essay topics on economic growth

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80 Economic Growth Essay Topics

🏆 best essay topics on economic growth, 📚 economic growth research paper examples, 🎓 most interesting economic growth research titles, 💡 simple economic growth essay ideas.

• Hospitality Industry in Economic Growth and Development
• Institutions and Economic Growth
• Sustainability of Economic Growth
• Sports Facilities Development for Economic Growth
• The Relationship Between Unemployment and Economic Growth
• Joseph Schumpeter’s Evolutionary Approach to Economic Growth
• Moral Dimensions of Economic Growth
• Trade in Environmental Goods and Economic Growth This paper analyzes how trading in environmental-friendly goods and services may be important in improving the quality of the environment and promoting economic development.
• Are Minimum Wages Harmful or Helpful to Economic Growth The minimum wage is an economic policy in which the state controls the minimum income of the citizens. It is distributed all over the world and is embedded in any economic model.
• Resources and Economic Growth in the Indonesian Region The article’s main topic concerns the assessment of the role of various resources, including natural and human ones, in achieving economic growth in the Indonesian region.
• Debt Burden and Sustainable Economic Growth in Nigeria This paper examines the relationship effects of debt burden on sustainable economic growth using Nigeria as a case study.
• Whether Infinite Economic Growth Is Possible The author believes that there is a number of reasons why endless economic development is impossible in practice.
• Bangladesh: Stimulating Economic Growth It is crucial to address the digital literacy level in rural Bangladesh to stimulate economic growth, as it is deficient nowadays.
• Transportation Developments and Subsequent Economic Growth From 1865 to 1900 This essay discusses the main factors of increasing economic growth through transportation, and the reasons for such a connection are presented.
• Deficit Spending and Economic Growth To gain an in-depth understanding of the economic outcomes of the Great Recession and other financial catastrophes, it is crucial to grasp the concept of deficit spending.
• Timor-Leste: Effects of Tourism on the Economic Growth The tourism sector in Timor-Leste, just like in any other Southeast Asian countries has an immense potential to contribute to the country’s economic growth.
• Social Determinants of Health: Economic Growth Effect Social injustice has adverse effects on the life that people lead in a given society. It also contributes to causes of diseases that affect the people.
• Long-Term Economic Growth in the East Asian States Although immigrants contribute positively to the economic status of East Asia, they cause overpopulation, native culture erosion, low wages, and unemployment.
• United Kingdom-Ghana Economic Growth Disparities The purpose of this paper is to explore some of the contributing factors that have led to economic growth disparities between the United Kingdom and Ghana.
• Economic Growth of East Asian States: The Impact of Foreign Workers Foreign workers perform essential skills and have affirmative productivity influences, thus, are integral to the long-term economic growth of East Asian states.
• Economic Issues: Factors of Production Growth and Unemployment Rates Assessing the factors such as the rates of production growth, the selected financial systems, and the rates of unemployment is essential for determining the threat to the state economy.
• What Is the Best Way to Stimulate Economic Growth? The examples of economic growth and downturns and economic theories propose different solutions to overcome financial crisis and stabilize economic situation in a country.
• China’s and India’s Economic Growth Experiences China is a country that has been in a position to have poverty reduction this has been due to the strategies that have been used in the country by the Chinese people.
• Trends and Projections of the United States Economic Growth The economic growth rate of a country is not constant over time, but it exhibits phases of expansion, stagnation, and decline.
• The Industrial Revolution and Economic Growth The Industrial Revolution began to lay the foundation for the first market economies where goods were sold and purchased, resulting in the exchange and accumulation of wealth.
• The Industrial Revolution and Economic Growth History The Industrial Revolution had an impact on various spheres of European society. Its primary consequence was urbanization; people started to move to cities to find jobs.
• Industrial Revolution’s Input to Economic Growth The industrial revolution created many working places all over the United Kingdom, whereas the population of the state became more educated and competent.
• Dubai’s Economic Growth and Laziness of Poor The unprecedented growth of Dubai’s economy started in the 1970s. Dubai’s success provides an important lesson in the importance of human capital development.
• Economic Growth Factors in Australia External factors such as Consumer Price Index (CPI), consumer behavior, and inflation rate play a very important role in stimulating economic growth.
• Global Warming Problems due to Economic Growth This paper investigates if it is possible to deal with global warming by reducing CO2 emissions and energy consumption without any threats to economic development.
• China’s Economic Growth and Manufacturing The enhanced economic growth, which China is currently experiencing, coexists with a drop in the manufacturing entrepreneurships’ performance.
• Trade Openness and Economic Growth’s Relationship In the article “The Relationship Between Trade Openness and Economic Growth,” authors discover aspects of measuring trade openness and its impact on economic growth.
• Economic Growth and Market Dynamics Gross domestic product (GDP) is a measure of the value of all services and goods produced in a certain period of time.
• Economic Growth and Expansion The acquisition of smaller companies, as well as creating mergers with the companies helps considerably when it comes to choosing an appropriate risk management strategy.
• Absorptive Capacity and the Effects of Foreign Direct Investment on Economic Growth
• Background Factors Facilitating Economic Growth Using Linear Regression and Soft Regression
• Accounting for the Decline in AFDC Caseloads: Welfare Reform or Economic Growth
• Defense Spending and Economic Growth in Turkey
• Building the Skills for Economic Growth and Competitiveness in Sri Lanka
• Capital Account Liberalization and Economic Growth in Developing Economies
• Accumulation, Technical Progress, and Increasing Returns in the Economic Growth of East Asia
• Rebalancing China’s Economic Growth: Some Insights From Japan’s Experience
• Achieving Sustainable Economic Growth and Development in Communities Across the United States
• China’s Economic Growth 1978-2025: What We Know Today About China’s Economic Growth Tomorrow
• Beyond Economic Growth: The Genuine Progress of Hong Kong From 1968 to 2010
• Economic Growth and Capital Flows in European Countries in Pre and Post-crisis Periods
• Adjustment Policies and Economic Growth in Developing Countries
• Linear and Nonlinear Causality Between Sectoral Electricity Consumption and Economic Growth
• Africa’s Recent Economic Growth: What Are the Contributing Factors
• Financial Development and Economic Growth: An Egg-and-Chicken Problem
• Banking Sector Development and Economic Growth in Central and Southeastern Europe Countries
• Measuring Intangible Capital and Its Contribution to Economic Growth in Europe
• Crime, Justice, and Growth in South Africa: Toward a Plausible Contribution From Criminal Justice to Economic Growth
• Optimal Economic Growth With Recursive Preferences: Decreasing Rate of Time Preference
• Aging and Economic Growth: The Role of Factor Markets and Fundamental Pension Reforms
• Challenge Facing China’s Economic Growth in Its Aging but Not Affluent Era
• Breaking Down the Barriers to Technological Progress: How U.S. Policy Can Promote Higher Economic Growth
• Finding the Cointegration and Causal Linkages Between Electricity Production and Economic Growth in Pakistan
• Accounting for Agricultural Decline With Economic Growth in Taiwan
• Labor Markets and Economic Growth: Lessons From Korea’s Industrialization, 1970-1990
• Bank and Non-Bank Financial Deepening and Economic Growth: The Nigerian Experience (1981–2010)
• Migrant Workers’ Remittances and Economic Growth: The Role of Financial Development
• Capital Flows and Economic Growth Across Spectral Frequencies: Evidence From Turkey
• Breaking Boundaries: Economic Growth in Canada in Relation to Immigration
• Population Growth and Endogenous Technological Change: Australian Economic Growth in the Long Run
• Addressing Smart Economic Growth by Specific Policies in the European Higher Education Area
• Determining the Relationship Between Financial Development and Economic Growth
• Capital Quality Improvement and the Sources of Economic Growth in the Euro Area
• Economic Growth and Climate Change in a Decentralized Economy
• Biodiversity and Economic Growth: Stabilization Versus Preservation of the Ecological Dynamics
• Living Standard and Economic Growth: The Relationship Through the Nonparametric Approach
• Agglomeration Economies, Economic Growth and the New Economic Geography in Mexico
• Financial Deepening and Economic Growth in Developing Countries
• Banking Structure and Regional Economic Growth
• A Causal Relationship Between Fossil Fuel Consumption and Economic Growth in the World
• Bridging and Bonding Social Capital: Which Type Is Good for Economic Growth
• China’s Eighteenth-Century Economic Growth and Imperial Power
• Financial Sector Development and Economic Growth
• British Economic Growth 1856-1973: The Post-War Period in Historical Perspective

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StudyCorgi . 2022. "80 Economic Growth Essay Topics." June 5, 2022. https://studycorgi.com/ideas/economic-growth-essay-topics/.

These essay examples and topics on Economic Growth were carefully selected by the StudyCorgi editorial team. They meet our highest standards in terms of grammar, punctuation, style, and fact accuracy. Please ensure you properly reference the materials if you’re using them to write your assignment.

This essay topic collection was updated on June 21, 2024 .

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102 Economic Essay Topic Ideas & Examples

Inside This Article

Economics is a complex and diverse field that covers a wide range of topics. From microeconomics to macroeconomics, there are countless areas of study within this discipline that can be explored through essays. If you are struggling to come up with a topic for your economic essay, don't worry - we've got you covered! Here are 102 economic essay topic ideas and examples to help get you started:

Microeconomics:

• The impact of supply and demand on pricing in a competitive market
• How changes in consumer preferences affect the demand for a product
• The role of advertising in influencing consumer behavior
• The effects of minimum wage laws on employment levels
• The relationship between income inequality and economic growth
• The impact of government regulations on small businesses
• The economics of pollution and environmental regulations
• The role of market structures in determining pricing and output levels
• The economics of healthcare and the role of insurance companies
• The relationship between education and economic outcomes

Macroeconomics:

• The role of fiscal policy in stabilizing the economy during a recession
• The impact of monetary policy on inflation and unemployment
• The effects of globalization on economic growth and income inequality
• The economics of international trade and tariffs
• The role of central banks in managing the money supply
• The impact of government spending on economic growth
• The economics of immigration and its effects on wages and employment
• The relationship between economic growth and poverty reduction
• The role of technology in driving economic growth
• The economics of financial markets and the role of regulation

Development Economics:

• The impact of foreign aid on economic development
• The role of education in promoting economic growth in developing countries
• The effects of corruption on economic development
• The economics of natural resource extraction in developing countries
• The relationship between trade liberalization and economic growth
• The role of infrastructure investment in promoting economic development
• The effects of population growth on economic development
• The economics of gender inequality and its impact on economic outcomes
• The role of microfinance in promoting entrepreneurship in developing countries
• The impact of climate change on economic development

Behavioral Economics:

• The role of cognitive biases in decision-making
• The effects of social norms on economic behavior
• The economics of addiction and its impact on economic outcomes
• The relationship between emotions and economic decision-making
• The impact of framing effects on consumer behavior
• The role of incentives in promoting desired behaviors
• The effects of peer pressure on economic decision-making
• The economics of happiness and well-being
• The relationship between risk aversion and economic choices
• The role of behavioral economics in public policy

These are just a few examples of the many topics that can be explored in an economic essay. Whether you are interested in microeconomics, macroeconomics, development economics, or behavioral economics, there is a wealth of material to draw from. So pick a topic that interests you, do some research, and start writing!

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Economics Essay Topics: Valuable Tips

Economics is a subject that has gained immense popularity in recent times. It deals with interesting economics topics like the production, distribution, and consumption of goods and services. Moreover, it is a social science that provides insights into how individuals, businesses, and governments make decisions that affect the overall economy. Given its importance, economics essays have become a crucial part of the curriculum for students pursuing various degrees.

Short Description

In this article, our essay writer will take you on a journey through various exciting topics in economics. We'll cover everything from big-picture concepts like macroeconomics to more focused ideas like microeconomics, international trade, and economic policy. Our goal is to help you find the perfect topic for your economics essay—one that matches your interests and demonstrates your understanding of how economics affects the real world.

🎓 What is Economics: Understanding the Importance

Before we dive into the different economics essay topics, it is crucial to understand what economics is and its importance. Economics is a social science that deals with the production, distribution, and consumption of goods and services. It is concerned with how individuals, businesses, and governments make decisions about allocating resources to satisfy their unlimited wants and needs.

Economics as a science provides a framework for analyzing society's production, distribution, and consumption of goods and services. It helps us understand how markets work and how they can be improved to increase efficiency and welfare. Moreover, economic principles have significant implications for various social issues, including poverty, inequality, environmental sustainability, and public policy. By studying economics essay topics, we can gain insights into these issues and develop policies that promote rapid economic growth and social welfare.

When it comes to economics, the range of essay topics is vast and covers various aspects of human interactions on different levels. With so many possibilities to explore, we understand the difficulty of narrowing down your options. That's why our ' write me an essay ' experts are here to offer their guidance and support. We're ready to help you select the ideal topic if you wish to learn how to write informative essay on economics.

🧩 Tips for Choosing Your Ideal Topic

Choosing a topic is the first and most crucial step in writing an economics essay. Your topic will determine the direction and scope of your essay. Here are some tips for choosing the ideal topic from our finance essay writing service :

Tip 1: Understand the relevance of economics to daily life and choose a topic with practical applications.

Recognize that economics plays a significant role in our everyday lives, as it encompasses the production, distribution, and consumption of goods and services. Therefore, when selecting a topic, ensure its societal relevance. For instance, you might consider exploring 'The Impact of Automation on Employment Rates' or 'The Role of Government Regulations in Controlling Inflation.'

Tip 2: Opt for narrow economics research topics to make them more manageable and allow for in-depth exploration.

Instead of tackling broad subjects like 'International Trade,' narrow down your focus to something like 'The Effects of Tariffs on Small Businesses in the Agriculture Sector' or 'The Relationship Between Exchange Rates and Export Performance in Developing Countries.' By delving deeper into a specific aspect, you can provide more detailed financial analysis and insights.

Tip 3: Conduct preliminary research to identify current topics, debates, and research gaps.

Before finalizing your topic, engage in preliminary research to gain an understanding of recent trends and issues in economics. Explore academic journals, news articles, and books to discover areas that warrant further exploration. For example, you might come across intriguing research gaps such as 'The Impact of Cryptocurrencies on Financial Markets' or 'The Role of Behavioral Economics in Shaping Consumer Decision-Making.'

Tip 4: Seek input from peers or professors to enhance your topic selection process.

Collaborate with your peers during brainstorming sessions to generate fresh ideas and gain different perspectives on potential topics. Additionally, seek guidance from your professor, who can offer valuable insights and feedback to refine your chosen topic. For instance, you can discuss your ideas with classmates and receive suggestions like 'The Influence of Economic Policies on Income Inequality' or receive expert advice from your professor on 'The Implications of Globalization on Developing Economies.'

And if you want expert assistance in applying theoretical concepts to practice and creating an exceptional paper, then address your request to our custom essay writing services .

🗒 Economics Essay Topics: A Comprehensive List

If you are looking for a comprehensive list of interesting economics essay topics, you have come to the right place. Here are some ideas that you can consider:

• Central Banks in Fiscal Policy : Examine central banks' roles in setting interest rates, regulating money supply, and managing inflation.
• Automation and Labor Market : Analyze the impact of automation on jobs, including worker displacement and new job creation.
• Immigration and Labor Market : Explore immigration's effects on wages, job opportunities, and economic growth.
• Economics of Climate Change : Discuss the costs and economic impact of climate change mitigation and adaptation.
• Economics of Healthcare : Investigate healthcare costs, the role of insurance, and the impact of healthcare policies on the economy.
• Government's Economic Role : Examine how government policies, both fiscal and monetary, affect the economy.
• Globalization's Economic Impact : Analyze how globalization affects industries, trade, and employment.
• Poverty and Inequality : Explore the causes and effects of poverty and inequality and the role of government interventions.
• Economics of Education : Investigate education costs, its impact on economic growth, and the government's role in education.
• Marketplace Competition : Discuss how competition promotes economic growth, innovation, and consumer welfare.
• Economics of Entrepreneurshi p: Examine factors promoting entrepreneurship and its impact on the economy.
• Quantitative Easing and Recovery : Analyze how large-scale asset purchases influence inflation, employment, and economic stability.
• Renewable Energy Economics : Assess the costs, benefits, and challenges of transitioning to renewable energy.
• Technological Innovation : Explore how R&D and digitalization impact productivity, job creation, and economic competitiveness.
• Behavioral Economics and Decision-Making : Investigate how cognitive biases and heuristics influence consumer behavior and market outcomes.

