Module 03: Foundations, Sources, and Effects of Economic Growth

Topics to be Covered

This module engages with academic work dealing with some of the “big-picture” questions in the fields of political economy and development economics around the sources of wealth and inequality. The second contribution “Basic Facts of Growth and Development,” takes up the question of why some countries today have levels of wealth, as measured by GDP, that equal the level of wealth in rich countries over 200 years ago. It turns out that the wealthier countries have much longer periods of sustained growth than the less developed countries. Large wealth differences across countries is a modern-day phenomenon starting in the 19th century and these divergences are widening over time. Some countries with certain institutions have caught up very quickly, however, within a generation, while other nations stagnated because of poor institutions and policies. Wealthier countries reap many benefits, including better health outcomes and longer lifespans. In the video “Are the Poor Overwhelmed?” the focus is on the psychology of poverty. The issue is framed through an economic lens as a question of how much motivation someone has to tackle a difficult problem when the person has limited time and energy and she can only make incremental progress on the problem. The incentive to take care of some tasks is low when there are many tasks that have to be carried out to solve the overall problem. Thus, giving poor people some help may give them a greater incentive to solve other problems, which look more manageable. The third presentation, entitled “The Moral Consequences of Economic Growth,” makes the case that progress in the political and social arenas is dependent on progress in the economic arena, especially in developed countries. Improvements in the standard of living can lay the groundwork for a more open, fair, and forward-looking society and more tolerant and democratic political institutions. Take South Korea, for example, which is now a functioning liberal electoral democracy. Progress in these arenas can stall when there is inadequate economic growth or when this growth is not distributed in the right way. Thus, it can be very destructive to political institutions and the social fabric when the majority of the population experiences the stagnation of its living standards or, worse, declines in this standard of living. It is likely that this process is happening in the 21st century US.

Learning Outcomes

Through listening to these lectures, students learn about some of the basic contours of economic development, as viewed from a historical perspective, the standpoint of psychology, and the standpoint of politics. This module will facilitate a better appreciation of the many sources of economic development and the multiple implications of economic development.

Videos

Basic Facts of Growth and Development

Source/Attribution: Marginal Revolution University

Are the Poor Overwhelmed?

Source/Attribution: Marginal Revolution University

Building Resilient Communities: A Moral Responsibility | Nick Tilsen | TEDxRapidCity

Source/Attribution: TEDx Talks

Benjamin Friedman, The Moral Consequences of Economic Growth

(25 min (start at 10:30 to 35:50) - click image for video)
Source/Attribution: American Enterprise Inst.-Brookings Jt.Ctr.for Regulatory Studies