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Lecture/seminar/reading content notes > Economics - Lecture/seminar notes > Flashcards

Economics - Lecture/seminar notes Flashcards

(From slides/readings)

1
Q

Main topics of economics…

(Wk 1/Term 2)

A
  • Consumption e.g. social factors which affect consumer preferences + Consumer behaviour
  • Production e.g. How firms orgainse production activities + Firms’ deveopment e.g. R&D + How firms compete/co-operate together
  • Macroeconomy e.g. aggregate lvls of consumption etc
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2
Q

Other main topics of economics…

(Wk 1/Term 2)

A
  • International trade, investment and production
  • Economic development
  • Environment
  • Reproductive economy
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3
Q

Some schools of economics…

(Wk 1/Term 2)

A
  • Classical
  • Neoclassical
  • Marxist
  • Keynesian
  • Schumepeterian
  • Austrian
  • Institutionalist (Old and New)
  • Behaviouralist
  • Developmentalist

(Smaller schools involce Neo-Ricardian, Ecological etc)

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4
Q

Where does the word ‘economy’ come from?

(Alongside the study of it)

(Wk 1/Term 2)

A
  • Comes from a Greek word for “one who manages a household
  • Economics is the study of how society manages its scarce resources.
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5
Q

What is equity?

(Wk 1/Term 2)

A
  • Equity means the benefits of those resources are distributed fairly among the members of society.
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6
Q

1st five principles of economics…

(TORPT)

(Wk 1/Term 2)

A
  • Trade-offs
  • Opportunity cost
  • Rational People think at the margin (small, incremental comparisons may be made).
  • People Respond to Incentives (people choose the thing which has its marginal benefits > marginal costs).
  • Trade can make everyone better off -> (people gain from their ability to trade with one another e.g. allows specilisation)
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7
Q

2nd five principles of economics…

(Wk 1/Term 2)

A
  • Markets are usually a good way to organise economic activity + Households decide what to buy and who to work for + ‘The invisible hand’
  • Governments Can Sometimes Improve Market Outcomes -> Market failure occurs when the market fails to allocate resources efficiently. + When the market fails (breaks down) government can intervene to promote efficiency and equity
  • Living standards depends on a country’s production -> They can be measured by comparing personal incomes or comparing total market value of nation’s production
  • Inflation (when the govt. prints too much money) + Short-run trade-off between inflation and unemployment

(A market economy is an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services)

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8
Q

‘The invisible hand’…

(Price mechanism things)

(Wk 1/Term 2)

A
  • Because households and firms look at prices when deciding what to buy and sell, they unknowingly take into account the social costs of their actions.
  • As a result, prices guide decision makers to reach outcomes that tend to maximize the welfare of society as a whole.
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9
Q

Definitions of economics…

(Wk 1/Term 2)

A
  • The Economist’s Dictionary of Economics defines economics as:
    ‘The study of the production, distribution and consumption of wealth in human society.’
  • EconomistLionel Robbins said in 1935 that:
    ‘Economics is a social science that studies human behaviour as a relationship between needs and wants and scarce means, which have alternative uses.’
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10
Q

The basic economic problem…

(Wk 1/Term 2)

A
  • Satisfying unlimited wants and needs with limited resources
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11
Q

Who first identified economics?

(Wk 1/Term 2)

A
  • First identified by Aristotle (384-322 BC) in his major work The Politics.
  • He also identified another activity, chrematistike -> involving the making and lending of money, wealth accumulation, commerce and earnings.
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12
Q

Define opportunity cost…

(Wk 1/Term 2)

A
  • The next best alternative foregone when a choice is made
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13
Q

Difference between positive statements and normative statements…

(Wk 1/Term 2)

A
  • Positive statements are objective, factual and can be tested
  • Normative statements are opinionated, subjective and carry value judgements
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14
Q

Needs, wants and choice…

(Wk 1/Term 2)