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🧮 Macroeconomics Essay Topics

Macroeconomics is a fascinating and complex field of study that aims to understand the overall performance of an economy. It takes into account various factors such as economic growth, inflation, unemployment, and trade policies. If you are looking for some thought-provoking macroeconomics essay topics, here are a few that you might find interesting:

• The Impact of Fiscal Policy on Economic Growth
• Monetary Policy and Inflation Control: Case Studies from Different Countries
• The Role of Central Banks in Modern Economies
• The Effects of Globalization on National Economies
• Unemployment Rates and Economic Stability
• The Influence of Political Stability on Economic Development
• The Economics of Recession and Recovery
• Debt Crisis: Causes and Solutions
• The Relationship Between Exchange Rates and International Trade
• The Future of Cryptocurrencies in the Global Economy

📉 Microeconomics Essay Topics

Microeconomics focuses on the behavior of individual consumers and businesses in the market. The principles of microeconomics are used to analyze how these entities make decisions, interact with each other, and influence the overall economy. If you're interested in exploring this field further, here are some microeconomics essay topics that you might find interesting:

• The Theory of Consumer Choice and Its Applications
• Market Structures: Comparing Perfect Competition, Monopolies, and Oligopolies
• Price Elasticity of Demand: Importance and Calculation
• The Role of Government in Market Failures
• The Economics of Labor Markets and Wage Determination
• The Impact of Minimum Wage Laws on Small Businesses
• Behavioral Economics: How Human Psychology Affects Economic Decisions
• Game Theory and Its Applications in Business
• The Economics of Information and Market Efficiency
• The Impact of Technology on Production and Costs

🎏 International Economics Essay Topics

International economics deals with the economic interactions between countries, including trade, investment, and migration. Here are some international economic relations topics:

• The Pros and Cons of Free Trade Agreements
• The Impact of Tariffs and Trade Wars on Global Economies
• Exchange Rate Dynamics and International Trade
• The Role of International Organizations in Global Trade
• Economic Integration: Case Studies of the EU and NAFTA
• The Economics of Developing Countries: Challenges and Opportunities
• Foreign Direct Investment: Benefits and Risks
• Global Supply Chains and Their Economic Implications
• The Role of Multinational Corporations in Globalization
• The Impact of Currency Crises on Emerging Markets

📉 Behavioral Economics Essay Topics

Behavioral economics combines psychology and economics to analyze how people make decisions. Here are some behavioral economics essay topics:

• The Role of Cognitive Biases in Economic Decision-Making
• How Social Preferences Influence Market Outcomes
• Behavioral Insights into Consumer Credit Usage
• The Impact of Behavioral Economics on Public Policy
• Nudging and Its Effectiveness in Changing Economic Behavior
• The Psychology of Saving and Investment Decisions
• The Influence of Emotions on Economic Decisions
• Behavioral Economics and Health-Related Decision-Making
• The Economics of Happiness: Measuring Well-Being
• The Role of Heuristics in Financial Decision-Making

🚑 Healthcare Economics Essay Topics

Healthcare economics analyzes how the healthcare system operates, including the costs and benefits of healthcare interventions. Here are some healthcare economics essay topics:

• The Economics of Universal Healthcare Systems
• The Impact of Health Insurance on Medical Costs
• The Role of Government Regulation in the Pharmaceutical Industry
• Cost-Benefit Analysis of Preventive Healthcare
• The Economics of Aging Populations and Healthcare Demand
• The Effectiveness of Public Health Interventions
• The Impact of Technological Advancements on Healthcare Costs
• Healthcare Disparities: Economic Causes and Solutions
• The Economics of Mental Health Services
• The Role of Economic Incentives in Health Behavior Change

🌎 Consumerism Essay Topics

Consumerism refers to the cultural and economic mindset that encourages the acquisition of goods and services. Here are some consumerism essay topics:

• The Impact of Advertising on Consumer Behavior
• Consumerism and Its Effects on the Environment
• The Role of Credit in Modern Consumerism
• The Psychology Behind Impulse Buying
• The Economic Implications of the Sharing Economy
• The Relationship Between Consumerism and Economic Growth
• Ethical Consumerism: Trends and Economic Impact
• The Influence of Social Media on Consumer Spending
• The Role of Consumer Protection Laws in Market Economies
• The Impact of Globalization on Consumer Choices

📚 Economic History Topics

Economic history is a field of study that examines the historical development of economic systems, policies, and institutions, as well as the social, political, and cultural factors that have influenced economic outcomes over time. Here are the 10 interesting topics:

• The Great Depression: Causes, Consequences, and Recovery
• The Economic Impact of World War II
• The Industrial Revolution and Economic Development
• The Evolution of Trade and Commerce in Ancient Civilizations
• The Economic Effects of Colonialism
• The Rise and Fall of the Gold Standard
• The History of Banking and Financial Institutions
• Economic Reforms in Post-Soviet States
• The Role of Agriculture in Early Economic Systems
• The Economic History of the Silk Road

📊 Public Finance Research Topics

Public finance research focuses on the study of the government's role in the allocation, distribution, and management of resources within an economy. It encompasses the analysis of public revenues, expenditures, taxation policies, and the impact of government interventions on economic outcomes and social welfare. Here are 10 relevant economics papers topics:

• The Role of Government in Economic Stabilization
• The Impact of Taxation on Economic Growth
• Public Debt and Its Implications for Future Generations
• The Economics of Social Security Systems
• Fiscal Policy and Income Inequality
• The Effectiveness of Government Spending on Education and Healthcare
• The Role of Public-Private Partnerships in Infrastructure Development
• The Economic Impact of Environmental Taxes
• The Challenges of Pension Fund Management
• The Role of Fiscal Rules in Economic Governance

Closing Remarks 

To wrap up, economics is a subject that offers insights into how the world works. It provides a framework for analyzing complex social issues, including poverty, inequality, and public policy. Therefore, exploring economics essays topics is an excellent way of understanding the subject's relevance in the real world.

By following the tips for choosing your ideal topic and exploring the comprehensive list of economics topics for an essay, you can write an insightful and inspiring paper that contributes to the ongoing dialogue on economics.

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Updated Topics

Macro Economic Essays

These are a collection of essays written for my economic blogs.

Exchange Rate Essays

• Effects of a falling Dollar
• Why Dollar keeps falling
• Discuss Policies to Stop the Dollar Falling
• Does Devaluation Cause Inflation?
• Benefits and Costs of Falling Dollar
• Reasons for Falling Dollar
• The Dollar as the World’s Reserve Currency

Economic Growth Essays

• Evaluate Benefits of Economic Growth
• Essays on Recessions
• Causes of Recessions
• Problems of Recovering from a Recession
• What can Increase Long-Run Economic Growth?
• Discuss Effect of a fall in the Savings Ratio

Inflation Essays

• Discuss the Difficulties of Controlling Inflation
• Should the aim of the Government be to Attain Low Inflation?
• Explain What Can Cause a Sustained Increase in the Rate of Inflation
• Reasons for low inflation in the UK
• Inflation Explained
• Difficulties of Inflation targeting
• Hyperinflation

Unemployment Essays

• Explain what is meant by Natural Rate of Unemployment?
• Should the Main Macro Economic Aim of the Government be Full Employment?
• The True Level of Unemployment in the UK
• What explains low inflation and low unemployment in the UK?

Demand Side Policies

• Discuss effect of Expansionary demand-side policies on Balance of Payments and Environment
• Effects of a Falling Stock Market
• How do Mortgage Defaults affect and Economy?
• Discuss the effect of increased Government spending on education
• Phillips Curve – Trade-off between Inflation and Unemployment

Development Economics

• Why Growth may not benefit developing countries
• Does Aid Increase Economic Welfare?
• Problems of Free Trade for Developing Economies

Fiscal Policy

• Will US Economy benefit from Tax Cuts?
• Can Fiscal Policy solve Unemployment?
• Explain Reasons for UK Current Account Deficit
• Benefits of Globalisation for Developing and Developed Countries

Monetary Policy

• Discuss Effects of an Increase in Interest Rates
• How MPC set Interest Rates
• Benefits of High-Interest Rates (and recessions)
• Who Sets interest rates – Markets or Bank of England?

Economic History

• Economics of the 1920s
• What Caused Wall Street Crash of 1929?
• UK economy under Mrs Thatcher
• Economy of the 1970s
• Lawson Boom of the 1980s
• UK recession of 1991
• The great recession 2008-13

General Economic Essays

• The Dismal Science
• Difference Between Economists and Non Economists
• War and Recessions
• The Economics of Fear
• The Economics of Happiness
• Can UK and US avoid Recession?
• 3 Of the Worst Economic Policies
• Overvalued Housing Markets
• What Went Wrong with US Economy?
• Problem with Bailing out financial sector
• Problems of Personal Debt
• Problem of Inflation
• National Debt in the UK
• How To Survive a Recession
• Can A recession be a good thing?

Chinese Economy

• Problems of Chinese Economic Growth
• Should we worry about a strong China
• Chinese Growth and Costs of Growth
• Chinese Interest Rates and Economic Growth

Model essays

• A2 model essays
• AS model essays
• Top 10 Reasons For Studying Economics
• Inflation explained by Victor Borge
• Funny Exam Answers
• Humorous look at Subprime crisis

Economic Growth - Essay Examples And Topic Ideas For Free

Economic growth denotes an increase in the production of goods and services in an economy over time, often measured by the growth of the Gross Domestic Product (GDP). Essays on economic growth could explore the factors contributing to growth, the relationship between economic growth and development, and the various theories explaining economic growth. Moreover, discussions might cover the implications of growth on income inequality, environmental sustainability, and social welfare. Examining policies aimed at stimulating growth, the historical and contemporary debates surrounding the benefits and costs of economic growth, and comparing different growth models across countries can provide a holistic understanding of this crucial economic concept. We have collected a large number of free essay examples about Economic Growth you can find at PapersOwl Website. You can use our samples for inspiration to write your own essay, research paper, or just to explore a new topic for yourself.

Legalization of Marijuana and Economic Growth

These would make occupations as well as set the ball moving for financial action in the pot business in these regions. On account of states like California and Nevada where such foundation as of now exists, the financial effect has turned out to be more quantifiable as the part has developed. A RCG Economics and Marijuana Policy Group consider on Nevada says that legitimizing recreational marijuana in the state could bolster more than 41,000 employments till 2024 and produce over […]

Income Inequality and Economic Growth in Pakistan

In time series data, which indicates that increasing income inequality is likely to spur higher levels of GDP, certain examples become apparent. For instance, Shahbaz (2010) employed a time series data on Pakistan for the period 1971-2005, using the ARDL bound test approach, to determine the relationship between income inequality and economic growth in Pakistan. The results show that income inequality is positively and significantly related in both long-run and short-run with economic growth in Pakistan. Gelan and Price (2003) […]

Pros and Cons of Increasing the Minimum Wage

Introduction The minimum wage is the lowest reasonable price that an employer is legally obliged to compensate for work, not including collective agreements and custom employee contracts. The federal and state governments are responsible for setting their minimum wage policies, which may differ. The aspect of wages is a grave concern in the modern world due to the discussion among economic experts, whose opinions differ on whether it should increase or stay stagnant (Kops, 2017). The increase in the minimum […]

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Why Slavery was the Engine of American Economic Growth

America views slavery in a negative perspective. It's not very known that there were some positives aspects that benefited America's economy. From the years 1619 to 1865, slavery became very important to the South because it supported the economic side of agriculture. The slave-based economy was somewhat separate from the market revolution. If it wasn't for slavery, the North wouldn't have been able to grow when industrializing the cotton textile. Cotton textile was one of the first industrially producing businesses […]

Effects of Agriculture on Economic Growth

The Ethiopian rural development strategy and policy fundamentally depend on small-scale farmer-led industrialization (ADLI) as an engine for economic development. ADLI builds on theories from the 1960s in which smallholder farming developed primarily to facilitate demand for industrial commodities and provide inputs for industrialization. ADLI aims at enhancing agricultural production for overall production growth, as well as investing in those industries with the most production linkages to rural areas. This strategy assumes that inter-sectoral connections will reinforce the development momentum […]

“Education is the most Powerful Tool which Can Use to Change the World”

Introduction Nelson Mandela states, ""Education is the most powerful tool which can use to change the world"". In the past, there has been a significant transformation in society that has been primarily attributed to education. For instance, the continued support and investments in education across the world have contributed to various technological advancements. These developments have improved life efficiency while addressing some of the global challenges. Most scholars argue that the social, economic, and cultural problems that countries face originate […]

Impact of Foreign Direct Investment on Economic Growth in Afghanistan

Our study includes four variables GDP which is the dependant variable, whilst the independent variables are FDI, export (EX) and official development assistance (ODA). The following table (4.1) unfolds the descriptive statistics for all those variables; it shows the Mean, Median, Maximum, Minimum and Standard Deviation. We can note that the mean of the GDP is equal 8.7512 USD with the standard deviation equal 1.1753 USD therefore the mean of FDI is equal 18.8318 USD with standard deviation 1.6227 USD […]

The Industrial Era

The Industrial Era was a time in which American transformed into a modern, urban and industrial nation. The growth of the economy encouraged the industry. The rural and farm life of the nation was taken over by the industry and urbanization. The development of cities involved advancements in technology and an increase in diversity within a society. The Industrial Revolution reached the United States during the 19th century. The Industrial Revolution reshaped culture in America. It had significant effects on […]

Breaking the Poverty Trap

One of the reasons the rich get richer, and the poor get poorer, is because of the lack of not knowing and ignorance hindering half the world, allowing the cycle of poverty to continue. Poverty trap is as a spiraling mechanism, that forces people to remain poor binding many to no hope of escaping. The poverty trap has been an ongoing cycle within generations even those close to me, that has tremendously taken a negative toll on society and my […]

The Great Gatsby Era

The Great Gatsby, by F. Scott Fitzgerald, was published in 1925 as a novel that attempts to describe that time period of society in America. The book provides an idea of frenzied society during post-war commonly referred to as the Jazz Age. Today, it offers the readers with a portal in which they can reflect on the life in American society during the 1920s. This paper will provide a discussion about the people in 1920s through looking into consideration on […]

Research Paper on Gender Inequality in the Workforce in India

Abstract India demonstrates significant economy growth that contrary to universal norms results in lower female labor force participation. The issue is a deep-rooted problem, which is aggravated by a wide range of factors, the major of which are social norms and insufficient level of training and information on job opportunities. Despite the presence of these constraints, the paper suggests that there is a scope of possible measures, which can be implemented by the government to overcome the problem and mitigate […]

Female Labor Force Participation

Economic inequality is a global phenomenon and unfortunately, it is rising despite many initiatives and policy formulations (Atkinson, A.B. 2015). Women persistently remain underrepresented in the global formal economy (The Global Gender Gap Report, 2017). However, what's even more unfortunate is that women remain a common group among all categories when it comes to economic inequalities if we investigate through an intersectional analysis. For example, women from rural areas have been contributing in the production process since the pre-historic ages […]

Revolutions are Seen as Positive Advancements

Industrial Revolutions are seen as positive advancements, which can lead to furthering economic growth in a nation. Although, industrial revolutions can bring numerous positive outcomes, it can also bring many negative outcomes to the developing country that is going through an industrial change. Throughout history, there has been more than one industrial revolution that has occurred, and it also continues to happen to this day. So far, there has been three different waves of industrial revolution and we are currently […]

Economics of Globalization

Tata Motors Limited located in India and in different countries all over the world. where economic growth has started for decades. Still, there are some challenges that can affect the growth rate in all respect. Like GDP; growth; business cycle; inflation; unemployment; political stability; trade balance. Real GDP or Gross Domestic Product (GDP) at constant (2011-12) prices in the year 2016-17 is likely to attain a level of 121.65 lakh crore INR, with a growth rate of 7.1 percent over […]

Rule of Law and Political Stability in Nigeria’s Governance and Economic Policy

Institutional qualities are the major determinant of good governance within every aspiring country. Factors such as voice and accountability, regulatory control, control of corruption, government effectiveness, rule of law, and political stability come into play. This study will focus on the rule of law and political stability as proxies for good governance. Good governance of a nation pertains to the management of the public sectors of the economy in terms of accountability, efficiency, and effectiveness, along with the free flow […]

Examining GDP and Unemployment

Research over the years has shown that unemployment rates and Gross Domestic Product (GDP) figures go hand in hand. This paper aims to define and discuss GDP, and its relation to economic growth. Additionally, the paper will discuss how the use of fiscal or monetary policies can effectively battle recession and aid in the growth of the economy, and how losing a battle to a recession can severely impact unemployment and the unemployment rate, along with other factors leading to […]

What is Capitalism?

