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Economic reality: a macroeconomic perspective · Growth and development

Development and wellbeing indicators

A country can fill its coffers and, at the same time, breathe unbreathable air, age worse and live with less freedom than a poorer one. Growing and living better are not always the same thing: that is why we need to measure beyond GDP.

Before you start, make sure you know: The welfare state and redistribution (4th ESO)

Growth and development

Circle diagram showing economic growth as a part contained within the broader concept of development growth(GDP) development health · education freedoms · environment

Growth is part of development: it is one of its pieces, but not the only one.

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Explain the difference between economic growth and development. Can a country's GDP grow without improving the lives of the majority? Give a reasoned example.

Explain the difference between economic growth and development. Can a country's GDP grow without improving the lives of the majority? Give a reasoned example.

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Explain in your own words what a country's development is and what dimensions it includes besides income (health, education, freedoms, the environment). Why is…

Explain in your own words what a country's development is and what dimensions it includes besides income (health, education, freedoms, the environment). Why is development said to be "multidimensional"?

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Development approaches talk about expanding people's "capabilities" and real freedoms: being able to read, living healthily, participating, choosing your own life…

Development approaches talk about expanding people's "capabilities" and real freedoms: being able to read, living healthily, participating, choosing your own life project. Explain with an example why a person with income but without freedom or without health is not truly "developed".

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The Human Development Index

Diagram of the three fundamental dimensions of the Human Development Index: health, education and income health education income HDI
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What does the Human Development Index (HDI) measure and which three dimensions does it combine? Explain why it is considered a more comprehensive measure than GDP per…

What does the Human Development Index (HDI) measure and which three dimensions does it combine? Explain why it is considered a more comprehensive measure than GDP per capita.

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What does life expectancy at birth measure and what does it tell us about a country? Two countries with the same income per capita have life expectancies of $74$ and…

What does life expectancy at birth measure and what does it tell us about a country? Two countries with the same income per capita have life expectancies of $74$ and $83$ years: what hypotheses would you make about their healthcare systems, their diets or their inequality?

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Two imaginary countries: Kolia has an income per capita of $40.000\ \text{€}$ and a medium HDI; Osia has $28.000\ \text{€}$ and a very high HDI. a) How is this…

Two imaginary countries: Kolia has an income per capita of $40.000\ \text{€}$ and a medium HDI; Osia has $28.000\ \text{€}$ and a very high HDI.

  1. a) How is this combination possible? Explain what Osia must be doing right.
  2. b) Which country would you choose to live in and what criterion do you use to decide?
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What GDP leaves out

Conceptual diagram showing the activities and factors excluded from GDP, such as unpaid care and environmental damage GDP (measured output) outside: unpaid care unpaid care · environmental damage
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Name three quality-of-life indicators other than GDP (related, for example, to health, education, the environment or leisure time) and explain what each one captures…

Name three quality-of-life indicators other than GDP (related, for example, to health, education, the environment or leisure time) and explain what each one captures that GDP does not.

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Give three reasons why GDP does not accurately measure well-being, focusing on unpaid work, the shadow economy and environmental damage. For each one, explain with an…

Give three reasons why GDP does not accurately measure well-being, focusing on unpaid work, the shadow economy and environmental damage. For each one, explain with an example how it distorts the measure.

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An earthquake destroys part of a city. The following year, the region's GDP rises strongly thanks to reconstruction. a) Explain why GDP grows even though residents are…

An earthquake destroys part of a city. The following year, the region's GDP rises strongly thanks to reconstruction.

  1. a) Explain why GDP grows even though residents are worse off than before the earthquake: what does GDP count and what does it not count?
  2. b) What complementary indicator would better reflect the situation (wealth or assets destroyed, perceived well-being)? Reason your answer.
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Other indicators of wellbeing

Comparative chart of three countries contrasting GDP per capita with a quality-of-life index, showing that higher income does not necessarily mean greater wellbeing 40 28 32 62 88 79 country A country B country C
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What do the literacy rate and the average years of schooling measure? Explain why education is both a sign of development and one of its causes: what chain connects it…

What do the literacy rate and the average years of schooling measure? Explain why education is both a sign of development and one of its causes: what chain connects it to future income?

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What does the per capita carbon footprint measure? Reason why environmental indicators form part of future well-being even though they do not measure today's life: what…

What does the per capita carbon footprint measure? Reason why environmental indicators form part of future well-being even though they do not measure today's life: what is the relationship between current emissions and the development of the next generations?

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If two neighbours each look after their own children, GDP records nothing; if they decide to pay each other to look after the other's children, GDP rises, even though…

If two neighbours each look after their own children, GDP records nothing; if they decide to pay each other to look after the other's children, GDP rises, even though the work done is the same.

  1. a) Explain the paradox and what it says about what GDP measures (market transactions).
  2. b) Reason how this affects GDP comparisons between countries or between periods with different levels of women's participation in paid work.
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Back to the beginning: That country which fills its coffers but breathes polluted air and lives worse has economic growth, but not development: to measure its real wellbeing we must look at its HDI and its ecological footprint, not just its GDP.

Summary

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