A

Needs:
Human needs are material items people need for survival, such as food, clothing, housing and ware.
Wants:
Human wants are the driving force which stimulates demand for goods and services. To curb the economic problem, organise production to satisfy as many wants as possible.
Choice:
The economic problem fundamentally revolves around the idea of choice, which ultimately must answer the problem

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15
Q

Interdisciplinity…

(Wk 1/Term 2)

A
  • interdisciplinarity is about how different fields of knowledge (disciplines) can be interrelated.
  • It is very important to see that Economics and Law can be interrelated in a broader global context.
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16
Q

Endogenous money…

(Wk 2/Term 2)

A
  • The key principle of endogenous money is that the quantity of money is not fixed and is not determined by the central bank.
  • Every time a commercial bank makes a loan, it provides money that may be spent in the real economy.
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17
Q

How do loans create demand in the economy?

(Wk 2/Term 2)

A
  • Loans create deposits
  • deposits circulate through banking system -> creating demand for reserves/base money

(Deposits fund credit creation)

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18
Q

Monetary control…

(Wk 2/Term 2)

A
  • Central bank targets price of reserves/liquidity
  • Shapes short, long-term interest rates, aggregate demand + inflation
  • Macroprudential policy: contain systemic risk
  • Banking crises: lender of last resort
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19
Q

How do global banks lend?

(Wk 2/Term 2)

A
  • They lend via cross-border banking markets
  • Foreign ownership: subsidiaries and branches (internal capital markets)
  • Banking crises and internal capital markets
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20
Q

Basel III things…

(Regulations put in place after the 2007-2009 financial crisis)

(Wk 2/Term 2)

A
  • Leverage ratio – a ‘backstop’ measure = at least 3%
    Roughly, (Tier 1)/(Total Exposure)
    TE - without reference to RWAs.
  • Liquidity coverage ratio (LCR)
    High Quality Liquid Assets / 30 Days Net Cash Outflows ≥100%
  • Net Stable Funding Ratio (NSFR): stable funding over a one-year horizon
  • NSFR equation: Available stable funding / Required stable funding ≥100%

(Tier 1 measures a bank’s core capital relative to its total assets)

Risk-weighted assets determine min. amount of capital a bank must have in relation to risk profile of its lending activities and other assets -> to reduce risk of insolvency and protect depositors

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21
Q

Global banking crises…

(Wk 2/Term 2)

A
  • Cross-border banking loans “destabilizing … floods and draughts”
  • Global banks as superspreaders of systemic risk
  • Internal capital markets: increase transmission of risks between home/host
  • Search for yield and global banking glut
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22
Q

Demand-side policies…

(Fiscal policy and monetary policy)

(Wk 2/Term 2)

A

Fiscal:
- Taxes
- Expenditure
Monetary:
- Interest rates
- Money supply

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23
Q

Which leaders were notably influenced monetarist policies?

(Wk 2/Term 2)

A
  • Monetarist policies greatly influenced the British PM Margaret Thatcher (1979-1990) and the US President Ronald Reagan (1981-1989).
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24
Q

How is the rate of inflation measured?

(Wk 2/Term 2)

A
  • Rate of inflation measured by annual % change price lvls -> as measured by the Consumer Price Index (CPI)
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25
Q

Consumer Price Index (CPI)…

(Main measure of inflation in the UK)

(Wk 2/Term 2)

A
  • BoE’s main role is to keep inflation at 2%.
  • This is the same for the European Central Bank (ECB) and countries using the Euro (€).
    The aim of this target is: to achieve a sustained period of low and stable inflation

(Low stable inflation is also known as price stability)

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26
Q

Monetary stimulus…

(Wk 2/Term 2)

A
  • Rise in money supply lowers I.R rate
  • Decrease in I.R rate boosts investment
  • Rise in investment boosts A.D
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27
Q

Expansionary monetary policy…

(Wk 2/Term 2)