"Freedom is the open window through which pours the sunlight of the human spirit and human dignity" (Herbert Hoover). In the 1920s, America turned away from worldly concerns and began concentrating on domestic affairs. Some might refer to this period in America as the Decade of Optimism. It ushered in many forward thinkers, innovators, innovations, and cultural changes. For example, Henry Ford created an efficient and cheap means to mass produce automobiles. This allowed even those who earned a modest […]

The Impacts of Neoliberalism in the Transition to Democracy in Chile

Compared to other developing countries in Latin America, Chile's political and economic development is distinctive. The country is one of the democratic exceptions, owing to its relatively poor and small population at the time of Spanish colonial rule. The indigenous population is also rather small, and the country has a high degree of ethnic and cultural homogeneity (Hillman and D’Agostino 2011, 67-107). However, today's regime wasn't always democratic. Between 1973 and 1990, Chile was under an authoritarian regime led by […]

The Problems on Income Inequality

In this part, we continue to briefly summarize our empirical analyses based on the ARDL model techniques adopted. The findings of this study are summarized below. Firstly, the objectives of the study were analyzed using cointegration analysis tests and the ARDL bound test on the national level data, covering the period of 2004-2016. The first step taken in the cointegration test involved carrying out a unit root test for each variable and determining their order of integration. The results indicated […]

An Important Role of Globalization

Recently, globalization has played an important role in the national market economies of various countries. It not only enhances economic integration but also motivates trade liberalization. However, many debates still exist regarding the "side effects" of globalization on the development of countries. Therefore, globalization is a controversial issue that consistently receives significant attention from governments around the world. Firstly, according to Chernotsky & Hobbs (2018), globalization is defined as a political, economic, and cultural exchange among nations that enhances trade […]

Change in America’s Role in Foreign Policy

America’s role in foreign affairs underwent significant changes from 1865-1920. Prior to this period, Americans were generally indifferent to and minimally involved in foreign affairs. America was primarily focused on domestic issues such as the Civil War, industrialization, and settlement of the west. However, this changed after 1865, the end of the Civil War, for many reasons. For one, industrial growth led to larger production quantities and a need for bigger markets and additional raw materials. In addition, the Spanish-American […]

Unemployment in Zimbabwe

Unemployment rate is equivalent to the economically active group of people that is unemployed and more so looking for jobs. During the precolonial era, Zimbabwe had one of the strongest economies in Africa and at one point dubbed the "Bread basket of Africa". The British colonized Zimbabwe and therefore in the process; managed to bring investors into the country that was rich in minerals such as gold, platinum and silver. Health sectors, education and agriculture were by far the best […]

Neoliberalism and Economic Inequality in Different Countries

Over the past few decades, the world economy has expanded rapidly under the influence of neoliberalism. However, neoliberalism is controversial, some people hold a positive attitude towards it, while others hold a negative attitude. Not all developed and developing countries will benefit from the new liberal process. Over time, more and more problems have surfaced as a result of the free market. In fact, today, with the spread of neoliberalism, economic and social inequality still exists in society, which has […]

Managing Air Pollution with Urban Transportation

Abstract: The recent economic expansion along with the population growth experienced in developing countries has had a big impact on the development of large cities like Delhi, India. Accompanied by Delhi's rapid spatial growth over the last 25 years, urban sprawl has been contributing to increased travel. The vehicle fleet projected at current growth rates will result in more than 13 million vehicles in Delhi in 2020. Planning and managing such a rapidly growing transport sector will be a big […]

Collaborative Innovations Sri Lankan Small Companies

Introduction Most countries depend on innovation as a method for social and economic growth. The Global Innovation Index is considered as the main indicator of a country’s level of innovativeness. Investors are making business decisions based on a country’s rank in this index. Countries that are in the top of innovation index are high income countries and countries that are lower in the innovation index is low income countries. Sri Lanka is ranked 91 of the global innovation index of […]

Information and Communication Technologies

Introduction Over the past few decades, information and communication technologies (ICTs) have played an important role as a key solution for comprehensive development, poverty elimination, and the empowerment of groups discriminated against in society. The ICT sector presents tremendous opportunities for women. However, for women to seize these opportunities equally as men, the gender stereotypes and biases that prevent them from pursuing or making it big in STEM-related fields need to be addressed. Women are still under-represented in this sector. […]

Research Paper : Luthans and Doh

As stated by Luthans and Doh (International Management), “globalization can be defined as the process of social, political, economic, cultural, and technological integration between countries around the world.” Ultimately, the goal of globalization is to create one world unit and market. An uptick in trade, capital flows, and migration encourage the trend of globalization. And according to Thomas Friedman (The World Is Flat), offshoring and outsourcing are some of the main contributing factors to the quick rise of globalization. As […]

Impact of Natural Disasters on Risk Management

Research says threats of natural disasters may continue to rise due to the increase in the average temperature of the water in oceans (Tennyson & Diala, 2016). Weather events will be intense and frequent due to global warming. This will result in rising sea levels and other environmental changes. According to Tennyson and Diala, disaster preparedness is the total of all measures that have been taken and the policies that have been adopted to address a disaster before it occurs […]

Unemployment Rate and Urbanization

Relationship Between Real GDP Per Capita, Inflation Rate, Unemployment Rate and Urbanization Introduction Economic growth of a country id influenced by various factors such as inflation, urbanization and unemployment. These factors can also influence economic income of a country. The relationship between inflation and real GDP per capita is one of the most widely researched topics. According to Khan & Ssnhadji, (2001), inflation implies an increase in commodity prices which results into a decrease in purchasing power, which in turn […]

Globalization’s Effects on Salta’s Viticulture Industry

Today's world economy is constantly shifting, changing, and adapting. With the increased interconnectedness of markets and communication, effectively every current industry looks remarkably distinct from what they looked like a hundred years ago. The distribution of these changes, however, are not uniform, and agricultural industries in particular see this imbalance. Globalization and technological advances may diminish agriculture's intrinsic variability, but this inconsistency can never be completely erased. This is most exemplified in the grape growing industry. Grapes are a sensitive […]

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Economics Essay Examples

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Published on: Jun 6, 2023

Last updated on: Jan 31, 2024

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Are you struggling to understand economics essays and how to write your own?

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We’ve got the solution you've been looking for. Explore quality examples that bridge the gap between theory and real-world applications. In addition, get insightful tips for writing economics essays.

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What is an Economics Essay?

An economics essay is a written piece that explores economic theories, concepts, and their real-world applications. It involves analyzing economic issues, presenting arguments, and providing evidence to support ideas. 

The goal of an economics essay is to demonstrate an understanding of economic principles and the ability to critically evaluate economic topics.

Why Write an Economics Essay?

Writing an economics essay serves multiple purposes:

• Demonstrate Understanding: Showcasing your comprehension of economic concepts and their practical applications.
• Develop Critical Thinking: Cultivating analytical skills to evaluate economic issues from different perspectives.
• Apply Theory to Real-World Contexts: Bridging the gap between economic theory and real-life scenarios.
• Enhance Research and Analysis Skills: Improving abilities to gather and interpret economic data.
• Prepare for Academic and Professional Pursuits: Building a foundation for success in future economics-related endeavors.

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If you’re wondering, ‘how do I write an economics essay?’, consulting an example essay might be a good option for you. Here are some economics essay examples:

Short Essay About Economics

A Level Economics Essay Examples

Here is an essay on economics a level structure:

Band 6 Economics Essay Examples

Here are some downloadable economics essays:

Economics essay pdf

Economics essay introduction

Economics Extended Essay Examples

In an economics extended essay, students have the opportunity to delve into a specific economic topic of interest. They are required to conduct an in-depth analysis of this topic and compile a lengthy essay. 

Here are some potential economics extended essay question examples:

• How does foreign direct investment impact economic growth in developing countries?
• What are the factors influencing consumer behavior and their effects on market demand for sustainable products?
• To what extent does government intervention in the form of minimum wage policies affect employment levels and income inequality?
• What are the economic consequences of implementing a carbon tax to combat climate change?
• How does globalization influence income distribution and the wage gap in developed economies?

IB Economics Extended Essay Examples 

IB Economics Extended Essay Examples

Economics Extended Essay Topic Examples

Extended Essay Research Question Examples Economics

Tips for Writing an Economics Essay

Writing an economics essay requires specific expertise and skills. So, it's important to have some tips up your sleeve to make sure your essay is of high quality:

• Start with a Clear Thesis Statement: It defines your essay's focus and argument. This statement should be concise, to the point, and present the crux of your essay.
• Conduct Research and Gather Data: Collect facts and figures from reliable sources such as academic journals, government reports, and reputable news outlets. Use this data to support your arguments and analysis and compile a literature review.
• Use Economic Theories and Models: These help you to support your arguments and provide a framework for your analysis. Make sure to clearly explain these theories and models so that the reader can follow your reasoning.
• Analyze the Micro and Macro Aspects: Consider all angles of the topic. This means examining how the issue affects individuals, businesses, and the economy as a whole.
• Use Real-World Examples: Practical examples and case studies help to illustrate your points. This can make your arguments more relatable and understandable.
• Consider the Policy Implications: Take into account the impacts of your analysis. What are the potential solutions to the problem you're examining? How might different policies affect the outcomes you're discussing?
• Use Graphs and Charts: These help to illustrate your data and analysis. These visual aids can help make your arguments more compelling and easier to understand.
• Proofread and Edit: Make sure to proofread your essay carefully for grammar and spelling errors. In economics, precision and accuracy are essential, so errors can undermine the credibility of your analysis.

These tips can help make your essay writing journey a breeze. Tailor them to your topic to make sure you end with a well-researched and accurate economics essay.

To wrap it up , writing an economics essay requires a combination of solid research, analytical thinking, and effective communication. 

You can craft a compelling piece of work by taking our examples as a guide and following the tips.

However, if you are still questioning "how do I write an economics essay?", it's time to get professional help from the best essay writing service -  CollegeEssay.org.

Our economics essay writing service is always ready to help students like you. Our experienced economics essay writers are dedicated to delivering high-quality, custom-written essays that are 100% plagiarism free.

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Essay on Economic Growth And Development

Students are often asked to write an essay on Economic Growth And Development in their schools and colleges. And if you’re also looking for the same, we have created 100-word, 250-word, and 500-word essays on the topic.

Let’s take a look…

100 Words Essay on Economic Growth And Development

What is economic growth.

Economic growth means that a country is making more goods and services than before. This is often measured by looking at the Gross Domestic Product (GDP), which adds up the value of everything produced in a country. When GDP goes up, it usually means more jobs and money for people.

What is Economic Development?

Economic development is different. It’s not just about making more things; it’s about improving people’s lives. This includes better education, healthcare, and housing. It also means having a cleaner environment and making sure that everyone has a chance to succeed.

Why Are They Important?

Growth and development are important because they can make people’s lives better. When an economy grows, there are usually more jobs, which means people can earn more money to buy what they need and want. Development makes sure that this money also leads to a better quality of life.

250 Words Essay on Economic Growth And Development

Understanding economic growth.

Economic growth means that a country is making more goods and services than before. Think of it like a lemonade stand. If you sell more lemonade this year than last year, your stand has grown. For a whole country, we measure this growth by looking at something called the Gross Domestic Product, or GDP for short. This is like adding up all the money made from lemonade and everything else sold in the country.

The Meaning of Economic Development

Why growth and development matter.

When countries grow and develop, people usually have more money and better lives. Parents can buy more things for their kids, like books or toys. They can also take better care of their families, with better food and medicine. Countries can also take care of the planet by keeping the air and water clean.

Challenges on the Way

Sometimes, making more money can hurt the environment or make some people very rich while others stay poor. So, leaders must make smart choices to ensure that growth helps everyone and doesn’t harm our planet.

In short, economic growth and development are about making more and living better. Just like a lemonade stand, a country works to sell more and also to improve the stand and the neighborhood. This way, everyone can enjoy a sweeter sip of success.

500 Words Essay on Economic Growth And Development

Economic growth is like a country’s scorecard. It tells us how much more goods and services a country is making this year compared to last year. Imagine you have a lemonade stand. If you sell more cups of lemonade this summer than you did last summer, that’s growth. Countries measure their economic growth by calculating something called the Gross Domestic Product, or GDP for short. It’s like adding up all the money made from every lemonade stand and every other business in the country.

Why Economic Growth Matters

Why should we care about a country growing economically? Because it’s a sign that things are going well. When a country’s economy grows, it means more jobs for people, better salaries, and more money to spend on important things like schools, hospitals, and roads. It’s like if your lemonade stand makes more money, you can buy more lemons and sugar, make your stand look nicer, and maybe even hire your friends to help you.

Difference Between Growth and Development

Challenges on the road to development.

Even though growth and development sound great, they’re not easy to achieve. Some countries have a hard time growing because they lack resources or technology. Others grow quickly but don’t make sure the benefits reach everyone. Imagine if you made lots of money at your lemonade stand but didn’t share with your helpers or didn’t make your stand safe and clean. That wouldn’t be fair, right?

How to Achieve Sustainable Development

To make sure a country develops in a good way, growth needs to be sustainable. This means taking care of the environment and making sure we don’t use up all the resources. It’s like using eco-friendly cups and not wasting lemons at your stand. Also, everyone in the country should be included in the growth. It’s important to help people who are poor or live in places where it’s harder to get good jobs.

The Role of Education

In conclusion, economic growth and development are about making more money and making life better for everyone in a country. It’s like running a successful lemonade stand that not only sells a lot of lemonades but also takes good care of its workers, customers, and the environment. When a country focuses on both growth and development, it’s on the path to becoming a happier, healthier place for all its people.

That’s it! I hope the essay helped you.

Happy studying!

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Home — Essay Samples — Economics — Economic Growth

Essays on Economic Growth

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The Multifaceted Purpose of Education

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The Rise of Inflation Rate in The Us

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Poverty Reduction is an Essential Development Goal

Financial development of the nations in mena region, research of how successful the new deal was for society and economy, gdg growth rate as a factor affecting economic growth, oil rent and regional economic development in mena, the succes of frank gehry's guggenheim museum in bilbao and its socio-economic impact, a study of undeveloped countries with high economic growth, statistic development and profit in mena region, economic gap between the global north and south, how gender inequality affects economic growth & development as illustrated in the articles by sen., knowles and klasen, owen and largely, the growing pains of the state of texas, overpopulation in africa: the importance of education and economics, what is economic growth, the development of islamic finance in turkey, arguments in support of implementing foreign aid, the role of enterpreneurs in the economy, trends impacting canadian economy, economic inequality vs economic growth, the role of strategic decisions in ebay growth, green financing issues in malaysia, relevant topics.

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Essays on Economic Growth

What is economic growth? And why is it so important?

The goods and services that we all need are not just there – they need to be produced – and growth means that their quality and quantity increase..

Good health, a place to live, access to education, nutrition, social connections, respect, peace, human rights, a healthy environment, and happiness. These are just some of the many aspects we care about in our lives.

At the heart of many of these aspects that we care about are needs for which we require particular goods and services . Think of those that are needed for the goals on the list above – the health services from nurses and doctors, the home you live in, or the teachers who provide education.

Poverty, prosperity, and growth are often measured in monetary terms, most commonly as people’s income. But while monetary measures have some important advantages, they have the big disadvantage that they are abstract. In the worst case, monetary measures – like GDP per capita – are so abstract that we forget what they are actually about: people’s access to goods and services.

The point of this text is to show why economic growth is important and how the abstract monetary measures tell us about the reality of people’s material living conditions around the world and throughout history:

• In the first part, I want to explain what economic growth is and why it is so difficult to measure.
• In the second part, I will discuss the advantages and disadvantages of several measures of growth, and you will find the latest data on several of these measures so that we can see what they tell us about how people’s material living conditions have changed.

What are these goods and services that I’m talking about?

Have a look around yourself right now. Many of the things you see are products that were produced by someone so that you can use them: the trousers you are wearing, the device you are reading this on, the electricity that powers it, the furniture around you, the toilet that is nearby, the sewage system it is connected to, the bus or car or bicycle you took to get where you are, the food you had this morning, the medications you will receive when you get sick, every window in your home, every shirt in your wardrobe, and every book on your shelf.

At some point in the past, many of these products were not available. The majority did not have access to the most basic goods and services they needed. A recent study on the history of global poverty estimates that just two centuries ago, roughly three-quarters of the world "could not afford a tiny space to live, food that would not induce malnutrition, and some minimum heating capacity.” 1

Let’s look at the history of the last item on that list above, books.

A few centuries ago, the only way to produce a book was for a scribe to copy it word-for-word by hand. Book production was a slow process; it took a scribe about eight months of daily work to produce a single copy of the Bible. 2

It was so laborious that only very few books were produced. The chart shows the estimates of historians. 3

But then, in the 15th century, the goldsmith Johannes Gutenberg combined the idea of movable letters with the mechanism that he knew from the wine presses in his hometown. He developed the printing press. Gutenberg developed a new production technology, and it changed things dramatically. Instead of spending months to produce one book, a worker was now able to produce several books a day.

As the printing press spread across Europe, book production soared. Books, which were previously only available to a tiny elite, became available to more and more people.

This is one example of how growth is possible and what economic growth is : an increase in the production of goods and services that people produce for each other.

A list of goods and services that people produce for each other

Before we get to a more detailed definition of economic growth, it’s helpful to remind ourselves of the astonishingly wide range of goods and services that people produce. I think this is helpful because measures of economic output can easily become abstract. This abstraction means we easily lose the mental connection to the goods and services such measures actually talk about.

This list of goods and services isn’t meant as a definitive list, but it helped me to think about the relevance of poverty and growth: 4

At home: Light in your home at night; the sewage system; a shower; vacuum cleaner; fridge; heating; air conditioning; electricity; windows; a toilet – even a flush toilet; soap; a balcony or a garden; running water; warm water; cutlery and dishes; a hut – or even a warm apartment or house; an oven; sewing machine; a stove (that doesn’t poison you ); carpet; toilet paper; trash bags; music recordings or even online streaming of the world’s music and film; garbage collection; radio; television; a washing machine; 5 furniture; telephone; a comfortable bed, and a room for one’s own.

Food: The most fundamental need is to have enough food. For much of human history, a large share of people suffered from hunger , and millions still do .

But we also need to have a richer and more varied diet to get all of the nutrients we need. Unfortunately, billions still suffer from micronutrient deficiency .

Also, think of clean drinking water; reliable markets and stores with a wide range of available goods; food that rarely poisons you (pasteurized milk, for example); spices; tea and coffee; kitchen utensils and practical ingredients (from a bag of flour to canned soups or a yogurt); chocolate and sweets; fresh fruit and vegetables; bread; take-away food or the possibility to go to a restaurant; ways to protect your food from spoiling (from the cold chain that delivers the goods to the cellophane to wrap it with); wine or beer; fertilizer ( very important); and tractors to work the fields.

