of education. He pointed out that economic growth is not correlated with the average score in a more educated country. Hanushek and WÃÆ'¶ÃÆ'Ÿmann investigate further whether the relationship of knowledge capital to economic growth is causal. They show that students' cognitive skills level can account for slow growth in Latin America and rapid growth in East Asia.
Energy consumption and growth
The theory of energy economy states that the level of energy consumption and energy efficiency are associated causally with economic growth. The steady relationship between the historical level of global energy consumption and the historical accumulation of global economic wealth has been observed. Increased energy efficiency is part of the increase in Total factor productivity. Some of the most technologically important innovations in history involve improving energy efficiency. These include major improvements in heat conversion efficiency for work, heat reuse, friction reduction and electrical transmission, primarily through electrification. "Electricity consumption and economic growth are strongly correlated". "The per capita power consumption correlates almost perfectly with economic development."
The importance of long-term growth
Over a long period of time, even a small growth rate, such as a 2% annual increase, has a huge effect. For example, the UK experienced an average annual increase of 1.97% in inflation-adjusted GDP between 1830 and 2008. In 1830, GDP was 41,373 million pounds. It grew to 1,330,088 million pounds in 2008. The average growth rate of 1.97% over 178 years resulted in a 32-fold increase in GDP in 2008.
The great impact of relatively small growth rates over a long period of time is due to the exponential growth forces. Rule 72, the results of mathematics, states that if something grows at an annual rate of x%, then the rate will double every 72/x years. For example, a 2.5% annual growth rate leads to a doubling of GDP in 28.8 years, while a growth rate of 8% per year leads to a doubling of GDP in 9 years. Thus, small differences in the rate of economic growth between countries can result in very different living standards for their populations if this minor difference continues over the years.
Quality of life
One theory linking economic growth to quality of life is "Threshold Hypothesis", which states that economic growth to a point brings about an improvement in the quality of life. But at that point - called the threshold point - further economic growth can bring a deterioration in the quality of life. This results in an inverted U curve, where the curve peak represents the growth rate to be targeted. Happiness has proven to increase with higher per capita GDP, at least up to $ 15,000 per person.
Economic growth has an indirect potential to alleviate poverty, as a result of simultaneous increase in employment opportunities and increased labor productivity. A study by researchers at the Overseas Development Institute (ODI) of 24 growing countries found that in 18 cases, poverty was reduced.
In some cases, life quality factors such as health care outcomes and educational attainment, as well as social and political freedom, do not increase as economic growth occurs.
Increased productivity does not necessarily lead to increased wages, as can be seen in the United States, where the gap between productivity and wages has increased since the 1980s.
Business cycle
Economists distinguish between short-term economic changes in production and long-term economic growth. The short-term variation in economic growth is referred to as the business cycle . Generally, economists connect the rise and fall of the business cycle to fluctuations in aggregate demand. In contrast, economic growth is associated with long-term trends in production due to structural causes such as technology growth and factor accumulation.
Income equals
Some theories developed in the 1970s show the possibility of a path through which inequality may have a positive effect on economic development. Savings by the rich, if this increase by inequality, is considered to offset the decrease in consumer demand.
Later analyzes, such as the political economy approach, developed by Alesina and Rodrik (1994) and Persson and Tabellini (1994), emphasize the negative impact of inequality on economic development; inequality generates pressure to adopt a redistributive policy that has adverse effects on investment and economic growth. However, the empirical test of a long version of Alesina and Rodrik's model by Li and Zou found that "income inequality is positive, and most of the time significantly, related to economic growth".
The credit market imperfection approach, developed by Galor and Zeira (1993), suggests that the inequality in credit market imperfection has a lasting detrimental effect on human capital formation and economic development.
A study by Perotti (1996) suggests that in accordance with the credit market imperfection approach, inequality is associated with lower levels of human resource development (education, experience, apprenticeship) and higher fertility rates, while lower levels of human capital are associated with lower growth and lower economic growth rates. In contrast, his examination of the channels of political economy found no support for the mechanisms of political economy.
The 1999 review suggests that high inequality decreases growth, perhaps because of increased social and political instability; However, changes in inequality rates have a relatively small effect on growth.