A
  • This boosts A.D in the economy
  • This is boosted via lower I.R rates, higher money supply

(To prevent deflation/disinflation)

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28
Q

Contractionary monetary policy…

(Wk 2/Term 2)

A
  • Lowers A.D in economy
  • Lowers money supply
  • Boost interest rates

(To prevent inflation/economy overheating)

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29
Q

MPC things…

(Wk 2/Term 2)

A
  • They set the base rate
  • They maintain financial and monetary stability
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30
Q

Basis of MPC Decisions…

(They decide on I.R rates and Q.E)

(Wk 2/Term 2)

A
  • I.R rates are main target for MPC which decides whether expansionary or restrictive monetary policy is appropriate + economic growth and employment.
  • Rate of rise of earnings as an indicator of pervasive excess demand.
  • Rate of rise in housing prices act as an indicator of inflationary pressures.
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31
Q

Q.E things…

(Wk 2/Term 2)

A
  • Q.E allows a central bank to reduce the I.R
  • A monetary policy instrument where the central bank creates new money and buys financial assets (bonds) in exchange for money -> to boost lending and borrowing in the economy
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32
Q

Green bonds…

(Wk 2/Term 2)

A
  • Green Bonds are to raise money for climate and environment concerns.
  • Usually asset-linked, backed by issuer’s balance sheet.
  • Therefore, they have the same credit rating as the issuer’s other debt obligations.
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33
Q

Quantity Theory of Money…

(A key consideration of monetary policy)

(Wk 2/Term 2)

A
  • QTM originates in the 16th Century when influx of gold and silver from the Americas into Europe produced significant inflation.
  • (1752) David Hume stated that money supply has a direct relationship to price lvls.
  • (1802) Thornton stated that rise in money supply didn’t always mean rise in economic output. + More money was equal to more inflation.
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34
Q

What do the two types of fiscal policy do?

(Wk 2/Term 2)

A

Expansionary - Boosts AD by increasing govt. spending and lowering taxation (can cause a budget deficit)

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35
Q

Pros and cons of expansionary and contractionary fiscal policy…

(Wk 2/Term 2)

A

Expansionary pros - Boosts economic growth and reduces unemployment,
-> HOWEVER, possible inflation + possible current account deficit, (may be used in a recession or a negative output gap).
Contractionary pros - Lowers economic growth and increases unemployment
-> HOWEVER, it will boost price levels and cause a current account surplus, (may be used during a positive output gap or a
boom).

-> For expansionary, a current account deficit can occur as with higher income, imports rise from more purchases.
-> For contractionary, a current account surplus can occur as with lower income + imports decrease from less purchases.

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36
Q

What is the current global atmospheric
temperature?

(As of 2023, according to Berkeley Earth)

(Wk 3/Term 2)

A
  • Its close to 1.5°C

(Compared to the pre-industrial average, (1850-1900)

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37
Q

Scientists have shown that the rise in atmospheric
temperature is directly related to…

(Wk 3/Term 2)

A
  • Directly related to the rise in CO2 concentration
38
Q

How would a world of 3°C-4°C look like?

(Wk 3/Term 2)

A
  • Much of Southern Europe may look like the Sahara desert.
    ▪ Events such as storms and cyclones are likely to be more intense with much higher speeds.
    ▪ The North India monsoon -> which shapes the agricultural lives of hundreds of millions, would change radically.
    ▪ Water availability problems for billions of people -> especially in the Global South, will arise.
    ▪ Many coastal areas will disappear because of sea lvl rise.
39
Q

How Global North are responsible for climate change lvls…

(Global North countries have more power and wealth than other countries)

(Wk 3/Term 2)

A
  • Global North is responsible for about 70% of cumulative CO2 emissions
  • Although China currently the
    biggest emitter at global lvl -> China’s lvl of cumulative emissions much lower than current lvls CO2 flows.