Knowledge: Education from primary up to university level; books; data that allows us to understand the world around us; newspapers; vocational training; kindergartens; and scientific knowledge to understand ourselves and the world around us.

Infrastructure: Public transportation with buses, subways, and trains; roads; paved roads; airplanes; bridges; financial services (including bank accounts, ATMs, and credit cards); cities; a network of competent workers that can help you to fix problems; postal services (that delivers fast); national parks; street cleaning; public swimming pools (even private pools); firefighters; parks; online shopping; weather forecasts; and a waste management system.

Tools and technologies: Pencils, ballpoint pens, and paper; lawnmowers; cars; car mechanics; bicycles; power tools like drills (even battery-powered ones); a watch; computers and laptops; smartphones (with GPS and a good camera); being able to stay in touch with distant friends or family members (or even visiting them); GPS; batteries; telephones and mobiles; video calls; WiFi; and the internet right here.

Social services: Caretakers for those who are disabled, sick, or elderly; protection from crime; non-profit organizations financed by the public, by donations or by philanthropies; insurance (against many different risks); and a legal system with judges and lawyers that implement the rule of law.

There is also a wide range of transfer payments, which in themselves are not services (they are transfers) but which become more affordable as a society becomes more prosperous: sick leave and disability benefits; unemployment benefits; and being able to help others with a regular donation of some of your income to an effective charity . 6

Life and free time : tents; travel and holidays; surfboards; skis; board games; hotels; playgrounds; children’s toys; courses to learn hobbies (from painting to musical instruments or courses on the environment around us); a football; pets; the cinema, theater or a music concert; clothes (even comfortable and good-looking ones that keep you warm and protect you from the rain); shoes (even shoes for different purposes); shoe repair; the contraceptive pill and the ability to choose if and when to have children; sports classes from rock climbing to pilates and yoga; cigarettes (not all goods that people produce for each other are good for them); 7 a musical instrument; a camera; and parties to celebrate life.

Health and staying well: Dentists; antibiotics; surgeries; anesthesia; mental health care from psychologists and psychiatrists; vaccines; public sewage; a haircut; a massage; midwives; ambulances; modern medicine; band-aids; pharmaceutical drugs; sanitary pads; toothbrushes; dental floss (some do floss); disinfectants; glasses; sunglasses; contact lenses; hearing aids; and hospitals – including very well-equipped, modern hospitals that offer CT scans, which include intensive care units and allow heart or brain surgery or organ transplants.

Specific needs and wishes: Most of the products listed above are generally helpful to people. But often, the goods and services that are most important to one individual are very specific.

As I’m writing this, I have a big cast on my left leg after I broke it. These days, I depend on products that I had no use for just three weeks ago. To move around, I need two long crutches, and to prevent thrombosis, I need to inject a blood thinner every day. After I broke my leg, I needed the service of nurses and doctors. They had to rely on a range of medical equipment, such as X-ray machines. To get back on my feet, I might need the service of physiotherapists.

We all have very specific needs or wishes for particular goods and services. Some needs arise from bad luck, like an injury. Others are due to a new phase in life – think of the specific goods and services you need when you have a baby or when you take care of an elderly person. And yet others are due to specific interests – think of the needs of a fisherman, or a pianist, or a painter.

All of these goods and services do not just magically appear. They need to be produced. At some point in the past, the production of most of them was zero, and even the most essential ones were extremely scarce. So, if you want to know what economic growth means for your life, look at the list above.

What is economic growth?

So, how can we define what economic growth is?

A definition that can be found in so many publications that I don’t know which one to quote is that economic growth is “an increase in the amount of goods and services produced per head of the population over a period of time.”

The definition in the Oxford Dictionary is almost identical: “Economic growth is the increase in the production of goods and services per head of population over a stated period of time”. And the definition in the Cambridge Dictionary is similar. It defines growth as “an increase in the economy of a country or an area, especially of the value of goods and services the country or area produces.”

In the following footnote, you find more definitions. Bringing these definitions together and taking into account the economic literature more broadly, I suggest the following definition: Economic growth is an increase in the quantity and quality of the economic goods and services that a society produces.

I prefer a definition that is slightly longer than most others. If you want a shorter definition, you can speak of ‘products’ rather than ‘goods and services’, and you can speak of ‘value’ rather than mentioning both the quantity and quality aspects separately.

The most important change in quantity is from zero to one when a new product becomes available. Many of the most important changes in history became possible when new goods and services were developed; think of antibiotics, vaccines, computers, or the telephone.

You find more thoughts on the definition of growth in the footnote. 8

What are economic goods and services?

Many definitions of economic growth simply speak of the production of ‘goods and services’ collectively. This sidesteps a key difficulty in its definition and measurement. Economic growth is not concerned with all goods and services but with a subset of them: economic goods and services.

In everything we do – even in our most mundane activities – we continuously ‘produce’ goods and services in some form. Early in the morning, once we’ve brushed our teeth and made ourselves toast, we have already produced one service and one good. Should we count the tooth-brushing and the toast-making towards the economic production of the country we live in? The question of where to draw the line isn’t easy to answer. But we have to draw the line somewhere. If we don’t, we end up with a concept of production that is so broad that it becomes meaningless; we’d produce a service with every breath we take and every time we scratch our nose.

The line that we have to draw to define the economic goods and services is called the ‘production boundary’. The sketch illustrates the idea. The production boundary defines those goods and services that we consider when we speak about economic growth.

For a huge number of goods or services, there is no question that they are of the ‘economic’ type. But for some of them, it can be complicated to decide on which side of the production boundary they fall. One example is the question of whether the production of illegal goods should be included. Another is whether production within a household should be included – should we consider it as economic production if we grow tomatoes in our backyard and make soup from them? Different authors and different measurement frameworks have given different answers to these questions. 9

There are some characteristics that are helpful in deciding on which side of the boundary a particular product falls. 10 Economic goods and services are those that can be produced and that are scarce in relation to the demand for them. They stand in contrast to free goods, like sunlight, which are abundant, or those many important aspects in our lives that cannot be produced, like friendships. 11 Our everyday language has this right: we don’t refer to the sun or our friendships as a good or service that we ‘produce’.

An economic good or service is provided by people to each other as a solution to a problem they are faced with, and this means that they are considered useful by the person who demands it.

A last characteristic that helps decide whether you are looking at an economic product is “delegability”. An activity is considered to be production in an economic sense if it can be delegated to someone else. This would include many of the goods and services on that long list we considered earlier but would exclude your breathing, for example.

Because economic goods are scarce in relation to the demand for them, human effort is required to produce them. 12 A shorter way of defining growth is, therefore, to say that it is an increase in the production of those products that people produce for each other.

The majority of goods and services on that long list above are uncontroversially of the economic type – everything from the light bulbs and furniture in your home to the roads and bridges that connect your home with the rest of the world. They are scarce in relation to the demand for them and have to be produced by someone; their production is delegable, and they are considered useful by those who want them.

It’s worth recognizing that many of the difficulties in defining the production boundary arise from the effort to make measures of economic production as comparable as possible.

To give just one concrete example of the type of considerations that make the discussion about specific definitions so difficult, let’s look at how the production boundary is drawn in the housing sector.

Imagine two countries that are identical except for one aspect: home ownership. In Country A, everyone rents their homes, and the total sum of annual rent amounts to €2 billion per year. In Country B, everyone owns their own home, and no one pays rent. To provide housing is certainly an economic service, but if we only counted monetary transactions, then we would get the false impression that the value of goods and services in Country A is €2 billion higher than in Country B. To avoid such misjudgment, the production boundary includes the housing services that are provided without any monetary transactions. In National Accounts, statisticians take into account the “imputed rental value of owner-occupied housing” – those households who own their home get assigned an imputed rental value. In the imagined scenario, these imputed rents would amount to €2 billion in Country B so that the prosperity of people in these two countries would be judged to be identical.

It is the case more broadly that National Account figures (like GDP) do include important non-market goods and services that are not included in household survey measures of people’s income. GDP does not only include the housing services by owner-occupied housing but also the provision of most goods and services that are provided by the government or nonprofit institutions.

How can we measure economic growth?

Many discussions about economic growth are extraordinarily confusing. People often talk past one another.

I believe the key reason for this is that the discussion of what economic growth is gets muddled up with how it is measured .

While it is straightforward enough to define what growth is, measuring growth is very, very difficult.

In the worst cases, measures of growth are mixed up with a definition of growth. Growth is often measured as an increase in income or inflation-adjusted GDP per capita. But these measures are not the definition of it – just like life expectancy is a measure of population health but is certainly not the definition of population health.

To see how difficult it is to measure growth, take a moment to think about how you would measure it. How would you determine whether the quantity and quality of all economic goods and services produced by a society increased or decreased over time?

Finding a measure means that you have to find a way to express a huge amount of relevant information in a single metric. As the sketch shows, you have to first measure the quantity and quality of all the many, many goods and services that get produced and then find a way to aggregate all of these measurements into one summarizing metric. No matter what measure you propose for such a difficult task, there will always be problems and shortcomings in any proposal you might make.

In the following section, I will show four possible ways of measuring growth and present some data for each of them to see how they can inform us about the history of material living conditions.

Measuring economic growth by tracking access to particular goods and services

One possible way to measure growth is to make a list of some specific products that people want and to see what share of the population has access to them.

We do this very often at Our World in Data . The chart here shows the share of the world population that has access to four basic resources. All of these statistics measure some particular aspect of economic growth.

You can switch this chart to any country in the world via the “Change country” option. You will find that, judged by this metric, some countries achieved rapid growth – like Indonesia – while others only saw very little growth, like Chad.

The advantage of measuring growth in this way is that it is concrete. It makes clear what exactly is growing, and it’s clear which particular goods and services people gain access to.

The downside is that it only captures a small part of economic growth. There are many other goods and services that people want in addition to water, electricity, sanitation, and cooking technology. 13

You could, of course, expand this approach of measuring growth to many more goods and services, but this is usually not done for both practical and ethical considerations:

One practical reason is that a list of all the products that people value would be extremely long. Keeping lists that track people’s access to all products would be a daunting task: hundreds of different toothbrushes, thousands of different dentists, hundreds of thousands of different dishes in different restaurants, and many millions of different books. 14 If you wanted to measure growth across all goods and services in this way, you’d soon employ half the country in the statistical office.

In practice, any attempt to measure growth as access to particular products, therefore, means that you look only at a relatively small number of very particular goods and services that statisticians or economists are interested in. This is problematic for ethical reasons. It should not be up to the statisticians or economists to determine which few products should be considered valuable.

You might have realized this problem already when you read my list at the beginning of this text. You might have disagreed with the things that I put on that list and thought that some other goods and services were missing. This is why it is important to track incomes and not just access to particular goods: measuring people’s income is a way of measuring the options that they have rather than the choices that they make. It respects people’s judgment to decide for themselves what they find most important for their lives.

On our site, you find many more such metrics of growth that capture whether people have access to particular goods and services:

• This chart shows the share of US households having access to specific technologies.
• This chart shows the share that has health insurance.
• This chart shows access to schools.

Measuring economic growth by tracking the ratio between people’s income and the prices of particular goods and services

To measure the options that a person’s income represents, we have to compare their income with the prices of the goods and services that they want. We have to look at the ratio between income and prices.

The chart here does this for one particular product – books – and brings us back to the history of growth in the publishing sector that we started with. 15 Shown is the ratio between the average income that a worker receives and the price of a book. It shows how long the average worker had to work to buy one book. Note that this data is plotted on a logarithmic axis.

Before the invention of the printing press in the 15th century, the price was often as high as several months of work. The fact that books were unaffordable for almost everyone should not be surprising. It corresponds to what we’ve seen earlier that it took a scribe several months to produce a single book.

The chart also shows how this changed when the printing press increased the productivity of publishing. As the labor required to produce a book declined from many months of work to less than a day, the price fell from months of wages to mere hours.

This shows us how an innovation in technology raises productivity and how an increase in production makes it more affordable. How it increases the options that people have.

Global inequality: How do incomes compare in countries around the world?

In the previous section, we measured growth as the ratio between income and the price of one particular good. But of course, we could do the same for all the many goods and services that people want. This ratio – the ratio between the nominal income that people receive and the prices that people have to pay for goods and services – is called ‘real income’ . 16

Real income = Nominal income / price of goods and services

Real income grows when people’s nominal income increases or when the prices of goods and services decrease.

In contrast to many of the other metrics on Our World in Data, a person’s real income does not matter for its own sake but because it is a means to an end. A means to many ends, in fact.

Economic growth – measured as an increase in people’s real income – means that the ratio between people’s income and the prices of what they can buy is increasing: goods and services become more affordable, and people become less poor. It is because a person has more choices as their income grows that economists care so much about these monetary measures of prosperity.

The two most prominent measures of real income are GDP per capita and people’s incomes, as determined through household surveys.

They are shown in this chart.

Before we get back to the question of economic growth, let’s see what these measures of real income tell us about the economic inequality in the world today.

Both measures show that global inequality is very large. In a rich country like Denmark, an average person can purchase goods and services for $54 a day, while the average Ethiopian can only afford goods and services that cost $3 per day.

Both measures of real incomes in this chart are measured in international dollars, which means that they take into account the level of prices in each country (using purchasing power parity conversion factors). This price adjustment is done in such a way that one international-$ is equivalent to the purchasing power of one US-$ in the US . An income of int.-$3 in Ethiopia, for example, means that it allows you to purchase goods and services in Ethiopia that would cost US-$3 in the US . All dollar values in this text are given in international dollars, even though I often shorten it to just the $-sign.

If you are living in a rich country and you want to have a sense of what it means to live in a poor country – where incomes are 20 times lower – you can imagine that the prices for everything around you suddenly increase 20-fold. 17 If all the things you buy suddenly get 20-times more expensive your real income is 20-times lower. A loaf of bread doesn’t cost $2 but $40, a pair of jeans costs $400, and an old car costs $40,000. If you ask yourself how these price increases would change your daily consumption and your day-to-day life, you can get a sense of what it means to live in a poor country.

The two shown measures of real income differ:

• The data on the vertical axis is based on surveys in which researchers go from house to house and ask people about their economic situation. In some countries, people are asked about their income, while in other countries, people are asked about their expenditure – expenditure is income minus savings. In poor countries, these two measures are close to each other since poor people do not have the chance to save much.
• On the other hand, GDP per capita starts at the aggregate level and divides the income of the entire economy by the number of people in that country. GDP per capita is higher than per capita survey income because GDP is a more comprehensive measure of income. As we’ve discussed before, it includes an imputed rental value of owner-occupied housing and other differences, such as government expenditure.

Income as a measure of economic prosperity is much more abstract than the metrics we looked at previously. The comparison of incomes of people around the world in this scatterplot measures options, not choices. It shows us that the economic options for billions of people are very low. The majority of the world lives on very low incomes of less than $20, $10, or even $5 per day. In the next section, we’ll see how poverty has changed over time.

• GDP per capita vs. Daily income of the poorest 10%
• GDP per capita vs. Daily average income

Global poverty and growth: How have incomes changed around the world?

Economic growth, as we said before, is an increase in the production of the quantity and quality of the economic goods and services that a society produces. The total income in a society corresponds to the total sum of goods and services the society produces – everyone’s spending is someone else’s income. This means that the average income corresponds to the level of average production, so that the average income in a society increases when the production of goods and services increases.

Average production = average income

In this final section, let’s see how incomes have changed over time, first as documented in survey incomes and then via GDP per capita.

Measuring economic growth by tracking incomes as reported in household surveys

The chart shows the income of people around the world over time, as reported in household surveys. It shows the share of the world population that lives below different poverty lines: from extremely low poverty lines up to $30 per day, which corresponds to notions of poverty in high-income countries .

Many of the poorest people in the world rely on subsistence farming and do not have a monetary income. To take this into account and make a fair comparison of their living standards, the statisticians who produce these figures estimate the monetary value of their home production and add it to their income.

Again, the prices of goods and services are taken into account: these are measures of real incomes. As explained before, incomes are adjusted for price differences between countries, and they are also adjusted for inflation. As a consequence of these two adjustments, incomes are expressed in international dollars in 2017 prices, which means that these income measures express what you would have been able to buy with US dollars in the US in 201 7.

Global economic growth can be seen in this chart as an increasing share of the population living on higher incomes. In 2000 two thirds of the world lived on less than $6.85 per day. In the following 19 years, this share fell by 22 percentage points.

In 2020 and 2021 — during the economic recession that followed the pandemic — the size of the world economy declined, and the share of people in poverty increased . As soon as global data for this period is available, we will update this chart.

The data shows that global poverty has declined, no matter what poverty line you choose. It also shows that the majority of the world still lives on very low incomes. As we’ve seen, we can describe the same reality from the production side: the global production of the goods and services that people want has increased, but there is still not enough production of even very basic products. Most people in the world do not have access to them.

An advantage of household survey data over GDP per capita is that it captures the inequality of incomes within a country. You can explore this inequality with this chart by switching to see the data for an individual country via the ‘Change country’ button.

Measuring economic growth by tracking GDP per capita

GDP per capita is a broader measure of real income, and in contrast to survey income, it also takes government expenditures into account. A lot of thinking has gone into the construction of this very prominent metric so that it is comparable not only over time but also across countries. This makes it especially useful as a measure to understand the economic inequality in the world, as we’ve seen above. 18

Another advantage of this measure is that historians have reconstructed estimates of GDP per capita that go back many centuries. This historical research is an extremely laborious task , and researchers have dedicated many years of work to these reconstructions. The ‘Maddison Project’ brings together these long-run reconstructions from various researchers, and thanks to these efforts, we have a good understanding of how incomes have changed over time.

