Lecture 4: The limits on economic growth as we know it Flashcards
Kuznets Curve
Industrialization –> urbanization –> less agriculture –> inequality … switch –> welfare policies in education and healthcare –> increase welfare –> decrease inequality
imperative of ecnoomic growth and development (Williamson and Washington Consensus)
- low government borrowing, discourage developing countries from having fiscal deficits
- …
opportunity costs
How much an investment pays relative to other uses of the same resources
revealed time preference
The degree to which you prefer present benefits (money today) over future benefits (money in the future)
discount rate formula
PV=FV/(1+r)^t
compound interest
pay less today to avoid higher costs in the future
discount rate
the emissions later, versus our actions today
Nordhaus on a high discount rate
A high discount rate means that future generations are valued less (or discounted), compared with nearer generations
Stern on a zero discount rate
A discount rate of zero means that future generations are valued equally to the present
Nordhaus on people in the future
people in the future will be richer than us, and thus better prepared to deal with climate damages
Stern on climate change
an increasingly disrupted climate may hamper economic productivity, causing economic growth rates to deviate below their historical trajectories
GDP
gross domestic product
measuring GDP –> the production boundary
- In relation to the goods and services that are the result of production
- It has to be exchanged through markets
- It has to be sold by people
GDP is not a proxy for welfare, but treated as if it was because:
- Priority for policies and incentives around the world
- Easy to use for economists and politicians
- Synonym with progress
Gini-coefficient
shows the distribution of economic wealth (the lower the better)