(Hickel,2020)

(See GDrive docs)

40
Q

Economic effects of climate change…

(Wk 3/Term 2)

A
  • There might be continuous destructions in capital infrastructure, affecting the profitability and investment of firms.
  • Health problems and hostile environment can affect people’s ability to work -> So labour productivity might go down.
  • Regions and countries that rely on agriculture and tourism might experience significant decline in economic activity.
41
Q

Economic effects of climate change…

(Emigration, debts and financial assets)

(Wk 3/Term 2)

A
  • Emigration in countries with severe climate change problems might increase significantly.
  • Defaults on debt might rise due to people’s and companies’ inability in affected regions to repay their debt.
  • Due to high uncertainty, people might increase their saving and they might stop risky investments -> which can destabilise financial markets.
42
Q

Economic strategies for tackling the
environmental crisis (CGG)…

(Examples of fiscal policies)

(Wk 3/Term 2)

A
  • Carbon taxes -> That make firms and households pay for carbon
    emissions -> This may disincentivise agents to produce CO2 emissions
  • Green subsidies -> Covers costs for production where there is renewable energy
  • Govt. investments e.g. R&D tech, low-carbon transportation, electricity transmission grids etc
43
Q

Economic strategies for tackling the environmental crisis (DGRG)…

(Examples of monetary policies)

(Wk 3/Term 2)

A
  • Decarbonised quantitative easing -> Central banks buying green bonds; use of climate criteria in identifying bond purchases
  • Green credit guidance -> min. amount of bank lending needs to be directed to environment-friendly sectors e.g. Reserve Bank of India
  • Restrict finance for high-carbon activities/companies -> financial regulation -> e.g. capital requirements
  • Green public banks -> Public entities that provide credit for financing of low-carbon projects
44
Q

Economic strategies for tackling the environmental crisis…

(Degrowth)

(Wk 3/Term 2)

A
  • Some economists argue reduction of environmental impact per GDP unit cannot ensure ecological sustainability.
  • They believe GDP reduction (degrowth) + changes in institutions’ and individual behaviour -> only way through which we can deal with environmental problems.
  • They argue that we need to reduce our consumption by dismantling culture of consumerism -> re-evaluate wellbeing and disconnect it from GDP + reduce working hrs to avoid a negative effect of a lower GDP on employment.
45
Q

What is fiscal policy?

(Wk 3/Term 2)

A
  • Use of government taxes and spending to alter macroeconomic outcomes

(Can be used to correct market failure)

46
Q

Expansionary fiscal policy…

(Wk 3/Term 2)

A
  • Boost A.D via rise in govt. spending + lowered taxation

(Deals with the problem of unemployment)

47
Q

Contractionary fiscal policy…

(Wk 3/Term 2)

A
  • Reduce A.D via reduced govt. spending + rise in taxation

(Deals with the problem of inflation)

48
Q

Market failure…

(Wk 3/Term 2)

A
  • An inefficient allocation of resources in a free market (overproduction/ underproduction), meaning markets do not function efficiently or equitably
  • This results in a loss of economic and social welfare.
49
Q

Externalities…

(Wk 3/Term 2)

A
  • Externalities occur when producing or consuming a good impacts third parties who are not directly related to the transaction.
  • Externalities are created when social costs and benefits differ from private costs and benefits.
  • Externalities can be positive or negative -> They can also occur from production or consumption.
50
Q

Fiscal Policy Intervention…

(Wk 3/Term 2)

A
  • Taxation can be used to raise the price of demerit goods and products with negative externalities.
  • Subsidies can be used to lower the price of merit goods and products with positive externalities.

(Can be used to alter demand lvls for different products and also the pattern of demand within the economy)

51
Q

What is fiscal policy intervention designed to do to correct market failure?