The chart shows how average incomes in different world regions have changed over the last two centuries. Looking at the latest data, you see again the very large inequality between different parts of the world today. You now also see the history of how we got here: small increases in production in some world regions and very large increases in those regions where people have the highest incomes today.

One of the very first countries to achieve sustained economic growth was the United Kingdom. In this chart, we see the reconstructions of GDP per capita in the UK over the last centuries.

It is no accident that the shape of this chart is very similar to the chart on book production at the beginning of this text – very low and almost flat for many generations and then quickly rising. Both of these developments are driven by changes in production.

Average income corresponds to average production, and societies around the world were able to produce very few goods and services in the past. There were no major exceptions to this reality. As we see in this chart, global inequality was much lower than today: the majority of people around the world were very poor.

To get a sense of what this means, you can again take the approach we’ve used to understand the inequality in the world today. When incomes in today’s rich countries were 20 times lower, it was as if all the prices around you today would suddenly increase 20-fold. But in addition to this, you have to consider that all the goods and services that were developed since then disappeared – no bicycle, no internet, no antibiotics. All that’s left for you are the goods and services of the 17th century, but all of them are 20 times more expensive than today. The majority of people around the world, including in today’s richest countries, live in deep poverty.

Just as we’ve seen in the history of book production, this changed once new production technologies were introduced. The printing press was an exceptionally early innovation in production technology; most innovations happened in the last 250 years. The starting point of this rise out of poverty is called the Industrial Revolution.

The printing press made it possible to produce more books. The many innovations that made up the Industrial Revolution made it possible to increase the production of many goods and services. Compare the effort that it takes for a farmer to reap corn with a scythe to the possibilities of a farmer with a tractor or a combined harvester, or think of the technologies that made overland travel faster – from walking on foot to traveling in a horse buggy to taking the train or car; or think of the effort it took to build those roads that the buggies once traveled on with the modern machinery that allows us to produce the corresponding public infrastructure today .

The production of a myriad of different goods and services followed trajectories very similar to the production of books – flat and low in the past and then steeply increasing. The rise in average income that we see in this chart is the result of the aggregation of all these production increases.

In the past, before societies achieved economic growth, the only way for anyone to become richer was for someone else to become poorer; the economy was a zero-sum game. In a society that achieves economic growth, this is no longer the case. When average incomes increase, it becomes possible for people to become richer without someone else becoming poorer.

This transition from a zero-sum to a positive-sum economy is the most important change in economic history (I wrote about it here ) and made it possible for entire societies to leave the extreme poverty of the past behind.

Conclusion: The history of global poverty reduction has just begun

The chart shows the global history of extreme poverty and economic growth.

In the top left panel, you can see how global poverty has declined as incomes increased; in the other eight panels, you see the same for all world regions separately. The starting point of each trajectory shows the data for 1820 and tells us that two centuries ago, the majority of people lived in extreme poverty, no matter where in the world they were at home.

Back then, it was widely believed that widespread poverty was inevitable. But this turned out to be wrong. The trajectories show how incomes and poverty have changed in each world region. All regions achieved growth – the goods and services that people need saw their production and quality increase – and the share living in extreme poverty declined. 19

This historical research was done by Michail Moatsos and is based on the ‘cost of basic needs’-approach as suggested by Robert Allen (2017) and recommended by the late Tony Atkinson. 20 The name ‘extreme poverty’ is appropriate as this measure is based on an extremely low poverty threshold. It takes us back to what I mentioned at the very beginning; this historical research tells us – as the author puts it – that three-quarters of the world "could not afford a tiny space to live, food that would not induce malnutrition, and some minimum heating capacity.”

Since then, all world regions have made progress against extreme poverty – some much earlier than others – but in particular, in Sub-Saharan Africa, the share of people living in deep poverty is still very high.

The last two centuries were the first time in human history that societies have achieved sustained economic growth, and the decline of global poverty is one of the most important achievements in history. But it is still a very long way to go.

This is what we see in this final chart. The red line shows the share of people living in extreme poverty that we just discussed. Additionally, you now also see the share living on less than $3.65, $6.85, and $30 per day. 21

The world today is very unequal, and the majority of the world still lives in poverty: 47% live on less than $6.85 per day, and 84% live on less than $30. Even after two centuries of progress, we are still in the early stages. The history of global poverty reduction has only just begun.

That the world has made substantial progress but nevertheless still has a long way to go is the case for many of the world’s very large problems. I’ve written before that all three statements are true at the same time: The world is much better, the world is awful, and the world can be much better. This is very much the case for global poverty. The world is much less poor than in the past, but it is still very poor, and it remains one of the largest problems we face.

Some writers suggest we can end poverty by simply reducing global inequality. This is not the case. I’m very much in favor of reducing global inequality, and I hope I do what I can to contribute to this. But it is important to be clear that a reduction of inequality alone would still mean that billions around the world would live in very poor conditions. Those who don’t see the importance of growth are not aware of the extent of global poverty. The production of many crucial goods and services has to increase if we want to end it. How much economic growth is needed to achieve this? This is the question I answered in this recent text .

To solve the problems we face, it is not enough to increase overall production. We also need to make good decisions about which goods and services we want to produce more of and which ones we want less of. Growth doesn’t just have a rate, it also has a direction, and the direction we choose matters – for our own happiness and for achieving a sustainable future .

I hope this text was helpful in making clear what economic growth is. It is necessary to remind ourselves of that because we mostly talk about poverty and growth in monetary terms. The monetary measures have the disadvantage that they are abstract, perhaps so abstract that we even forget what growth is actually about and why it is so important. The goods and services that we all need are not just there – they need to be produced – and economic growth means that the quality and quantity of these goods and services increase, from the food that we eat to the public infrastructure we rely on.

The history of economic growth is the history of how societies leave widespread poverty behind by finding ways to produce more of the goods and services that people need – all the very many goods and services that people produce for each other: look around you now.

Acknowledgments: I would like to thank Joe Hasell and Hannah Ritchie for very helpful comments on draft versions of this article.

Our World in Data presents the data and research to make progress against the world’s largest problems. This article draws on data and research discussed in our topic pages on Economic Inequality , Global Poverty , and Economic Growth .

Version history: In October 2023, I copy-edited this article; it was a minor update, and nothing substantial was changed.

Michail Moatsos (2021) – Global extreme poverty: Present and past since 1820. Published in OECD (2021), How Was Life? Volume II: New Perspectives on Well-being and Global Inequality since 1820 , OECD Publishing, Paris, https://doi.org/10.1787/3d96efc5-en .

At the time when material prosperity was so poor, living conditions were extremely poor in general; close to half of all children died .

Historian Gregory Clark reports the estimate that scribes were able to copy about 3,000 words of plain text per day.

See Clark (2007) – A Farewell to Alms: A Brief Economic History of the World. Clark (2007). In it, Clark quotes his earlier working paper with Patricia Levin as the source of these estimates. Gregory Clark and Patricia Levin (2001) – “How Different Was the Industrial Revolution? The Revolution in Printing, 1350–1869.”

There are about 760,000 words in the bible (it differs between various translations and languages; here is an overview of some translations).

This implies that the production of one copy of the Bible meant 253.3 days (8.3 months) of daily work.

Copying the text was not the only step in the production process for which productivity was low. The ink had to be made, parchment had to be produced and cut, and many other steps involved laborious work.

Wikipedia’s article about scribes reports sources that estimate that the production time per bible was even longer than 8 months.

Clark himself states in the same publication that “Prior to that innovation, books had to be copied by hand, with copyists on works with just plain text still only able to copy 3,000 words per day. Producing one copy of the Bible at this rate would take 136 man-days.” Since the product of 136 and 3000 is only 408,000, it is unclear to me how Clark has arrived at this estimate – 408,000 words are fewer words than in the Tanakh and other versions of the bible.

The data is taken from Eltjo Buringh and Jan Luiten Van Zanden (2009) – Charting the “Rise of the West”: Manuscripts and Printed Books in Europe, a Long-Term Perspective from the Sixth through Eighteenth Centuries. In The Journal of Economic History Vol. 69, No. 2 (June 2009), pp. 409-445. Online here .

Western Europe in this study is the area of today’s Great Britain, Ireland, France, Belgium, Netherlands, Germany, Switzerland, Italy, Spain, Sweden, and Poland.

On the history and economics of book production, see also the historical work of Jeremiah Dittmar.

I’ve relied on several sources to produce this list. One source was the simple descriptions of the consumption bundles that are relied upon for CPI measurement – like this one from Germany’s statistical office . And I have also relied on the national accounts themselves.

This list is also inspired partly by this list of Gwern and I’m also grateful for the feedback that I got via Twitter to earlier versions of this list. [ Here I shared the list on Twitter ]

This is Hans Rosling’s talk on the magic of the washing machine – worth watching if you haven’t seen it.

Of course all of these transfer payments have a service component to them, someone is managing the payment of the disability benefits etc.

Because smoking causes a large amount of suffering and death I do not find cigarettes valuable, but my opinion is not what matters for a list of goods and services that people produce for each other. Whether some good is considered to be part of the domestic product depends on whether it is a good that some people want, not whether you or I want it. More on this below.

Very similar to the definitions given above is the definition that Kimberly Amadeo gives: “Economic growth is an increase in the production of goods and services over a specific period.”

“Economic growth is an increase in the production of economic goods and services, compared from one period of time to another” is the definition at Investopedia .

Alternatively, to my definition, I think it can be useful to think of economic growth as not directly concerned with the output as such but with the capacity to produce this output. The NASDAQ’s glossary defines growth in that way: “An increase in the nation's capacity to produce goods and services.”

Wikipedia defines economic growth as follows: “Economic growth can be defined as the increase in the inflation-adjusted market value of the goods and services produced by an economy over time.” Definitions that are based on how growth is measured strike me as wrong – just like life expectancy is a measure of population health and hardly the definition of population health. I will get back to this mistake further below in this text.

An aspect that I emphasize more explicitly than others is the quality of the goods and services. People obviously do just care about the number of goods, and in the literature on growth, the measurement of changes in quality is a central question. Many definitions speak more broadly about the ‘value’ of the goods and services that are produced, but I think it is worth emphasizing that growth is also concerned with a rise in the quality of goods and services.

OECD – Measuring the Non-Observed Economy: A Handbook .

The relevant numbers are not small. For the US alone, “illegal drugs add $108 billion to measured nominal GDP in 2017, illegal prostitution adds $10 billion, illegal gambling adds $4 billion, and theft from businesses adds $109 billion” if they were to be included in the US National Accounts. This is according to the report by Rachel Soloveichik (2019) – Including Illegal Activity in the U.S. National Economic Accounts . Published by the BEA.

Ironmonger (2001) – Household Production. In International Encyclopedia of the Social & Behavioral Sciences. Pages 6934-6939. https://doi.org/10.1016/B0-08-043076-7/03964-4

Or for some longer run data on the US: Danit Kanal and Joseph Ted Kornegay (2019) – Accounting for Household Production in the National Accounts: An Update, 1965–2017 . In the Survey of Current Business.

Helpful references that discuss how the production boundary is drawn (and how it changed over time) are: Lequiller and Blades – Understanding National Accounts (available in various editions) Diane Coyle (2016) – GDP: A Brief but Affectionate History https://press.princeton.edu/books/paperback/9780691169859/gdp

The definition of the production boundary by Statistics Finland

Itsuo Sakuma (2013) – The Production Boundary Reconsidered. In The Review of Income and Wealth. Volume 59, Issue 3; Pages 556-567.

Diane Coyle (2017) – Do-it-Yourself Digital: The Production Boundary and the Productivity Puzzle. ESCoE Discussion Paper 2017-01, Available at SSRN: http://dx.doi.org/10.2139/ssrn.2986725

A more general way of thinking about free goods and services is to consider them as those for which the supply is hugely greater than the demand.

Their production, therefore, has an opportunity cost, which means that if someone obtains an economic good, someone is giving up on something for it – this can either be the person themselves or society more broadly. Free goods, in contrast, are provided with zero opportunity cost to society.

It is also the case that the international statistics on these measures often have very low cutoffs for what it means ‘to have access’; this is, for example, the case for what it means to have access to energy.

10 years ago, Google counted there were 129,864,880 different books, and since then, the number has increased further by many thousands of new books every day.

This chart is from Jeremiah Dittmar and Skipper Seabold (2019) – New Media New Knowledge – How the printing press led to a transformation of European thought . I was unfortunately not able to find the raw data anywhere and could not redraw this chart; if someone knows where this (or comparable) data can be found, please let me know.

In the language of economists, the nominal value is measured in terms of money, whereas the real value is measured against goods or services. This means that the real income is the income adjusted for inflation (it is adjusted for the changes in prices of goods and services). Thereby, it allows comparisons that tell us the quantity and quality of the goods and services that people were able to purchase at different points in time.

I learned this way of thinking about it from Twitter user @Kirsten3531, who responded with this idea to a tweet of mine here https://twitter.com/Kirsten3531/status/1389553625308045317

We’ve discussed one such consideration that is crucial for comparability when we consider how to take into account the value of owner-occupied housing.

Whether economic growth translates into the reduction of poverty depends not only on the growth itself but also on how the distribution of income changes. The poverty metrics shown in this chart and in previous charts take both of these aspects – the average level of production/income and its distribution – into account.

Jutta Bolt and Jan Luiten van Zanden (2021) – The GDP data in the chart is taken from The Long View on Economic Growth: New Estimates of GDP, How Was Life? Volume II: New Perspectives on Well-being and Global Inequality since 1820 , OECD Publishing, Paris, https://doi.org/10.1787/3d96efc5-en .

The latest data point for the poverty data refers to 2018, while the latest data point for GDP per capita refers to 2016. In the chart, I have chosen the middle year (2017) as the reference year.

The ‘cost of basic needs’-approach was recommended by the ‘World Bank Commission on Global Poverty’, headed by Tony Atkinson, as a complementary method in measuring poverty.

The report for the ‘World Bank Commission on Global Poverty’ can be found here .

Tony Atkinson – and, after his death, his colleagues – turned this report into a book that was published as Anthony B. Atkinson (2019) – Measuring Poverty Around the World. You find more information on Atkinson’s website .

The CBN-approach Moatsos’ work is based on what was suggested by Allen in Robert Allen (2017) – Absolute poverty: When necessity displaces desire. In American Economic Review, Vol. 107/12, pp. 3690-3721, https://doi.org/10.1257/aer.20161080 .

Moatsos describes the methodology as follows: “In this approach, poverty lines are calculated for every year and country separately, rather than using a single global line. The second step is to gather the necessary data to operationalize this approach alongside imputation methods in cases where not all the necessary data are available. The third step is to devise a method for aggregating countries’ poverty estimates on a global scale to account for countries that lack some of the relevant data.” In his publication – linked above – you find much more detail on all of the shown poverty data. The speed at which extreme poverty declined increased over time, as the chart shows. Moatsos writes, “It took 136 years from 1820 for our global poverty rate to fall under 50%, then another 45 years to cut this rate in half again by 2001. In the early 21st century, global poverty reduction accelerated, and in 13 years, our global measure of extreme poverty was halved again by 2014.”

These are the same global poverty estimates – based on household surveys – we discussed above.

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Essay on Economic Growth: Top 13 Essays | Economics

Here is a compilation of essays on ‘Economic Growth’ for class 9, 10, 11 and 12. Find paragraphs, long and short essays on ‘Economic Growth’ especially written for school and college students.

Essay on Economic Growth

Essay Contents:

• The New (Endogenous) Economic Growth Theory

Essay # 1. Introduction to Economic Growth:

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Various theories, viewpoints and models have been presented from time to time to account for the sources of economic growth and the determinants of economic development. To most peo­ple, a theory is a contention that is impractical and has no factual support.

For the economist, however, a theory is a systematic explanation of interrelationships among economic variables and its purpose is to explain causal relationships among these variables. Usually a theory is used not only to understand the world better but also to provide a basis for policy. This essay discusses a few of the major theories of economic development, from which emerged alterna­tive approaches to economic development.

The earliest students of development economics were the mercantilists. Mercantilists were a group of traders. They believed that exports were always good for a country because exports implied inflow of precious metals (such as gold and silver). By contrast, imports were harmful for a country because imports implied outflow of precious metals. So, in their view, growth and development of a nation depended on its accumulation of precious metals.

Essay # 2. Adam Smith and Economic Growth :

The mercantilist view was challenged by Adam Smith (1723-1790), the Father of Economics, in 1776. Smith, in his Wealth of Nations, pointed out that the mercantilist view contained a major fallacy. International trade is just like a two-person zero-sum game in which one coun­try’s gains is the other country’s loss. So two trading nations cannot have trade surplus (or favourable balance of trade) at the same time. In the late 18th century Smith argued that the true wealth of a nation is not its accumulated gold and silver hut its labour power— the human factor of production.

And the wealth of nation depended on two main factors:

(i) The productivity of labour, and

(ii) The proportion of productive labour in the total labour force (i.e., the labour force participation rate).

Smith believed that division of labour, specialisation, and exchange were the true springs of economic growth.

