History of Economics

Economics 515
Midterm 1

1. Economic growth vs. economic development, define extensive growth & intensive growth

Economic growth is the sustained increase in the output of goods/services of a society.
Economic development is economic growth plus changes in technical and institutional arrangements by with output are produced.

Extensive growth- increase in output due to increase in inputs (labor force grows, land stock increases)
Intensive growth- increase in output per unit of input – productivity increases (technological change)

2. List 2 data sources researchers use to estimate historical standards of living; three indicators of economic development other than National Income measures of interest to economists

Data sources:
 Census, survey- population, demographic info, occupational distribution
 Tax records-production info, shipping info, exports/imports, wealth
 Church records- births, deaths, life expectancy
 Heights/skeletal remains-

Indicators of economic development:
 Life expectancy at birth- measure of well being
 Adult literacy (female and in total)- measure of human capital, how productive is labor force o Child labor- high literacy = low child labor o Female literacy- measure of how egalitarian society is

3. Explain 3 weaknesses of per capita GNP (or GDP) as a measure of economic well-being

Weaknesses:
 Doesn’t capture all economically important activities o black/informal mkt (larger in less developed countries), agriculture (own consumption), housework (diff goods/services more often provided in home (not mkt)
 Dollar value of good doesn’t always = “social” value o industrial revolution (wages↑ but pollution/disease rates↑), war (↑GDP w/out making better off), education (↑spending.. yield ↑standard of living beyond $ value)
 Welfare depends not only on size of national income but on its distribution
 Doesn’t account for differences in “cost of living” across time/space o “cost of living”- cost of