(Wk 3/Term 2)

A
  • Designed to increase the ‘opportunity cost’ of consumption and, thereby, reduce consumer demand towards a socially optimal level

(With govt. spending and taxation)

52
Q

Some forms of govt. intervention to correct market failure (RDPPPT)…

(Wk 3/Term 2)

A
  • Regulation of markets and firms.
  • Direct provision of public goods (defence).
  • Policies to introduce competition into markets (de-regulation).
  • Price controls
  • Pollution taxes to correct for negative externalities.
  • Taxation of profits.
53
Q

Define bond yield…

(Wk 3/Term 2)

A
  • The rate of interest paid on govt. debt
54
Q

Direct tax and indirect tax…

(Wk 3/Term 2)

A
  • Direct taxes tax income
  • Indirect taxes tax spending
55
Q

Define market failure…

(Wk 3/Term 2)

A
  • This occurs when there’s a misallocation of resources within a market, and leads to society suffering as a result.
56
Q

Define government failure…

(Wk 3/Term 2)

A
  • When governemnt intervention causes a misallocation of resources in a market.
57
Q

Pros and cons of tradable pollution permits…

(Wk 3/Term 2)

A

Pros:
- Encourages firms to pollute less
- Firms selling their permits could allow them to expand
- Govt. could use invest revenue from e.g. fines towards reducing pollution schemes
- Permit may internalise negative externality of pollution
Cons:
- Optimal pollution lvl can be hard to set -> If too high, no incentive to reduce emissions -> If too low, firms may relocate + New firms may not be able to start up at all
- Pollution permit scheme creates new market -> Potential market failure OR black market?
- High lvls of pollution in areas could harm environment
- High costs in enforcing such schemes

58
Q

Pros and cons of expansionary and contractionary fiscal policy…

(Wk 3/Term 2)

A

Expansionary - Boosts economic growth and reduces unemployment, HOWEVER, possible inflation and possible current account deficit, (may be used during a recession or a negative output gap).
Contractionary - Lowers economic growth and increases unemployment, HOWEVER, it will boost price levels and cause a current account surplus, (may be used during a positive output gap or a
boom).
-> For expansionary, a current account deficit can occur as with higher income, imports rise from more purchases.
-> For contractionary, a current account surplus can occur as with lower income, imports decrease from less purchases.

59
Q

Monetary policy…

(Wk 3/Term 2)

A
  • Manipulate A.D with money supply and I.R rates
  • Expansionary -> Boost money supply and lower I.R rates
  • Contractionary -> Lower money supply and boost I.R rates
60
Q

Fiscal policy…

(Wk 3/Term 2)

A
  • Manipulate A.D with govt. spending and taxation
  • Expansionary -> Boost govt. spending and lower taxation
  • Contractionary -> Lower govt. spending and booat taxation
61
Q

‘Mainstream’ economic approach to labour…

(Wk 4/Term 2)

A
  • Todays neoclassical economics view assumes labour is a commodity
62
Q

‘Mainstream’ economic approach to labour…

(Wk 4/Term 2)

A
  • Human capital theory (Becker 1964; Mincer 1974)
63
Q

Specificity of labour…

(Wk 4/Term 2)

A
  • Labour (power) cannot be seperated from the labourer
  • Labour (power) cannot be stored
  • Labour is an active, self-conscious FoP
64
Q

Institutional approaches to labour markets…

(Wk 4/Term 2)

A
  • Labour market institutions e.g. trade unions, collective bargaining etc)
65
Q

Details on the Elephant curve…

Devised by Branko Milanović and Christopher Lakner (2013)

(Wk 4/Term 2)

A
  • Shows what has happened with incomes across a global income distribution between 1988 and 2008
  • The curve has been described as possibly ‘the most important chart for understanding politics today’ (O’Brien, 2016) and ‘the most powerful chart of the last decade’ (Nangle, 2016).

(It also shows the winners and losers of globalisation).