Smith argued that in a market-based (competitive) economy, with no collusion, cartel or monopoly, each individual, by acting in his (her) own interest, promoted the public interest. A producer who charges more than others will not find buyers, a worker who asks more than the going wages will not get job, and an employer who pays less than the market wage (i.e., the wages competitors pay) will not find anyone to work.

It was as if an invisible hand were behind the self-interest of capitalists, merchants, landlords and workers, directing their actions toward maximum economic growth. So Smith advocated a laissez-faire (non-interference of govern­ment in economic matters) and free trade policy as two growth-promoting measures.

Essay # 3. The Classical Theory of Economic Stagnation :

The classical theory, based on the work of David Ricardo (1772-1823), had a pessimistic view about the possibility of sustained economic growth. For Ricardo, who assumed little continu­ing technical progress, growth was limited by scarcity of land. A major tenet of Ricardo was the law of diminishing returns.

For him, diminishing returns due to population growth and a fixed supply of land threatened economic growth. Since Ricardo believed that technical change or improved production techniques could only temporarily avert the operation of the law of di­minishing returns, increasing capital was seen as the only way to offset this long-run threat.

However, any fall in the rate of capital accumulation would lead to eventual stagnation. Ricardian stagnation might result in a Marxian scenario, in which wages and investment would be maintained only if property were confiscated by society and payments to private capitalists and landlords stopped.

Essay # 4. Marx’s Theory of Economic Development :

Marx (1818-83) predicted that the capitalist system would in the initial stage grow due to increased profit (surplus value which was the result of exploitation of labour) and would pro­vide funds for accumulation. But since wages were pegged at the subsistence level, due to the existence of a huge reserve army of unemployed, the capitalists would suffer from a realisation crisis. They would not be able to realise the profits embodied in already produced goods. And, according to Marx, the under consumption of the masses is the root cause of all crises.

Marx, in fact, made certain predictions about the growth, maturity and stagnation of capital­ism. He predicted that the capitalist system would ultimately collapse for want of markets and would yield place to socialism.

Unfortunately, history has not obliged Marx. The year 1989 saw the collapse of socialism (especially in erstwhile USSR and its satellite countries) and with it the abandonment of the centralised planning system and the emergence of newborn post-socialist countries.

All these countries have embraced the market system which is now thought to be a more efficient mecha­nism for solving society’s economic problems, promoting faster economic growth and improv­ing the living standards of the people.

Essay # 5. Rostow’s Stages of Economic Grow th:

By criticizing Marx’s stages of growth, viz, feudalism, capitalism and socialism, Walter W. Rostow sets forth a new historical synthesis about the beginnings of modern economic growth on six continents.

His economic stages are:

(i) The traditional society,

(ii) The preconditions for takeoff,

(iii) The takeoff,

(iv) The drive to maturity, and

(v) The age of high mass consumption.

The most important stage is the third one, i.e., the takeoff stage. In order to reach that stage a country must save and invest at least 10 -12% of its national income. Many Western countries had already reached the stage when Rostow’s book appeared. Many underdeveloped countries reached the stage later (mainly under the influence of planning).

Essay # 6. Vicious Circle Theory of Economic Growth :

The vicious circle theory presented by Ragnar Nurkse in his book- The Problems of Capital Formation in Underdeveloped Countries, 1953) indicates that poverty perpetuates itself in mutually reinforcing vicious circles on both the supply and demand sides. In fact, low per capita income is both the cause and the effect of poverty.

A. Supply Side :

At low levels of income, people cannot save much. Shortage of capital leads to low productiv­ity of labour, which perpetuates low levels of income. Thus the circle is complete, as shown in Fig. 1. A country is poor because it was previously so poor that it could not save and invest. Or, as Jeffrey Sachs (2005) explains the poverty trap: ‘Poverty itself is the cause of economic stagnation.’

In short, various obstacles to development are self-enforcing. Low levels of income prevent saving, retard capital growth, hinder productivity growth and keep income low. Successful development may require taking steps to break the chain at various points. By contrast, as countries get richer they save more, creating a virtuous circle in which high sayings rates lead to faster growth. A country is rich because it was rich in the past. Or a rich country is likely to become richer in the future.

B. Demand Side:

In addition, due to the narrow size of the domestic market for light consumer goods (such as shoes, textiles, radio, etc.) there is hardly any incentives for potential entrepreneurs to investment. Lack of invest means low factor productivity and continued low income. A country is poor because it was so poor in the past that it could not provide the market to spur investment.

Essay # 7. Balanced Vs. Unbalanced Economic Growth :

A major debate in the areas of development economics from the 1940s through the 1960s concerned balanced growth versus unbalanced growth. The term balanced growth has been used in different senses. The meaning of the term may vary from the absurd requirement that all sectors grow at the same rate to the more sensible plan that a minimum attention has to be given to all major sectors—industry, agriculture, and services.

Balanced Growth :

The main advocate of the doctrine of balanced growth was Nurkse. To him, balanced growth means the synchronized application of capital to a wide range of different industries. Nurkse considers this strategy as the only escape route from the vicious circle of poverty (under­development).

Big Push Thesis :

The advocates of the Nurkseian doctrine support the big push thesis, arguing that a strategy of gradualism is bound to fail. A substantial effort is needed to overcome the inertia inherent in a stagnant economy. According to Paul N. Rosenstein-Rodan (1943), the factors that contribute to economic growth—such as demand and investment in infrastructure—do not increase smoothly but are subject to sizable jumps or indivisibilities. These indivisibilies result from flows created in the investment market by external economies (positive externalities), that is, cost advantages en­joyed by one firm due to output expansion by another firm.

These benefits spillover to society as a whole, or to some members of it, rather than to the investor concerned. This means that the social profitability of this investment exceeds its private profitability. Furthermore, unless the government intervenes, total private investment will be grossly inadequate compared to soci­ety’s needs.

Indivisibility in Infrastructure :

For Rosenstein-Rodan, a major indivisibility is in infrastructure, such as power, transport and communications. This basic social capital reduces costs to other industries.

Indivisibility in Demand :

The indivisibility arises from the interdependence of investment decisions; that is, a prospec­tive investor is uncertain whether the output from his investment projects will find a market. This problem can be solved if a number of industries are set up so that new producers become each other’s customers and create additional markets through increased incomes. Complemen­tary demand reduces the risk of not finding a market. Reducing interdependent risks increases the incentive to invest.

Hirschman’s Strategy of Unbalanced Growth:

A. O. Hirschman develops (1958) the idea of unbalanced investment to complement existing imbalances. In his view, deliberately unbalancing the economy, in line with a predesigned strategy, is the best path for economic growth. He argues that the big push theory cannot be applied to less developed countries (LDCs) because they do not have the skills needed to launch such a massive effort. The scarcest resource in LDCs is the decision-making input, i.e., entrepreneurship, not capital. Economic development is held in check not by shortage of savings, but by that of risk-takers and decision-makers.

In Hischman’s view, low-income countries need a development strategy that spurs invest­ment decisions. He suggests that since physical resources and managerial skills and abilities are scarce in LDCs, a big push is sensible only in strategically selected industries within the economy. Growth is then likely to spread from one sector to another (similar to Rostow’s concept of leading and lagging sectors).

However, it is not in the Tightness of things to leave investment decisions solely to indi­vidual entrepreneurs in the market. The reason is that the profitability of different investment projects may depend on the order in which they are undertaken. For example, the return from a car factory may be 12%, and that from a steel plant 10%. However, if the car factory is set up first, its return is likely to be low due to shortage of steel.

However, if the steel plant is set up, the returns to the car factory may increase in the next period from 12 to 15%. This means that society would be better off investing in the steel plant first and the car factory next, rather than making independent decisions based on the market. So planners and policy-makers need to consider the interdependence of one investment project with another so that they maximise overall social profitability.

They need to make that investment which promotes the maximum investment. Investment should be concentrated in those industries which have the strongest linkages—both backward (to enterprises that sell inputs to the industry) and forward (to units that buy output from the industry).

The steel industry, for instance, may be accorded the maxi­mum priority by the planners because it has backward linkages with coal and iron ore indus­tries, and forward linkages with car and engineering industries. So there is need for making public investment in steel industry which has a strong investment potential in the sense that it is likely to spur private investment. Similarly, public investment in power and transport will in­crease productivity and thus encourage investment in various other industries.

Critique of Unbalanced Growth :

One main drawback of unbalanced growth approach is that it fails to stress the importance of agricultural investments. According to Hirschman, agriculture does not stimulate linkage for­mation so directly as other industries.

However, empirical studies indicate that agriculture has substantial linkages to other sectors. Moreover, as Johnston and Mellor have pointed out, agri­cultural growth makes vital contributions to the non-agricultural sector through increased food supplies, added foreign exchange, labour supply, capital transfer and wider markets.

The truth is that there is no conflict between these two strategies of development. An opti­mum strategy must combine some elements of balance as well as imbalance. As E. Wayne Nafziger has opined- ‘What constitutes the proper investment balance among sectors requires careful analysis. In some instances, imbalances may be essential for compensating for existing imbalances. By contrast, Hirschman’s unbalanced growth should have some kind of balance as an ultimate aim.’

Essay # 8. Underdevelopment as Coordination Failure :

To some modern economists underdevelopment is result of coordination failure. This is why the theory of big push or critical minimum effort or balanced growth has been put forward. The coordination failure problem leads to multiple equilibria, as has been suggested by M. P. Todaro.

The basic point is that benefits an economic agent receives from taking an action depends positively on how many other agents are expected to take the same action or the extent of these actions. For example, price a farmer can expect to receive for his output depends on the number of intermediaries who are active in channel of distribution which, in turn, depends on number of other farmers who specialise in the same product.

Likewise, fertility decision need in effect to be coordinated across families. All are better if average fertility rate declines. But any one family may be worse off by being only one to have fewer children. The reason is that in rural areas children are a source of labour power for agricultural families. So if only one family adopts the small family norm it will have to hire workers from the external labour market by paying higher wages.

In Fig. 2 the S-shaped privately rational decision function YY first increase at a increasing rate and the at a decreasing rate.

This shape reflects typical nature of complementariness. For example, some economic agents may take complementary action such investing even if others in the economy do not, particu­larly when interactions are expected through foreigners, say, through exporting. If in this case one or a few agents take action, each agent may be isolated from others. So spillovers may be minimum.

Thus the curve YY does not rise quickly at first as more agents take the decision to invest. But after enough invest there may be a cumulative effect, in which most agents begin to provide external benefits to neighbouring agents and the curve rises at a much faster rate. Finally, after most potential investors have been seriously affected and most important gains have been realised the curve starts to rise at a decreasing rate.

In Fig. 2 function YY cuts the 45° line three times. Thus there is possibility of multiple equilibria. Of these D 1 and D 3 are stable equilibria. The reason is that if expectations were slightly changed to a little above or below these-levels economic agents (investors) would adjust their behaviour in such a way as to bring the economy back to equilibrium levels. In each case YY function cuts 45° line from above. This is the hallmark of a stable equilibrium.

The intermediate equilibrium at D 2 cuts YY function from below. So it is unstable. This is because if a few less entrepreneurs were expected to invest equilibrium would be D 1 and if a few more, equilibrium would shift to D 3 .

Therefore, D 2 may be treated as chance equilibrium, i.e., it could be an equilibrium only by chance. Thus in practice we can think of an unstable equilibrium such as a D 2 as ways of dividing ranges of expectations over which a higher or lower stable equilibrium will hold sway.

Thus there is need for coordinating investment decisions when the value (rate of relation) of one investment depends on the presence or the extent of other investments. All are better off with more investors or higher rate of investment.

But this cannot be achieved only through market system. So there is need for government intervention. It is possible to achieve the de­sired outcome only under the influence of certain types of government policies. Difficulties of investment coordination give rise to government-led strategies for industrialisation.

Technology Spillover :

The investment coordination perspective explains the nature and extent of problems posed when technology has spread effects, i.e., development of technology by one firm has favour­able effects on other firms, i.e., positive externality.

Now suppose we show average rate of investment expected of other key firms or in the economy as a whole on the horizontal axis or profitable rate of investment for a particular firm on the vertical axis, given what other firms are expected to invest on average. In this case points where the YY the curve crosses 45° line in Fig. 2 depict equilibrium investment rates.

Then due to direct relation between investment and growth, the economy may get struck in a low growth rate largely because its expected rate of investment is likely to be low. Changing expectations may not be sufficient if it is more profitable for a firm to wait for others to invest rather than to take the lead and become a ‘pioneer’ investor. In that case there is need for government policy in addition to a change of expectation of investors.

This is why attention to the presence of multiple equilibria is so important. Market forces can bring us to one of these equilibria but they are not sufficient to ensure that no equilibrium will be achieved and they offer no mechanism to move from a bad equilibrium to a good one.

In general when jointly profitable investment may not be made without coordination multi­ple equilibria may exist in which the same individuals with access to same resources and tech­nologies could find themselves in either a good or bad situation. For example, the extent of effort of each firm in a developing region puts to increase the rate of technological transfer depends on effort put by other firms.

No doubt bring in modern technology from abroad often has spillover effects for other firms. But the presence of multiple equilibria subject to making better technology available is a necessary but not a sufficient condition to achieve faster economic growth and consequent improvement in the living standards of the people.

Essay # 9. The Lewis Model of Economic Growth :

In the Lewis model, economic growth occurs due to an increase in the size of the industrial sector, which accumulates capital, relative to the subsistence agricultural sector, which does not accumulate any capital. The source of capital in the industrial sector is profits from the low wages paid in unlimited supply of surplus labour from traditional agriculture. An unlimited supply of labour available to the industrial sector facilitates capital accumulation and economic growth.

Urban industrialists increase their labour supply by attracting workers from agriculture who migrate to urban areas when wages there exceed rural wages. Lewis elaborates this point while explaining labour transfer from agricultural to industry in a newly industrializing country. Industrial expansion would come to a halt when labour shortages develop in rural areas.

The significance of the Lewis model is that growth takes place as a result of structural change. An economy consisting mainly of a subsistence agricultural sector (which does not save) is transformed into one predominantly in the modern capitalist sector (which alone saves). As the relative size of the capitalist sector grows, the ratio of profits and other surplus to na­tional income grows.

Essay # 10. The Fei-Ranis Modification of Lewis Model of Economic Growth :

In John Fei and Gustav Ranis, in their modification of the Lewis model, contend that the agri­cultural sector must grow, through technical progress, for output to grow as fast as population; technical change increases output per hectare to compensate for the growing pressure of labour on land, which is a fixed resource. As with the Lewis model, the advent of fully commercialized agriculture and industry ends industrial growth (or what Fei-Ranis calls the take-off into self-sustained growth).

Essay # 11. Baran’s Neo-Marxist Thesis :

Paul A. Baran incorporated Lenin’s concepts of imperialism and international class conflict into his theory of economic growth and stagnation. For Baran LDCs were unlikely to achieve growth and development because of Western economic and political domination, especially in the colonial period.

Capitalism arose not through the growth of small competitive firms at home but through the transfer from abroad of advanced monopolistic business. Baran felt that as capitalism took hold, the bourgeoisie (business and middle classes) in LDCs, lacking the strength to spearhead thorough institutional change for major capital accumulation, would have to seek allies among other classes.

From Marxian perspective Baran writes:

What is decisive is that economic development in underdeveloped countries is profoundly inimical to the dominant interests in the advanced capitalist countries. The backward world has always represented the indispensable hinterland of the highly developed capitalist West.

The only way out of the impasse may be worker and peasant revolution, expropriating land and capital, and establishing a new regime based on collective effort and the creed of the pre­dominance of interests of society over the interests of a selected few.

Essay # 12. Dependency Theory of Economic Growth :

According to A. G. Frank, a major dependency theorist, underdevelopment is not simply non-development, but is a unique type of socioeconomic structure that results from the depend­ency of the underdeveloped country on advanced capitalist countries.

This results from foreign capital removing a surplus from the dependent economy to the advanced country by structur­ing the underdeveloped economy in an ‘external orientation’ that includes the export of pri­mary products, the import of manufactures, and dependent industrialisation. As Frank states- ‘It is capitalism, world and national, which produced under development in the past and still generates underdevelopment in the present.’

Frank’s dependency approach maintains that countries become underdeveloped through integration into, not isolation from, the international capitalist system. However, despite some evidence supporting Frank, he does not give adequately demonstration that withdrawing from the capitalist system results in faster economic development.

Unequal Exchange :

According to dependency theorists, the same process of capitalism that brought development to the presently advanced capitalists countries resulted in the underdevelopment of the depend­ent periphery. The global system is such that the development of part of the system occurs at the expense of other parts. Underdevelopment of the periphery is the Siamese twin of develop­ment of the centre.

Centre-periphery trade is characterised by unequal exchange. This may refer to deteriora­tion in the peripheral country’s terms of trade. It may also refer to unequal bargaining power in investment, transfer of technology, taxation, and relations with multinational corporations. According to S. Amin, unequal exchange means the exchange of products whose production involves wage differentials greater than those of productivity.

The Neoclassical Counterrevolution :

The neoclassical counterrevolution to Marxian and dependency theory emphasised reliance on the market, private initiative, and deregulation in LDCs. Neoclassical growth theory empha­sised the importance of increased saving and capital formation for economic development and for empirical measures of sources of growth. The neoclassical model predicts that incomes per capita between rich and poor countries will converge. But empirical studies do not support this prediction.