The study by Robert Barro, found that there is "little relationship between income inequality and growth and investment rates". According to Barro, high levels of inequality reduce growth in relatively poor countries but encourage growth in rich countries. Princeton economist Roland Benabou's research shows that inequality is not a problem for growth, but "inequality in the relative distribution of income and political power" is important.
According to Andrew Berg and Jonathan Ostry (2011) of the International Monetary Fund, inequality in wealth and income is negatively correlated with subsequent economic growth. Likewise, economists Dierk Herzer and Sebastian Vollmer find that increasing income inequality reduces economic growth, but growth itself also increases income inequality over the long term.
In 2013, the French economist Thomas Piketty postulated that in a period when the average annual return on investment in capital exceeded the average annual growth in economic output ( g ) , the level of inequality will increase. According to Piketty, this is the case because the wealth already possessed or inherited, expected to grow at the rate of r , will grow at a faster rate than the accumulation of wealth through labor, which is more closely bound to g . An advocate for reducing inequality, Piketty advises to tax the global wealth to reduce the difference in wealth caused by inequality.
Fair growth
While acknowledging the central role of economic growth can potentially play in human development, poverty alleviation and the achievement of the Millennium Development Goals, it becomes widely understood among the development community that a special effort should be made to ensure a poorer part of society can participate in economic growth. The effect of economic growth on poverty reduction - the elasticity of growth of poverty - can depend on the degree of inequality. For example, with a low inequality of a country with a 2% per head growth rate and 40% of the population living in poverty, it can halve poverty in ten years, but a country with high inequality would take nearly 60 years to achieve the same reduction.. In the words of UN Secretary General Ban Ki-Moon: "While economic growth is needed, it is not enough for progress in reducing poverty."
Environmental impact
Critics such as the Roma Club argue that a narrow view of economic growth, combined with globalization, is creating a scenario in which we can see the systemic collapse of our planet's natural resources.
Concerns about the negative environmental effects of growth have prompted some to advocate for lower growth rates, or to abandon growth at all. In the academic world, concepts like uneconomical growth, steady-state economics, and low growth have been developed to achieve this. In politics, the party of the Charter of the Global Greens embrace green, admitted that "... the dogma of economic growth at any cost and the use of natural resources without considering the excessive and wasteful carrying capacity of the Earth, causing extreme damage and large-scale environment. Extinction of species. "
Those who are more optimistic about the environmental impact of growth believe that, although localized environmental effects can occur, the ecological effects are small-scale. The argument, as stated by commentator Julian Lincoln Simon, states that if this global-scale ecological effect exists, human ingenuity will find a way to adapt to them.
Global warming
To date, there is a close correlation between economic growth and carbon dioxide emission levels across the country, although there are also considerable differences in carbon intensity (carbon emissions per GDP). Until now, there is also a direct connection between global economic wealth and global emission levels. The Stern review notes that the prediction that, "Under business as usual, global emissions will be enough to encourage greenhouse gas concentrations to be more than 550 ppm CO 2 by 2050 and over 650-700 ppm by the end of the century this is strong for the various changes in model assumptions. "The scientific consensus is that planetary ecosystems functioning without causing dangerous risks require stabilization at 450-550 ppm.
As a result, the growth-oriented environmental economist proposes government intervention into switching sources of energy production, supporting wind, solar, hydroelectric and nuclear power. This will severely limit the use of fossil fuels either for domestic cooking needs (such as for kerosene burners) or where carbon capture and storage technologies can be cost effective and reliable. The Stern Review, published by the Royal Government of England in 2006, concludes that an investment of 1% of GDP (then changed to 2%) would be enough to avoid the worst effects of climate change, and that failure to do so could pose a climate risk related cost amounting to 20% of GDP. Because carbon capture and storage has not been widely proven, and its long-term effectiveness (such as 'leaking' carbon dioxide) is unknown, and because of the current cost of alternative fuels, this policy response depends largely on technological change beliefs.
Conservative politician and British journalist Nigel Lawson has regarded carbon emissions trading as an 'inefficient allotment system'. Instead, he prefers a carbon tax to take full advantage of market efficiency. However, to avoid the migration of energy-intensive industries, the whole world should impose such taxes, not just England, Lawson points out. There is no point in leading if no one follows.