66
Q

Globalisation and living standards…

(Wk 4/Term 2)

A
  • Globalisation has raised living standards in aggregate
  • (1988-2008) Global avg. income rose by 24%
67
Q

Inner details of the Elephant Curve…

(Wk 4/Term 2)

A
  • The middle classes in emerging economies have gained (China and India, in particular);
  • Few, if any, gains for the bottom half of the income range in rich countries. This has drawn significant attention;
  • The world’s richest, ‘the global plutocrats’, have gained a lot; and,
    The world’s poorest have not gained.
68
Q

Some associated narratives…

(Wk 4/Term 2)

A
  • Some workers have lost jobs, or experienced stagnant or declining incomes, because of low-wage competition in emerging economies and/or increased immigrant labour.
  • The perception of trade relations where workers are exploited, firms are subsidised and access to markets is not equal.
  • Backlash against trade liberalisation agreements (e.g., TTIP).
  • Faster population growth in the emerging economies affects the graph.
  • Overall income growth is understated, because of changing data and country selection between 1988 and 2008.
69
Q

Some Associated Narratives…

(Data and population things)

(Wk 4/Term 2)

A
  • Availability of data for poor countries and the influence of different income groups.
  • Differences in rich countries (Japan, USA, UK, Germany). Where is the most obvious stagnation?
  • Uneven population shifts suppress the recorded income growth of parts of the global distribution.
  • Importance of stability in selection.
  • According to Milanović, ‘the political implications of a global “elephant graph” are being played out in national political spaces.’
70
Q

World Inequality Report…

(Wk 4/Term 2)

A
  • Contemporary income and wealth inequalities are significant.
  • Income inequality has increased globally, but at different speeds which suggests institutions and policies are important in shaping inequality.
  • Income inequality lowest in Europe and highest in Middle East + North Africa (MENA).
  • Avg. national incomes say little about inequality. (See Figure 1 on slide 23)
  • Very clear patterns evident in China, India and Russia.
  • ‘Inequality is a political choice, not an inevitability.’ (WIR, 2022)
  • Divergence in inequality extreme in Western Europe and the United States, because of education inequalities and a less progressive taxation system.
  • Redistributing wealth is needed to invest in the future.
71
Q

World Inequality Report…

(Wk 4/Term 2)

A
  • Contemporary global inequalities are close to early 20th century levels.
  • In Western Europe and the US, income inequality between men and women has declined.
  • Inequality has increased within countries but declined globally between countries.
  • Gender inequality remains significant.
  • Significant inequalities exist in countries’ carbon emissions.
  • Wealth inequalities have increased at the top of distribution.
  • Wealth inequalities within countries have shrank.
  • Significant transfers of public to private wealth. Why?
  • Nations have become richer, but govts. have become poorer. Most govts. now in debt.
  • Privatisation and rising income inequality is at the root of wealth inequality.
72
Q

Possible solutions to combat inequality…

(Wk 4/Term 2)

A
  • A global financial register to record the ownership of financial assets would better address tax evasion, money laundering and rising inequality
  • Better access to education and well-paid jobs would better address income growth rates amongst the poorest half of the population.
  • Taxation (perhaps progressive taxation)
  • Better govt. investment for future
73
Q

Unit labour costs…

(Wk 4/Term 2)

A
  • Unit labour costs are often viewed as a broad measure of (international) price competitiveness.
  • They are defined as avg. cost of labour per unit of output produced
  • Can be expressed as the ratio of total labour compensation per hour worked to output per hour worked (labour productivity). - This indicator is measured in percentage changes and indices.’