This is why N. G. Mankiw and others propose an augmented Solow neoclassical model which includes human capital as an additional explanatory variable to physical capital and labour. The Washington institutions of the World Bank, IMF, and US Government have applied neoclassical analysis in their policy-based lending to LDCs.

Essay # 13. The New (Endogenous) Economic Growth Theory :

The new (endogenous) growth theory developed by Paul Romer arose from concerns that neo­classical economists neglected the explanations of technical change and accepted the unrealis­tic assumption of perfect competition. For Mankiw, Romer, and Weil, human capital and for Romer, endogenous (originating internally) technology, when added to physical capital and labour in neoclassical growth theory, are important factors contributing to economic growth.

One reason is that although there are diminishing returns to physical capital, there are constant returns to all (human and physical) capital. The new growth theory, however, does no better than an enhanced neoclassical model in measuring the sources of economic growth.

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Essay on Economic Growth

Introduction.

Economic growth entails the process of increasing the gross domestic product (GDP) of a country. The growth can be evaluated as an increase in the real gross national product (GNP) or Gross Domestic Product (GDP) over a certain period. When GDP increases, the value of services or goods produced, people can consume more. To increase services and goods, countries should increase their potential to produce. As such, broadly, economic growth entails analyzing the variables that result in a sustained increase in production capacity.

Notably, economic growth directly influences the quality of an individual’s living standards. Increasing the production capacity increases income; hence, consumers can purchase more services and goods. Subsequently, the increased incomes and production work together to increase productivity. This cycle continues while productivity in the production factors speedily increases real GDP. Consequently, job opportunities increase, and the government has more tax revenues for public services.

Subsequently, economic growth and increased production capacity result from capital accumulation, technological changes and increased education levels. If a nation puts its entire resources to generate more services and goods but no resources to accrue capital, the production capacity will remain the same. There is basically an interchange between current increased production and future economic growth. For a nation to attain more future consumption, it must reduce the production of services and goods. The forgone consumption now is the opportunity cost for a better economy.

Sources of Economic Growth

Capital accumulation.

Capital accumulation entails increasing capital resources like physical and human capital. Human capital involves the knowledge and skill that an individual possesses. It may come from work experience or education. Human capital increases significantly when more people learn and engage in productive work. Subsequently, physical capital may involve additions to buildings, machines or equipment. It results in more money per employee, leading to increased productivity. The buildup of physical capital is essential for economic growth and vital in all economic areas.

Technological Change

Technological changes entail innovating and looking for more effective and efficient production means. With new technologies, companies can produce more output at a reduced cost. These lower-cost systems enable companies to provide either greater quantity or lower prices. Technology entails the application of science, particularly for commercial and industrial purposes, to make innovations to the production methods, production machines and products to increase efficiency and production volume, all leading to profit increases and competition advantages (Çalışkan, 2015). Technology helps to facilitate various aspects of life in an economy. It directly improves the accuracy and speed of production and takes over different, more time-consuming and laborious duties. This enables people previously involved in these jobs to engage and invest in different economic sectors. Thus, technological changes contribute significantly to economic growth. Technology facilitates the production of a certain product with less input. Further, countries that efficiently adopt technology in all societal aspects create new employment areas, hence economic growth.

Another source of economic growth is education. Notably, education is the primary source of the rise in living standards (Apostu et al., 2022). This is because education increases the capacity to function and societal development. Further, the more skilled the labor force, the higher the production levels and the more technological advancements. In addition, higher education levels lead to increased wage levels hence high spending. This can involve increased demand which pushes the supply side hence more production in the market. Fostering education leads to a more knowledgeable and skilful population, which puts this acquired information and skills on the market. As such, education has a positive impact on general economic improvement.

Notably, universities play a significant role in promoting sustainable development through knowledge transmission and creating certain competencies in students (Apostu et al., 2022). For instance, universities initiate corporate social responsibility programs to safeguard the environment, develop local communities and fight corruption. In addition, highly educated people have skills and attitudes that positively influence the labor force. First, these people are highly predisposed to entrepreneurship. This has a direct positive influence on economic growth and welfare. Entrepreneurs, particularly educated entrepreneurs, introduce knowledge spilling indirectly or directly. This means they introduce improvement and innovative ideas to the current market practices. In this way, they indirectly stimulate change and a rise in general individual knowledge. Also, this is an effective way of inspiring rivalry and competition. By introducing improvements and new ideas to the markets, the upcoming investors force the current ones to introduce respective changes to maintain their current position in the market places. As a result, entrepreneurship contributes significantly to the economy.

Policies to Enhance the Sources of Economic Growth

The policy that can enhance education as a source of economic growth is a policy in education, such as an equality policy. This can contribute to the generation of human capital, which can counter the forces of falling returns in other production factors like physical capital necessary for economic growth. Besides its direct role as a production factor, human capital and education complement various factors like natural resources and physical capital that determine the level of technological innovations in a nation (Loayza & Soto, 2014). Hence, a policy toward enhancing education and human capital can lead to increased economic growth.

The other policy to promote technological change is in the area of financial depth. There should be the introduction of good financial systems to facilitate long-term growth. Financial systems influence economic growth and economic efficiency through various channels. Financial markets promote risk diversification by pooling, trading and hedging economic instruments (Loayza & Soto, 2014). They help to recognize profitable investment areas and rally savings for them. Further, financial systems can encourage adoption and change in technology by facilitating the capital needed for such activities. In addition, financial systems help monitor organization managers and impose corporate controls, reducing principal-agent issues resulting in inefficient investment. Consequently, financial developments result in more technology adoption and higher economic growth.

The next economic policy should be in the area of international trade openness to facilitate capital accumulation. Trade has a significant role in capital accumulation and economic growth (Loayza & Soto, 2014). First, trade results in higher specialization; hence, countries should exploit their comparative advantage area to advance in total factor productivity (TFP). Also, trade expands potential markets, enabling domestic companies to benefit from economies of scale and increasing their TFP. Further, trade diffuses enhanced managerial practices and technological innovations through better interactions with overseas markets and firms. Lastly, trade liberalizations decrease the incentives for companies to carry out unproductive activities, improving economic growth.

The Negative Impacts of Economic Growth

Although economic growth has indisputably been a positive influence, it still has adverse effects. Economic growth has various negative impacts, including environmental costs and income inequality. Notably, it can be possible to fix financial crises over time since their effect is not collective. However, damaging the environment can be irreversible once it reaches a tipping point. Higher outputs result in increased congestion and pollution, which can decrease the living standards, for instance, more breathing problems and wasting time in traffic jams because of pollution congestion, respectively (Kozluk & Zipperer, 2015). In addition, an increase in the consumption of non-renewable energy resources may put costs on incoming generations.

Subsequently, economic growth may cause income inequality. This happens because economic growth results in more benefits to the more affluent people, those owning assets and have well-paying jobs. With sufficient redistribution policies, wealthy people tend to gain more wealth at an increased rate compared to the economic growth rate since they can reinvest their bonuses.

One policy that would counter environmental costs caused by economic growth is the consumption of renewable sources to reduce pollution that contributes to the destruction of the ozone layer. Companies can achieve economic growth free from pollution by focusing on more environmentally friendly production methods (Kozluk & Zipperer, 2015). The other policy to counter income inequality is to increase the earned income tax. This can help to pull most families out of poverty and offer more economic support to poor people. Wealthy people will be required to pay more in federal taxes compared to low-income people hence an effective way of resolving the income inequality issue.

From this assignment, I have learnt that economic growth has many benefits. However, I have noticed that the impact of economic growth relies on various factors like the nature of growth, whether that growth is sustainable and whether it causes harm to the environment. Going forward, I will apply this knowledge by focusing on the aspects of economic growth that make it desirable, like advocating for environmental protection.

Apostu, S. A., Mukli, L., Panait, M., Gigauri, I., & Hysa, E. (2022). Economic Growth through the Lenses of Education, Entrepreneurship, and Innovation. Administrative Sciences, 12(3), 74.

Çalışkan, H. K. (2015). Technological change and economic growth. Procedia-Social and Behavioral Sciences, 195, 649-654.

Kozluk, T., & Zipperer, V. (2015). Environmental policies and productivity growth: a critical review of empirical findings. OECD Journal: Economic Studies, 2014(1), 155-185.

Loayza, N., & Soto, R. (2014). The sources of economic growth: An overview. Series on Central Banking, Analysis, and Economic Policies, no. 6.

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Enough With the Economic Doomsaying

T he U.S. economy grew at a robust 2.8% in the second quarter, far faster than economists’ predictions of just 2%. The miss is reminiscent of a long losing streak for doomsaying about the U.S. economy. 2023 stood in the shadow of the “ inevitable recession ,” a spectacular forecasting failure that persisted in the face of remarkable economic strength. In 2022, the economic narrative suggested that inflation would spiral into persistent 1970s-style inflation ; and, in 2020, a “ COVID depression ,” a downturn worse than 2008 and perhaps as bad as the 1930s, was widely foreseen.

The recent pile-up of forecast failures is reminiscent of 2008, when the global financial crisis crushed the reputation of economics along with banks’ balance sheets. Then, the most stinging criticism of the discipline came from unexpected quarters. On a campus visit to the London School of Economics, the Queen asked a simple question that captured the global mood: “why did nobody see the crisis coming?”

What’s wrong with economics

Publicly humbled, the economists retreated to their quarters to conduct a post-mortem. But the resulting  letter to the Queen  epitomizes much of what is wrong with economics—now as then. The academics were already improving their approaches, they wrote, and would perfect their models such that her Majesty would “never need to ask your question again.”

If only. The problem of economics is not that models have yet to be perfected but that practitioners still believe they can and should be. “ Physics envy ”—the desire of economists to emulate the natural sciences—has led to borrowing mathematical and statistical methods in the hopes of replicating their accuracy. It has made their work weaker, not stronger.

Economists can’t say they weren’t warned. Some of the discipline’s luminaries, on both sides of the ideological spectrum, criticized economists’ scientific pretenses many years ago. In 1938, John Maynard Keynes warned that economics was “ not homogenous through time ” the way we can assume the physical world to be. In 1949, Ludwig von Mises wrote that there were “ no constant relations ” in economics. And putting it most bluntly and aptly, Friedrich von Hayek in the 1970s stated that it would lead to “ outright error ” if economists continued to “imitate the brilliantly successful natural sciences.”

Consider recent “outright errors” in predicting inflation, the inevitability of recession, and impossibility of a “soft landing.” The loudest voices propagating this narrative, such as Larry Summers, did so in the tradition of the Phillips curve, a model of inflation with a checkered history. It posits a trade-off between lower inflation and higher unemployment—only by putting workers out of work would consumption and therefore price growth slow. The post-pandemic version of this idea was that unemployment would have to rise to a recessionary 6% to bring inflation down. But inflation fell from 9.1% to just above 3% in a year, and unemployment stayed near record lows. 

Milton Friedman’s mantra that “inflation is always and everywhere a monetary phenomenon” is another case in point. Hammered into generations of students, monetarism—the school of thought that linked growth in money supply and inflation—has enduring appeal even as empirical failures have accumulated. In the aftermath of 2008, when central banks aggressively grew the money supply, many economists leaned on monetarism to predict imminent hyperinflation. Yet what followed was a decade-long struggle to reach a modest 2% inflation target.

In reality, macroeconomic prediction may be closer to playing a series of one-round games than cracking hard but stable truths the way physicists do. How could a recession be predicted with any degree of reliability if each has unique causes and contexts? The differences between the last four recessions—2020 (COVID-19 pandemic), 2008 (housing crash and banking crisis), 2001 (investment bust and stock-market crash) and 1990 (an oil shock)—speak to this point. And even if they did have common drivers, the U.S. has seen only 12 recessions since World War II. This means that when trying to model and forecast recessions the data available is very modest. It may irk economists, but that sample size is more suited to the historian than the physicist.

Nor will AI and ever-better computing power solve economic forecasting. Every new technology is a siren song for modelers—and each its own false dawn. When satellite imagery became commercially available, shots of Walmart parking lots were touted as real-time recession indicators but have not moved us closer to calling a recession, as we’ve seen. Web-scraping of prices was supposed to flag inflation in real time but failed to deliver any insight about the path of the inflation rollercoaster. AI will be powerful in many ways, but it will not “solve” economists’ forecasting problem.

Read More: To Fight Inequality, America Needs to Rethink Its Economic Model

The missing oath of humility

The upshot has hardly been just a series of bad forecasts. Unlike natural scientists, economists have an outsized voice in society—commanding the ear of policymakers, executives, investors, and the public. Passing economics off as a natural science is more than academic frivolity—it is a societal problem.

This too came with a warning—some 50 years ago. In 1974, Austrian-British economist Friedrich August von Hayek won the Nobel prize in economics, then a recent addition to the original prizes in peace, literature, physics, chemistry, and medicine. In a dinner speech to those honoring him, Hayek delivered a stinging message : The Nobel prize in economics, he said, should never have been introduced because it conferred undue authority on its recipients. This was not a worry in other disciplines, but economists’ societal influence meant the honor could do real harm.

So worried was Hayek about the gap between economists’ aspirations and abilities that he urged the Nobel committee to require an “oath of humility” from economics laureates, a sort of Hippocratic oath, “never to exceed in public pronouncements the limits of their competence.”  Hayek feared the rise of the omniscient economic oracle: a laurate at once whispering into leaders’ ears and shouting at the public even as their predictions remain largely guesswork.

Instead of adopting an oath of humility, economics has since churned out generations of model-wielding academics and policy wonks. And, as forewarned by Hayek, their figureheads often command outsized societal influence while ignoring the brittle nature of their craft. They routinely stray outside the bounds of their original field of competence—with bold confidence in their prognostications.

In 1990, for instance, a decade and a half after Hayek planted the idea of the humility oath, economist Paul Krugman predicted in The Age of Diminished Expectations that the U.S. would fall behind Japan and Europe in the economic pecking order, a defeatist narrative of relative decline that strayed outside his main academic work. As a columnist, Krugman has long written confidently on nearly any topic, a societal microphone that his 2008 Nobel prize turned into a megaphone. There are many brilliant insights in Krugman’s writing. Yet more than three decades after having predicted the U.S.’ relative decline in a major book, Japan and Europe remain far behind the U.S.

Read More: Why Paul Krugman Is Wrong About the 1990s

The audience is at fault, too

Hayek’s warning about the omniscient oracle holds another insight: The discipline’s dysfunction is not economists’ fault alone. In their embrace of math and models, economists misuse the discipline, but it’s the audience that routinely abuses their work.

Again, this has a long tradition. During World War II, Kenneth Arrow, another Nobel laureate in economics, was told to use his prodigious mathematical skills to forecast the weather a month out. He quickly uncovered that modeled forecasts were no better than those chosen at random and asked his commanding officer to send his analysis up the chain of command. The reply came back down : “The Commanding General is well aware that the forecasts are no good. However, he needs them for planning purposes.”

Today, repeated empirical, practical, and theoretical flops have not deterred demand for precision forecasts, for both the short  and  longer run. Businesses are no shier to request and use 3-year inflation forecasts for their strategic plans, never mind economists’ all too public struggles to get even the next month right. Policymakers routinely request economic forecasts to underpin their legislative proposals—even when told the predictive power is little better than junk. The audience’s hunger for precision is enduring.

And it’s not just professional users of economists’ output who gloss over the flaws for convenience. The media routinely does the same. Consider again the recent false alarm of an “inevitable recession.” Inevitability was certainly dialed up by economists. But even the gloomiest forecasters gave a 10, 20, or even 30% chance of a soft landing. An audience in search of an answer will readily gloss over such detail, particularly if the main argument is a simple message of collapse.

Indeed, public discourse is complicit in the doomsaying the “dismal science” is so good at. Often, economists are incentivized to make crass, bold, and apocalyptic predictions in a game to attract attention, airtime, and relevance. Though systemic risks remain in the economy, volatile economic data are routinely spun into stories of collapse and despair.

When inflation was 9.1% the choice was presented as either a runaway wage-price spiral, a deep recession with high unemployment, or even both: stagflation. But now we’ve had the longest stretch of unemployment below 4% in over 50 years and inflation is back within eyesight of the policy target. For every true crisis, there are many false alarms. Even so, there is little appetite for holding doomsayers accountable.

Read More: Is Economics Ideological by Nature?

Don’t fight uncertainty. Embrace it

The practitioners and users of economics must—and can—do better. But how?

Imposing a “humility oath” was workable neither half a century ago nor is it today—change must come from within and address the root cause of dysfunction.

Economists (and their audiences) can take inspiration from unexpected quarters. In 1760, before macroeconomics was born, Voltaire, the French philosopher, made an observation about uncertainty that epitomizes the struggles of modern economics: “Doubt is not an agreeable condition, but certainty is an absurd one.”

Economists’ relationship with uncertainty must be inverted. Welcoming uncertainty, rather than masking it with absurd scientific veneer, could bring three benefits.

First, accepting their vulnerabilities will nudge economists to seek inspiration—and help—from other disciplines. Those who eclectically string together economics, history, politics, finance, and other fields tend to produce more resilient readings of the future. Economists need not even feel ashamed of owning up to their limitations. Disciplines that stand on much firmer scientific ground are known to fail, too. In 2020, epidemiologists did no better at predicting COVID-19 deaths than economics did at predicting recovery.