Substitution of resources
Many previous predictions about resource depletion, such as the prediction of Thomas Malthus 1798 on approaching famine in Europe, The Population Bomb (1968), and Simon-Ehrlich (1980) bets have not materialized. The decline in production of most resources has not happened so far, one reason is that advances in technology and science have enabled some resources that were not previously available to produce. In some cases, substitution of more abundant materials, such as plastics for cast metal, decreases the growth in use for some metals. In the case of limited land resources, hunger was dampened first by revolutions in transport caused by trains and steamers, and then by the Green Revolution and chemical fertilizers, especially the Haber process for the synthesis of ammonia.
Reduced resource quality
Resource quality consists of a variety of factors including ore content, location, altitude above or below sea level, close to railways, highways, water supply and climate. These factors affect the capital and operating costs to extract resources. In terms of minerals, lower-grade mineral resources are being extracted, requiring higher capital and energy input for extraction and processing. The value of copper ore has declined significantly over the last century. Another example is natural gas from shale and other low permeability rocks, which can be developed with much higher energy, capital and material inputs than conventional gases in previous decades. Offshore oil and gas exponentially increase costs as water depth increases.
Physical constraint
Some physical scientists such as Al Bartlett regard sustainable economic growth as unsustainable. Several factors can hamper economic growth - for example: limited, peaked, or exhausted resources.
In 1972, The Limits to Growth study exemplified limits for infinite growth; originally ridiculed, these models have been validated and updated.
Malthus like William R. Catton, Jr. is skeptical of technological advances that increase resource availability. Such improvements and efficiency improvements, they suggest, only accelerate the withdrawal of limited resources. Catton claims that the increased level of resource extraction is "... stealing gluttonily from the future".
See also
- Degrowth
- Economic development
- Export-oriented industrialization
- Accounting for growth
- Growth Limit
- List of countries based on real GDP growth rate
- multiplicative calculus
- Post-growth
- Productivism
- Growth is not economical
References
Further reading
- Acemoglu, Daron; Robinson, James A. (2012). Why the Nation Fails: The Origin of Power, Prosperity, and Poverty . Random Home Business Division. ISBN 978 0 307 71922 5. Ã ,
- Argyrous, G., Forstater, M and Mongiovi, G. (eds.) (2004) Growth, Distribution, and Effective Demand: Essays on Honor Edward J. Nell . New York: M.E. Sharpe.
- Barro, Robert J. (1997) Determinants of Economic Growth: Cross-Country Empirical Studies. MIT Press: Cambridge, MA.
- Galor, O. (2005) From Stagnation to Growth: Integrated Growth Theory. Economic Growth Handbook, Elsevier.
- Halevi, Joseph; Laibman, David and Nell, Edward J. (eds.) (1992) Beyond Steady State: Essays in Revival of Growth Theory, edited together, London, UK:
- Jones, Charles I. (2002) Introduction to Economic Growth 2nd ed. W. W. Norton & amp; Company: New York, N.Y.
- Lucas, Robert E., Jr. (2003) Industrial Revolution: Past and Future , Federal Reserve Bank of Minneapolis, Annual Report online edition
- Schumpeter, Jospeph A. (1912) The Theory of Economic Development 1982 reprint, Transaction Publisher
- Weil, David N. (2008) Economic Growth 2nd ed. Addison Wesley.
External links
Articles and lectures
- "Economic growth." EncyclopÃÆ'Â|dia Britannic. 2007. EncyclopÃÆ'Â|dia Britannica Online. November 17, 2007.
- Beyond Classical and Keynesian Macroeconomic Policies. Paul Romer's simple-English explanation of the endogenous growth theory.
- CEPR Economic Series Seminar Two seminars on the importance of growth with economists Dean Baker and Mark Weisbrot
- About the history of the global economy by Jan Luiten van Zanden. Explores the notion of the inevitability of the Industrial Revolution.
- The Economist Has No Clothes - essay by Robert Nadeau of Scientific American on the basic assumptions behind current economic theory
- The World Growth Institute. An organization dedicated to helping developing countries realize its full potential through economic growth.
- Why Growth Continues to Slow Down? St. Louis Federal Reserve Bank
Data
Angus Maddison's Historical Dataseries - Serial for almost all countries in GDP, Population and GDP per capita from year 0 to 2003Source of the article : Wikipedia
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