(OECD)

74
Q

Reasons for inequality…

(Wk 4/Term 2)

A
  • Trade unions
  • Tax evasion
  • How progressive tax is
  • Govt. spending (however, inflation etc)
75
Q

‘Mainstream’ economic approach to labour…

(Wk 4/Term 2)

A
  • Causes + drives of income inequality is multidimensional -> but schools of
    thought in labour economics can shed different perspectives on the explanation and
    prescription for it.
  • Today’s ‘mainstream’/ ‘orthodox’ neoclassical economics typically assumes that labour
    is a commodity not essentially different to any other + Labour market is presented as
    just another market with a straightforward application of the theory of supply and
    demand.
  • Wages depend on labour demand and supply (to put differently: correspondence of
    factor earnings with productivity under perfectly competitive markets and particular
    production function etc.).
76
Q

‘Mainstream’ ECONOMIC APPROACH TO THE LABOUR
MARKET (2)…

(Wk 4/Term 2)

A
  • Human capital theory (Becker 1964; Mincer 1974): inequality stems from skill
    formation (education, training etc).
  • Inequality that arises from low wages or unemployment/ underemployment can be
    either a result of institutions and policies or be blamed on personal choices,
    preference or the failings of individual workers.
  • As a result, ‘mainstream’/ ‘orthodox’ economists are generally less concerned with
    inequality: e.g. Lucas (2004): economic analysis should not focus on inequality or
    distribution because the ‘potential for improving the lives of poor people by finding
    different ways of distributing current production is nothing compared to the
    apparently limitless potential of increasing production’.
77
Q

Specificity of labour…

(Wk 4/Term 2)

A
  • Labour (power) cannot be separated from the labourer
  • Labour (power) cannot be stored
  • Labour is an active, self-conscious factor of production
78
Q

Institutional approaches to tackling inequality in labour markets…

(Wk 4/Term 2)

A
  • Labour market institutions (labour laws; unionisation; collective bargaining);
    weakening of the welfare state.
  • Segmented labour market theories: historical emergence and reproduction of the
    labour market structures.
  • Governance of firms: global inequality as resulting from global value chains +
    concentration of surplus value in the global North.
  • In contrast to ‘mainstream’ approaches, focus on institutional and policy
    interventions to tackle inequality
79
Q

FROM LABOUR MARKET TO LABOUR REGIME?

(Wk 4/Term 2)

A
  • In contrast to the ‘mainstream’, alternative approaches highlight the specificity of
    labour (power).
  • Unlike other ‘factors of production’, wages are not just costs but are sources of
    aggregate demand -> productivity and the basis to reproduce labour power.
  • Over-emphasis on the labour ‘market’ underestimates the importance of unpaid
    work in sustaining ‘regime’ of labour in capitalist society
80
Q

Development economics as a whole…

(Wk 5/Term 2)

A
  • Is a study of structural change
  • Is a study of understanding development as a whole which is not
    reducible to economic performance
  • Is best characterized as a field of competing paradigms (Hunt, 1989)
81
Q

Development vs. Growth…

(Wk 5/Term 2)

A
  • Development does not just focus on economic growth, but also other aspects such as lifespan, education lvls, income equality etc.
  • Focuses on improving the lives of people lead rather than
    assuming that economic growth will lead automatically to greater wellbeing.
82
Q

Some approaches to development…

(Wk 5/Term 2)

A
  • Convergence vs. divergence debates
  • Relationship between development and inequality
  • Structural vs. micro approaches to development

(Our understanding of development has changed significantly with respect to
changes in our world economy)

83
Q

Convergence vs. Divergence…

(Wk 5/Term 2)

A
  • Do countries necessarily follow a strict developmental path, which is more
    or less the same for all countries, and therefore converge to one another
    in the end?
  • Or because of different historical trajectories do countries start at similar levels of development but then diverge from one another?
84
Q

Stages of growth theories in convergence and divergence…

(Wk 5/Term 2)

A
  • Stages of growth theories (such as Rostow’s) argue there is necessarily an ultimate convergence in global development.
  • Dependency theory suggests otherwise -> Due to historical path dependency (such as the impacts of colonialism), some countries are structurally underdeveloped.
  • Some believe there is divergence within convergence (i.e. some Marxist scholars believe although we can talk about stages of growth on an abstract theoretical lvl -> there is also divergence on a concrete country specific lvl).
85
Q

Classical theories of development…

(Wk 5/Term 2)

