How to explain the different growth experiences of different countries in history, how rich countries maintain high living standards, and how poor countries accelerate economic growth and join the ranks of developed countries are the most important issues in macroeconomics
Real GDP per capita shows that the living standards of countries vary greatly. Due to differences in growth rates, countries with high growth rates become super economic powers over time, such as Japan. Countries with low growth rates still live in miserable poverty
The differences in living standards among countries around the world can be summed up in one word, productivity
Productivity: the number of goods and products produced per unit of labor input Quantity of services
Only when a country produces a large number of goods and services can it enjoy a higher standard of living. One of the ten principles of economics is that a country's living standard depends on the goods and services it produces. Capacity
The factors that determine productivity include physical capital, human capital, natural resources and technical knowledge
Physical capital: the stock of equipment and buildings used to produce goods and services, referred to as Capital, the characteristic of capital is that it is a produced factor of production. Capital is an input to the production process and an output of the past production process
Human capital: obtained by workers through education, training and experience Knowledge and skills. Human capital is also a produced factor of production
Natural resources: inputs provided by nature that are used to produce goods and services, such as land, rivers, and mineral deposits. Including renewable and non-renewable. The production of natural resources has caused some differences in the living standards of countries around the world. For example, the success of the United States in history is partly due to the large supply of land suitable for farming. The Middle East countries are rich because they happen to be located in the largest oil storage area. Although natural resources are important, they are not necessary for high productivity. For example, Japan imports natural resources and exports manufactured goods to a natural resource-rich economy
Technical knowledge: society's best methods for producing goods and services understanding. One technology is public knowledge and the other is privately owned. It is necessary to distinguish between technical knowledge and human capital. Technical knowledge refers to society’s understanding of how the world works, while human capital is the consumption of resources that only transfers this understanding to the labor force
A way to improve future productivity The method is to invest more current resources in the production of capital. If society invests more in capital, it will need to sacrifice current consumption of goods and services
Diminishing returns: As the amount of income increases, The characteristic of decreasing returns for each additional unit of input
In the long run, a high savings rate leads to high levels of productivity and income, but not high growth rates, because of diminishing returns and the high savings rate Growth is only temporary
Catch-up effect: The characteristic that countries that start out poor tend to grow faster than countries that start out rich
The savings of domestic residents are not invested in new capital. The only way, the other way is investment by foreigners
Two forms: investment in capital owned and operated by foreign entities becomes foreign direct investment, investment operated by domestic residents is called foreign portfolio investment
Although some of the proceeds from foreign investment flow back to foreign owners, this investment also increases a country's capital stock, leading to higher productivity and wages. In addition, investment from abroad is a way for poor countries to learn from rich countries. A way of advancing technology. Therefore, economists believe that policies that encourage investment from abroad often mean removing restrictions on foreigners owning domestic capital.
The World Bank is an international organization that obtains funds from advanced countries and uses these funds to issue loans to less developed countries so that these countries can invest in roads and other capital, and also provides consultation on the effective use of funds. The World Bank was established after World War II. The lesson the war taught us is that economic downturns often cause political turmoil, international tensions and military conflicts. Therefore, every country should promote the economic prosperity of all countries in the world. The purpose of the establishment of the World Bank is this.
Education, investment in human capital, is as important to a country's long-term economic prosperity as investment in physical capital.
But there is also an opportunity cost. Going to school means giving up the income that could have been earned as a labor force.
Economists believe that human capital is particularly important to economic growth because human capital carries positive externalities. Therefore, the social benefits of education are far greater than the personal benefits. This view proves the correctness of the large human capital investment subsidies we see in the form of public education
When other conditions are equal, more Healthy workers are more productive, so investing appropriately in the health of the population is a one-pot approach to improving productivity and living standards
A market economy achieves a balance between supply and demand through market prices, and an important prerequisite for the price system to work is There is widespread respect in the economy for property rights, the ability to exercise authority over the resources one owns.
The main role played by the courts in the market economy is to enforce the protection of property rights. In less developed countries, the imperfect judicial system cannot protect property rights well. In addition, political instability is also a threat. When revolutions and coups are common, it is doubtful whether property rights can be respected in the future, and domestic residents have no incentives to save, invest and start businesses
Poor countries practice and the world An outward-looking policy that integrates the economy would be better. Trade is like a technology that turns one item into another.
The amount of trade a country has with other countries does not only depend on government policies. , also depends on the geographical environment, so countries with natural seaports can trade more easily than countries without such resources
The main reason why today's living standards are higher than a century ago is because of advances in technological knowledge
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To a large extent, knowledge is a public good, with no consumer competition and no exclusivity in the long run. Therefore, the government should play a role in encouraging the research and development of new technologies just as it does in providing public goods such as national defense.
The government uses research funds to encourage knowledge advancement and tax cuts. The company is engaged in research and development. Another way is through the patent system, which gives inventors the exclusive right to produce a product for a specified number of years. In essence, patents give inventors property rights to their inventions, which changes new ideas from public goods to private goods, increasing the incentives for individuals and companies to engage in research
Population directly affects the labor force Scale, a large population means more workers producing goods and services, but it also means a large population consuming goods and services, so it does not necessarily mean a high standard of living for ordinary citizens. In addition to population size, it also affects other factors of production:
Leads to a strain on natural resources: Malthus believed that population growth may lead to a strain on natural resources, but it turns out that the increase in human creativity offsets the impact of an increase in population , technological progress makes people more productive, economic growth makes hunger less common than in the past, and the emergence of famine is usually the result of unequal income distribution or political instability
Diluted the capital stock: modern times Economic growth theory emphasizes the impact of population on capital accumulation. As population increases, the capital allocated to each worker decreases, causing a reduction in productivity and per capita GDP. As far as human capital is concerned, this problem is most obvious and burdens the education system of countries with high population growth. Heavier
Promotes technological progress: World population growth has been the engine of technological progress and economic prosperity.