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Relationship between economic growth and the environment
Adam Smith views on economic thought
Environmental effects of global warming
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In this essay we will be able to analyze in detail several important components such as economic growth and economic development. For this, we will analyze some of the most outstanding theories in this field, with authors such as Adam Smith, Kuznets and Georgescu-Roegen. We will also highlight several studies that attempt to demonstrate the close relationship that economic growth has in the environment and what are the repercussions that global warming, also called climate change, has had on economic growth. Finally, we will briefly look at some pollution regulatory agreements and which are the countries that pollute the most according to the latest study carried out.
First of all, we have to describe roughly what is the Economic Growth. Economic growth is an increase in the capacity of an economy to produce goods and services, compared from one period of time to another. It is
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Endogenous growth theories: Rate of economic growth strongly influenced by human capital and rate of technological innovation.
Keynesian demand-side: This perspective is at odds with classical economic theory, or supply-side economics, which states the production of goods or services, or supply, is of primary importance in economic growth.
Limits to growth: this theory has an environmental approach, some argue that very long-term economic growth will be limited by the degradation of resources and global warming. This means that economic growth may come to an end, reminiscent of Malthus's theories. It is argued that economic growth may have certain limitations due to the scarcity of raw materials, climate change and overpopulation. But Malthus's predictions have not been produced, so these theories are often discarded. However, there may come a time when growth is limited by environmental factors.
(Source: Meadows et al. (2004,
Comparing Keynesian Economics and Supply Side Economic Theories Two controversial economic policies are Keynesian economics and Supply Side economics. They represent opposite sides of the economic policy spectrum and were introduced at opposite ends of the 20th century, yet still are the most famous for their effects on the economy of the United States when they were used. The founder of Keynesian economic theory was John Maynard Keynes.
Oded Galor and David N. Weil’s work, From Malthusian Stagnation to Modern Growth describes three different regimes on society including population, GDP per capita, family, and lifespan. They are the Malthusian model, the Post Malthusian model, and the Modern Growth Era model. The first of these three was the Malthusian model, developed by Malthus in the late 18th century, the Modern Growth is what we have today, and the post Malthusian model is the transition between the two ends of the spectrum.
The measure of growth is flawed, how countries see their growth is based on the consumption of their people. Many countries use the GDP (Gross Domestic Product) as an indicator for growth, as defined in It’s All Connected, “(GDP) is a calculation of the total monetary value of goods and services produced annually in a country” (Wheeler 11). The...
Robert E. Lucas Jr.’s journal article, “Some Macroeconomics for the 21st Century” in the Journal of Economic Perspectives, uses both his own and other economist’s models to track and predict economic industrialization and growth by per capita income. Using models of growth on a country wide basis, Lucas is able to track the rate at which nations become industrialized, and the growth rate of the average income once industrialization has taken place. In doing so, he has come to the conclusion that the average rate of growth among industrialized nations is around 2% for the last 30 years, but is higher the closer the nation is to the point in time that it first industrialized. This conclusion is supported by his models, and is a generally accepted idea. Lucas goes on to say that the farther we get from the industrial revolution the average growth rate is more likely to hit 1.5% as a greater percentage of countries become industrialized.
Every year there is a ‘league table‘ published showing the level of economic growth achieved by each country. The comparison is made using each countries Gross Domestic Product, or GDP. An important factor to look at is the difference between actual and potential economic growth. Actual economic growth increases in real GDP. This increase can occur as result of using previously unemployed resources, or reallocating resources into more productive areas or improving existing resources. Whereas potential economic growth is the productive capacity of the economy. For example, it can be shown by the predicted ability of the country to produce goods and services. This changes when there is an increase in the quantity or quality of the resources. All countries have different ways of achieving this with the resources they have available to them. For this reason it party answers the question of why some countries are richer than others. It is widely thought that the productive capacity of an economy will increase each year largely due to improvements in education and technology. This will obviously differ from country to country. For example, in the UK the quality of fertilizer could be improved, hence forth increase the years fruit and vegetable output.
Slow, growth causes few jobs to be created as it means a slower rate of
Economic growth focuses on encouraging firms to invest or encouraging people to save, which in turn creates funds for firms to invest. It runs hand-in-hand with the goal of high employment because in order for firms to be comfortable investing in assets such as plants and equipment, unemployment must be low. Hereby, the people and resources will be available to spur economic growth.