A
  • In order to understand the concept of development in its contemporary form, you
    need to have an idea about why and how it came into existence.
  • As a distinct branch within economics, “development economics” first introduced in post-World War II period, in order to address and understand the growing discrepancies between the industrialised first world and the rest of the world.
  • The early theories of development were primarily concerned with economic growth
    (considering the industrialisation and modernisation movements of the time, this is
    unsurprising).
  • W. W. Rostow 1959, The Stages of Growth: A Non-Communist Manifesto -> Building upon Marx’s ideas on stages of growth through accumulation of capital and the utilisation of the means of production
  • In Marx’s understanding, different stages of growth necessarily lead to a socialist
    political setting – highly contested views in the post-WWII era
  • In that sense, development economics born out of a need to discuss structural
    elements such as growth and development within a non-Marxian context.
86
Q

Stages of growth in classical development…

(Wk 5/Term 2)

A
  • According to Rostow (1959), there are five stages of growth:
    — The traditional society
    — The pre-conditions for take-off
    — The take-off
    — The drive to maturity
    — The age of high mass-consumption
    — Moving from the Keynesian distribution of income between investment and saving to
    a dynamic understanding of production.
    What does dynamic growth mean?
  • Dynamic growth is also concerned with the
    allocation of resources between different sectors.
    “Sectoral optimum positions”
  • How are those optimum positions determined?
    On side of demand, by lvls of income and population
    On the side of supply, by state of tech and entrepreneurship
87
Q

Critique of early development theories…

(Wk 5/Term 2)

A
  • By the end of the 1960s, it was obvious that the differences in the patterns and pace of development across the globe was persistent.
  • This gave rise to some critiques of early development theories: Dependency theory
    and the world systems analysis are products of this period.
  • Andre Gunder Frank (1966) “The Development of Underdevelopment”
    Development is not a linear, straightforward process.
  • Some countries are “underdeveloped” due to years of exploitative practices of
    colonialism that extracted their raw materials and prevented local industries to
    develop.
  • Putting development in a historical and political context.
88
Q

Post-1980s…

(Wk 5/Term 2)

A
  • We can roughly divide the period after the World War II into three broad categories:
  • 1950s to 1970s: Early developmentalism and “golden age of capitalism” Characterised by fast industrialisation + Emphasis on industrial policy and growth
  • 1980s to 1990s: Washington Consensus and liberalisation + Large fiscal and monetary deficits + tightening controls over wages
    Privatisation, deregulation, financial growth, minimal state intervention
  • 2000s onwards: Post-Washington Consensus “Imperfect markets” + Financial crisis – some regulation is necessary
  • To give some role to the state not as a market agent but rather as a regulator ->
    New Structural Economics: Read Fine and Van Waeyenberge (2013) for a critique
89
Q

The evolution of development rhetoric since the
WWII…

(Wk 5/Term 2)

A

(1950s-1960s) Early developmentalism: Modernisation and
industrialisation
* Development = economic
growth
* Stages of growth theories
(1960s-1980s) Critiques of early
developmentalism:
- Dependency theory, world
systems analysis
* Putting development in a
historical and political
context
* Impacts of colonialism
New development paradigms
(1980s-2010s):
- Kaldorian critique
* Discussions of inequality
* Discussions of globalisation
* Finance and development
* Discussions of postmodernism (are there no structures?)
Is development no longer
relevant?
* How can we identify and
address the issues in the
financialised world?

90
Q

The Evolution of Development Doctrine, Thorbecke (2006)…

(Wk 5/Term 2)

A
  • The prevailing development
    objectives
  • Theories, models and
    techniques
  • The underlying data system
  • The resulting development
    strategy and policies

(Check Wk 5/Term 2 Development Economics on Google Drive for more)

91
Q

What is GDP?

(Wk 5/Term 2)

A
  • GDP measures the value of output produced within domestic boundaries.

Lecture/seminar/reading content notes (9 decks)

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