Week 1: Growth & Development
Lecture 1 - Economic growth
A crowded, unequal and degraded planet…
● Crowded...
○ 7.8 billion people (10 times more than in 1750)
○ Output of 90 trillion US$ (200 times more than in 1750)
○ Both are projected to continue growing
● Unequal…
○ Billions are enjoying longevity and good health
○ More than a billion people live in abject poverty
● Degraded…
○ Anthropocene: Human activity drives the Earth’s physical change
○ Humanity is threatening earth
○ Changes are dangerous and unprecedented
UN’s Sustainable Development Goals
1. No poverty
2. No hunger
3. Good health
4. Quality education
5. Gender equality
6. Clean water and sanitation
7. Clean energy
8. Good jobs and economic growth
9. Innovation and infrastructure
10. Reduced inequalities
11. Sustainable cities and communities
12. Responsible consumption
13. Protect the planet
14. Life below water
15. Life below land
16. Peace and justice
17. Partnerships for the goals
,Sustainable Development Goals related to economic growth
8. Good jobs and economic growth
9. Innovation and infrastructure
10. Reduced inequalities
The role of economic growth
Economic growth as:
● The cause of sustainability problems
● The key to eradicating poverty
● Part of the solution?
● Are there limits to growth?
● We need to first understand where growth comes from
Big questions
● Why are we so rich and they so poor?
● What is the engine of economic growth?
● Is our standard of living sustainable?
Measuring economic development
Gross domestic product: market value of total production of goods and services within
a country in a given year.
Three corrections are needed:
, ● Divide population by population (GDP per capita)
● Correct for inflation (real versus nominal GDP)
● Correct for international differences in price levels (PPP)
Preferred measure: GDP per capita at PPP in constant prices
Example of PPP: Big Mac Index
Price of a Big Mac in:
● NL: 3.75 euros
● US: 5.51
PPP exchange rate: 5.51/3.75 = 1.47 dollar/euro
Market exchange rate: 1.20 dollar/euro
Table: Standard of living in the Netherlands and India
, ●
Concluding points (Measuring economic development)
● Preferred measure: GDP per capita at constant PPP prices
○ Only a rough indicator of true ‘wellbeing’ / ‘life satisfaction’ / ‘happiness’
○ But is highly (though imperfectly) correlated with broader measures
○ Hence, GDP per capita will be used as a useful summary statistic for
wellbeing.
History of economic growth
Graph 1.4: Growth of GWP (International Prices of 1990)
Graph summaries:
● For most of human history, there was no growth and output was at a subsistence
level
Lecture 1 - Economic growth
A crowded, unequal and degraded planet…
● Crowded...
○ 7.8 billion people (10 times more than in 1750)
○ Output of 90 trillion US$ (200 times more than in 1750)
○ Both are projected to continue growing
● Unequal…
○ Billions are enjoying longevity and good health
○ More than a billion people live in abject poverty
● Degraded…
○ Anthropocene: Human activity drives the Earth’s physical change
○ Humanity is threatening earth
○ Changes are dangerous and unprecedented
UN’s Sustainable Development Goals
1. No poverty
2. No hunger
3. Good health
4. Quality education
5. Gender equality
6. Clean water and sanitation
7. Clean energy
8. Good jobs and economic growth
9. Innovation and infrastructure
10. Reduced inequalities
11. Sustainable cities and communities
12. Responsible consumption
13. Protect the planet
14. Life below water
15. Life below land
16. Peace and justice
17. Partnerships for the goals
,Sustainable Development Goals related to economic growth
8. Good jobs and economic growth
9. Innovation and infrastructure
10. Reduced inequalities
The role of economic growth
Economic growth as:
● The cause of sustainability problems
● The key to eradicating poverty
● Part of the solution?
● Are there limits to growth?
● We need to first understand where growth comes from
Big questions
● Why are we so rich and they so poor?
● What is the engine of economic growth?
● Is our standard of living sustainable?
Measuring economic development
Gross domestic product: market value of total production of goods and services within
a country in a given year.
Three corrections are needed:
, ● Divide population by population (GDP per capita)
● Correct for inflation (real versus nominal GDP)
● Correct for international differences in price levels (PPP)
Preferred measure: GDP per capita at PPP in constant prices
Example of PPP: Big Mac Index
Price of a Big Mac in:
● NL: 3.75 euros
● US: 5.51
PPP exchange rate: 5.51/3.75 = 1.47 dollar/euro
Market exchange rate: 1.20 dollar/euro
Table: Standard of living in the Netherlands and India
, ●
Concluding points (Measuring economic development)
● Preferred measure: GDP per capita at constant PPP prices
○ Only a rough indicator of true ‘wellbeing’ / ‘life satisfaction’ / ‘happiness’
○ But is highly (though imperfectly) correlated with broader measures
○ Hence, GDP per capita will be used as a useful summary statistic for
wellbeing.
History of economic growth
Graph 1.4: Growth of GWP (International Prices of 1990)
Graph summaries:
● For most of human history, there was no growth and output was at a subsistence
level