Keynesian Economics was developed and founding by John Maynard Keynes. He believed and wrote in his book “The General Theory of Employment, Interest and Money” that it is essential for the Government to play a vital role in economic stability. Keynesian theorist believe Government spending, tax hikes or tax breaks are vital in economic success. Keynesian assumptions include: Rigid or Inflexible Prices, Effective Demand, and Savings-Investment Determinants. Rigid or Inflexible Prices suggest that wages increases are easier to take while wage decreases hits resistance; likewise, a producer will increase prices yet when needed will be reluctant to decrease prices.
In contrast, the Keynesian Economic Theory was presented in the 1930's, during the Great Depression, by a man named John Maynard Keynes (Classical vs. Keynesian). It relies on spending and aggregate demand which makes this theory demand driven. These economists believe that aggregate demand is influenced by public and private decisions. The public means the government, and the private means individuals and businesses. Aggregate demand sometimes affects production, employment, and inflation. When the economy starts to slack, they rely on the government to build it back up.
Mobility has allowed human civilizations throughout history to reap the benefits of unrestricted, intercontinental trade, but there are environmental costs as a result which are not immediately apparent. There is no doubt that trade between nations has depleted natural resources, but the question as to whether current trade policies augment or temper environmental degradation is currently under contention. One view is that environmental regulations will create "pollution havens" in countries where there are less stringent regulations, simply relocating environmental damage to a country where the environment is worth less. The opposing view comes in the form of the "Porter hypothesis" named for Michael Porter and his suggestion that stringent regulations will encourage technological innovation among polluting firms thereby decreasing the rate at which the environment is damaged. The opposing views deal with current trade policies, but it is also important also to look at the effects that trade has had on the environment when trade policies were just taking shape.
In order for any country to survive in comparison to another developed country they must be able to grow and sustain a healthy and flourishing economy. This paper is designed to give a detailed insight of economic growth and the sectors that influence economic growth. Economic growth in a country is essential to the reduction of poverty, without such reduction; poverty would continue to increase therefore economic growth is inevitable. Through economic growth, it is also an aid in the reduction of the unemployment rate and it also helps to reduce the budget deficit of the government. Economic growth can also encourage better living standards for all it is citizens because with economic growth there are improvements in the public sectors, educational and healthcare facilities. Through economic growth social spending can also be increased without an increase of taxes.
Ayres (2008) advances the concept of ‘sustainability economics’, which deals with the issue of maintaining economic growth while paying special attention to environmental concerns of energy utilization and resource exhaustion, especially carbon fuel consumption and its relation to climate change.
Theoretical model of modern economic growth shows that long-term economic growth and raise the level of per capita income depends on technological progress. This is because of without technological progress and with the increase of capital per capita, marginal returns of capital would diminish and output per capita growth would eventually stagnate (Solow, 1956; Swan, 1956). Studies have shown that “experience, skills and knowledge in the long-term economic growth is playing an increasingly important role” (World Bank, 1999). Despite how technological progress work on economic growth, and how there are different views on the role of in the end, but I am afraid no one would deny that technical progress in the important role of economic development. In this sense, for a country to achieve long-term economic growth, we must continue to promote technological progress. However, economic growth theory is analyzed in general, and usually under the assumption that in the closed economy, and technological progress in a country not normally have taken place in various departments at the same time, and now the economy are often increasingly open economy. In this way, the technological progress in different economic impact on a country may be quite different. In addition, we assume that technological progress is Hicks neutral, is to an industry in itself, but technological progress also reflects the establishment of new industries and development. The new industries and technology-intensive industries generally older than the high, the use of less labor. Even the old industries, the general trend of technological progress is labor-saving.
In order to grow, besides using technology, the economy also feeds on natural resources. This in turn emits waste that pollutes the air and threatens the climate, causes an overuse of natural resources such as oil and gas, and in the long run, this will create a skin hole which will swallow up the economy, environment and society.
However, the GDP of country growth too rapidly also will negatively affect such as inequality of income increases to a significant level. This problem frequently facing due to economic development. This will let the rich people are getting more richer and poor are becoming poorer. Next, the economic develop rapidly also will increase of pollution rate. This is because the country is producing the maximum output for fulfilling the demand of the consumer. This will let the country has negative consequences for the environment and health of citizens is