Second, by embracing uncertainty, economists can let go of the faux precision of point forecasts and communicate more realistically about the distribution of their views, as well as the flaws and “error terms” that remain in any model. When the pretense of scientific precision fades, so does the need to project over-confidently. Though the doomsaying slant in public discourse will prevail, the audience can recognize the need for more-calibrated predictions and discount the brashest ones.

Third, though the embrace of uncertainty won’t deter economists from straying outside their specialized expertise, they can do so more effectively. Pontification can give way to exploration. This would also help the audience see there are no economic oracles—and that any economist comporting themselves as such should be avoided.

Does the embrace of uncertainty mean that forecasting and mathematical economics should be discarded? No. Both have a role when used thoughtfully. Forecasts should be understood as an uncertain, ever-changing numerical snapshot of an economic base case. And even the pretense of an “economic equilibrium” can be a useful analytical idea if we also acknowledge that the economy continuously moves from one disequilibrium to the next. But their usefulness should not be overstated, nor translated as inevitable in public discourse.

Read More: If the Economy Is Doing So Well, Why Does It Feel Like a Disaster?

Judgment not prediction

Today, there is already a wider range of approaches to economics and the economic mainstream may or may not drift towards a humbler future. Those too impatient for (uncertain) betterment can strengthen their own defenses.

We can and should reflexively question forecasts, taking them as a snapshot of somebody’s opinion, not a representation of the future. We can—and should—lean against doomsaying and keep track of the false alarms that economists sound. We can and should ask to hear the causes and drivers, explanations of supposedly dark outcomes rather their prediction. And we can be skeptical of the loudest voices and why they hold the microphone.

If we cast aside the pretense of certainty and accept uncertainty, we’ll find ourselves one step ahead of public discourse. That still won’t give us failsafe predictions of the future. But rather than outsource our judgment, we can cultivate it.

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• Economic News

New Signs of Weakening Economy Heighten Concerns About High Interest Rates

Key Takeaways

• A trio of economic reports Thursday came in below expectations, raising the prospect that high interest rates are seriously slowing the economy.
• Manufacturing activity was lower than expected, construction spending was lower, and more people filed unemployment claims.
• The increasingly gloomy outlook raised the possibility that the Federal Reserve would lower its benchmark interest rate in the months ahead at a faster pace than previously anticipated.

A raft of worse-than-expected economic data Thursday raised questions about how long the economy will be able to keep its head above water as high interest rates drag down vulnerable industries. Three separate reports delivered downbeat surprises. Construction spending fell in June for the second month in a row, dropping 0.3%, the Census Bureau said. Forecasters had expected a 0.2% increase instead, according to a survey of economists by Dow Jones Newswires and the Wall Street Journal.  

The manufacturing sector is struggling too, according to an index released by the Institute of Supply Management, which showed manufacturing activity declining for a fourth month in a row in July, the 20th decline in the last 21 months. The index dropped to a reading of 46.8%, down from 48.5% in June and below the 50% mark that separates expansion from contraction. Forecasters had expected an uptick to 48.9% rather than the deepening slump.

Industry struggles may be affecting workers too: 249,000 people filed for unemployment for the first time, the most since last August, the Department of Labor said. Economists typically take that report with a grain of salt, since the numbers tend to bounce around a lot from week to week.

Does That Mean We're Headed Toward a Recession?

Taken together, the data was enough to raise concerns among investors that the economy could be more at risk of a downturn than previously thought. Major U.S. stock indexes fell sharply, in part because of concerns about the additional signs of a slowing economy. Friday's monthly jobs report will provide another critical indication of the economy's health.

Up to this point, the U.S. has avoided a long-predicted recession as the economy has stayed resilient despite the Federal Reserve’s campaign of anti-inflation interest rate hikes that are meant to slow it down. The unemployment rate is low by historic standards despite a recent uptick, and overall economic growth, as measured by the Gross Domestic Product, has run at a healthy clip . The Fed has maintained its benchmark interest rate at its highest since 2001 for more than a year, pushing up borrowing costs on mortgages, car loans, and all kinds of other credit, to discourage borrowing and spending and allow supply and demand to rebalance. Inflation has come down significantly since its recent peak in mid-2022, but it’s come at a cost. “The economy is in pretty good shape in 2024, but it does have weak spots. High interest rates are a major headwind for industries that use a lot of credit, like manufacturing, property development, and retailers of big-ticket items like furniture and cars,”  Bill Adams, chief economist for Comerica Bank, wrote in a commentary. One of the softer weak spots has been the housing market, which has been all but paralyzed by high mortgage rates driving buyers out of the market. With 2023 marking the worst year for home sales in nearly 30 years , the slowdown may be spilling over into other areas, especially manufacturing. 

“The U.S. economy’s manufacturing base appears to be capitulating to the sustained combination of high interest rates, weak homebuying, and consumers’ price tag fatigue,” Gus Faucher, chief economist at PNC wrote in a commentary. 

What About Rate Cuts?

If the grim numbers have a bright side for borrowers and investors, it’s that the Fed may respond by lowering those high interest rates faster than previously thought.

The Fed was already widely expected to cut its benchmark interest rate as soon as its next meeting in September. In the wake of Thursday’s data, the odds grew that the central bank would follow that up with more rate cuts at a faster pace, according to the CME Group’s FedWatch tool, which forecasts rate movements based on fed funds futures trading data.

Treasury yields, which are sensitive to expectations around interest rates, moved sharply lower Thursday, after falling on Wednesday following Fed Chair Jerome Powell's comments about the prospects for monetary easing as soon as September. The yield on the 10-year Treasury dropped below 4% on Thursday for the first time since February.

MarketWatch. " U.S. Economic Calendar ."

Census Bureau. " Monthly Construction Spending, June 2024 ."

ISM. " July 2024 Manufacturing ISM® Report On Business ."

Department of Labor. " Unemployment Insurance Weekly Claims ."

CME Group. " FedWatch Tool ."

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Why fear is sweeping markets everywhere

American and japanese indices have taken a battering. so have banks and gold.

H ow quickly the mood turns. Barely a fortnight ago stockmarkets were on a seemingly unstoppable bull run , after months of hitting new all-time highs. Now they are in free fall. America’s Nasdaq 100 index, dominated by the tech giants that were at the heart of the boom, has fallen by more than 10% since a peak in mid-July. Japan’s benchmark Topix index has clocked losses well into the double digits, dropping by 6% on August 2nd alone—its worst day since 2016 and, following a 3% decline on August 1st, its worst two-day streak since 2011. Share prices elsewhere have not been bludgeoned quite so badly, but panic is sweeping through markets (see chart 1). Wall Street’s “fear gauge”, the VIX index, which measures expected volatility through the prices traders pay to protect themselves from it, has rocketed to its highest since America’s regional-banking crisis last year (see chart 2).

Look beneath the surface, at individual sectors and firms, and the mood is even wilder. The Philadelphia semiconductor index, which tracks companies in the chipmaking supply chain globally, has fallen by more than a fifth in a matter of weeks. Arm, one such firm, has lost 40% of its market value. The share price of Nvidia, the previous bull run’s darling, has been flailing. In the three days from July 30th it dropped by 7%, soared by 13%, then dropped by 7% again. On August 2nd the value of Intel, another chipmaker, plunged by more than a quarter. And it is not just the semiconductor industry. The KBW index of American banking stocks has fallen by 8% in a matter of days. The prices of Japanese bank shares have plummeted, too.

The things that are—or, at least, were—doing well are the boltholes investors dash to when terrified: gold, the Japanese yen and American Treasuries. Troublingly, though, even the gold price cratered on August 2nd, with a peak-to-trough drop of more than 2%. Gold is usually a hedge against exactly the sort of chaos in the air just now. That its price was driven down suggests investors may have been selling not because they wanted to, but because they had to raise cash quickly to meet margin calls elsewhere. If so, there is a risk that other fire sales and a self-reinforcing doom loop may follow.

Three developments have combined to tip investors over the edge. The first is a dawning realisation that artificial intelligence ( AI ), and especially the chipmaking industry that powers it, has been imbued with unrealistically high hopes. The biggest swings in American share prices came during a ten-day period in which five tech giants—Alphabet, Amazon , Apple, Meta and Microsoft—released results that left their shareholders crestfallen. Even Alphabet and Microsoft, whose revenues beat analysts’ expectations, saw their share prices fall the day after they reported. Those of Amazon, which undershot such expectations, were punished far more. The across-the-board battering suggests investors’ former euphoria over all things AI is evaporating.

That has an immediate knock-on effect for chipmakers which, if AI investment retrenches, may not be facing limitless demand for their products after all. In fact, recent weeks have given such firms far more to fear than a mere change in animal spirits. On July 17th Donald Trump sent semiconductor stocks into a tailspin by suggesting Taiwan should pay for its own defence against China. TSMC , which makes the vast majority of the world’s most advanced chips, is based in Taiwan and so would be vulnerable to a Chinese invasion. The Biden administration is also planning new curbs on exports of chipmaking equipment to China. With the twin threats of faltering demand and worsening geopolitics, it is little wonder that chip stocks are plunging.

As tech firms have stumbled, so has America’s economy—the second development to give investors an attack of the vapours. Until recently “bad news is good news” was the mantra of the market. Any hint of slowing growth or a weaker labour market was good for asset prices, since it meant inflation was likely to stay quiescent and allow the Federal Reserve to cut interest rates more swiftly. But by the time America’s jobs report was released on August 2nd, the mood had shifted: bad news is now bad news.

The report revealed that the unemployment rate rose to a three-year high of 4.3% in July, while the economy added just 114,000 jobs, against a consensus forecast beforehand of 175,000. In other words, the risk of a recession that many thought had been avoided has just risen. Accordingly, traders began placing bets that the Fed would cut rates by half a percentage point at the central bank’s next meeting in September, to stave off such a slowdown. That is despite Jerome Powell, the Fed’s chairman, having dismissed the suggestion that rate-setters were considering such a move at the last meeting only days ago. Treasury yields plummeted, with the two-year rate falling to 3.9%, more than a percentage point below its level at the end of April. Weeks ago such a reduction in borrowing costs might have boosted stocks. Now investors seem to fear the downside of slowing growth, and its implications for company earnings, more than they long for cheaper money.

The third force roiling markets is the strength of the Japanese yen. In recent weeks it has strengthened against a trade-weighted basket of currencies at close to its fastest pace in two decades. In part, this is because of the Bank of Japan’s surprise decision to raise interest rates by a tenth of a percentage point on July 31st. A rising yen automatically depresses Japanese share prices, as many of the country’s largest globetrotting firms, such as Hitachi, Sony and Toyota, make their earnings overseas in foreign currencies.

Some of the decline in Japanese stocks may be explained by this effect. Probably more important, though, is the unwinding of popular trades linked to a weak yen and ultra-doveish monetary policy. The combination of the two made it possible to borrow cheaply in yen, convert the proceeds to dollars and invest in Treasuries, yielding far more than it cost to service the debt—a “carry trade”. But with Japanese interest rates rising and American ones falling, the trade has fading attraction. Worse, the yen’s rapid strengthening raises the dollar cost of paying back the debt, pushing the trade into the red. The violent moves of the past few weeks will have forced many investors to close their positions, and possibly also to fire-sell other assets, adding to instability in both domestic and global stocks.

As ever at the end of a turbulent week, the first question now is whether—somewhere amid the chaos—an asset’s price has swung sharply enough to imperil an outfit that is heavily exposed to it. On that front, the decline in the gold price, and those of bank stocks, is ominous. The other, linked question is whether next week will be better or worse. Assuming no big investor decides it is time for a sell-off that will be up to the collective mood. Going on recent form, it isn’t good. ■

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Economic Growth and Development Essay

• To find inspiration for your paper and overcome writer’s block
• As a source of information (ensure proper referencing)
• As a template for you assignment

Differences between economic growth and economic development When compared to economic development as we are to witness shortly, economic growth is a simpler and narrower subject (Acemoglu, 2009). According to the presented definitions, economic growth is a constant and sustained increase in a countries output graded as national.

The increase is depicted on the growth indicators such as education quality of citizens, how healthy a nation is, the technological adaptation rates and quantity of improvement recorded in the way technology is applied (Weil 2005).

The most common way of looking at economic growth is through the sustained improvement in the value of goods and services which are under current production in the contemporary operational environments. When a record increase is made on a country’s GDP, we pronounce an economic growth (Weil 2005).

GDP is the measure used because it shows the sum total of consumption, investments, government expenditure and the net export over a single financial period; they are used for financial forecasting (Friedman 2005).

This mode does not represent an informal size of economy; the rate at which environmental depletion through pollution takes place is likely to discourage growth aspects. Economic development on its part is a numerical indicator which uses numbers in gauging the economic well being of a country through it citizens who are the beneficiaries (Song & Woo 2008).

While economic growth bases its measurements on quantity, economic development is a measure of quality which applies in the context of morality. It is therefore vivid when living standards rise, also when the people realize and increase in their self- esteem and freedom in their operations hence wider options on choices.

Apart from GDP, Human Development Index(HDI) is also a tool used to determine Economic Development since this aspect covers even other factors affecting productivity like literacy levels and life expectancy of a countries population (Nafziger 2006).

Economic development supports economic growth definition and calculation by widening the opportunities in the economy’s productive sectors like health, education, employment and environment since in indicates the per capita income of every individual in a country (Song & Woo 2008).

Economic development busts the living standards through provision of basic requirements of life like health services, shelter, food and education (Nafziger 2006). Therefore, Economic Development is termed to major their concerns on sustainability measures. It is therefore prudent to mention that economic growth is an ingredient required for economic development though it is not needed singly.

Problems concerning measuring economic development and applicable cases Through National Income Accounting an economy maintains a record of its performance to help know how the economy is operating. The limitations of measuring economic development revolve around the setbacks shown by the measures used like the GDP and the HDI.

The measures are less accurate since they only measure Economic Development based on production value as opposed to the actual population; this is irrespective of the fact that the whole population is involved in consumption (McKibben 2007). Economic development describes efficiency on production effectiveness of the population.

If production alone was used in India to measure Economic development, India would today be the most developed country in the whole world since it has the largest GDP (Nafziger 2006). GDP as a measure of growth hence development does not include transactions which are non-market in nature in as much as they are representations of production roles.

This presents a difficulty in valuing production activities that are non- market in nature such as domestic farming in as much as they represent production. Others include cases where individuals do their own laundry and also painting their own houses.

This is applicable for developing countries such as Bangladesh whose economies’ are largely made up of the non-market items hence understatement of their GDP’s with non-market figures. GDP calculation also has the inability of involving adverse effects such as externalities and diseconomies of large-scale production (Stiglitz, Sen & Fitoussi 2010).

Most economies still fails to recognize pollution and environmental hazards which are the greatest components and hence attracts high costs hence posing environmental threat. While the values of negative externalities are incorporated in GDP calculations the costs of the bad side effects are never inculcated resulting into inaccuracies of GDP to show economic development.

Therefore, it is important that the value of externalities be deducted from that of the GDP for it to be relied upon (Stiglitz, Sen & Fitoussi 2010). This is because the proposed replacements such as Net Economic Welfare (NEW) and Measure of Economic Welfare (MEW) failed to pick given the bad effects such as pollution cannot be ignored.

The method of development calculation also fails to clearly differentiate between items produced and the quantity produced, specifically; it does not have the ability of noting all that is produced by an economy (Song & Woo 2008).

This is witnessed in cases where in comparing GDP’s of $480 and $659 of two countries, we would conclude the first country is more developed not knowing that the GDP of $659 is mainly composed of luxurious commodity which is against the spirit of social welfare and therefore unjustifiable Conclusion It is very therefore important to note that there is never a more reliable and more suitable measure that is placed for GDP measurement and translate them to Economic Development.

This therefore leaves us with economic development that is defined in a non-clear way since methods like Human Development index pose a challenge of difficulty in data collection (Okpaji 2008).

Acemoglu, D 2009, Introduction to modern economic growth , Princeton University Press: Princeton.

Friedman, BM 2005, The moral consequences of economic growth , Knopf: New York.

McKibben, B 2007, Deep economy: the wealth of communities and the durable future , Times Books: New York.

Nafziger, EW 2006, Economic development (4th ed.), Cambridge University Press: Cambridge.

Okpaji, A 2008, Economic Progression at our time, Economic Times, 23 (48), 97.

Song, L & Woo, WT 2008, China’s dilemma: economic growth, the environment and climate change , Anu E Press: Canberra.

Stiglitz, JE, Sen, A & Fitoussi, J 2010, Mismeasuring our lives why GDP doesn’t add up , New Press: New York, N.Y.

Weil, DN 2005, Economic growth , Addison-Wesley: Boston.

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IvyPanda. (2019, May 20). Economic Growth and Development. https://ivypanda.com/essays/economic-growth-and-development-essay/

"Economic Growth and Development." IvyPanda , 20 May 2019, ivypanda.com/essays/economic-growth-and-development-essay/.

IvyPanda . (2019) 'Economic Growth and Development'. 20 May.

IvyPanda . 2019. "Economic Growth and Development." May 20, 2019. https://ivypanda.com/essays/economic-growth-and-development-essay/.

1. IvyPanda . "Economic Growth and Development." May 20, 2019. https://ivypanda.com/essays/economic-growth-and-development-essay/.

Bibliography

IvyPanda . "Economic Growth and Development." May 20, 2019. https://ivypanda.com/essays/economic-growth-and-development-essay/.