ECONOMIC GROWTH AND ECONOMIC THEORIES

Economic Growth – Expansion of the nation’s wealth through the improvement of the standards of living. Trade cycle – The pattern of the economic growth of a certain country. Laissez Faire – A French word meaning “leave us alone”. Economic Factors: Money Machines Natural Resources Note: Economic and non-economic factors interrelate to pursue economic growth and development. Non-economic Factors: Culture Values Beliefs Attitudes

Causes of Economic Growth Advancement in Technology To be globally Competitive, a nation should be updated with the latest technology. Latest innovations can be very helpful in producing improved quality of products and services. Computerized machines, for example, speed up production. Improved Quality of Education Education is part of man’s necessities and is therefore important for the production of highly competitive manpower. High standard education is a proof that the government properly utilizes its resources, because it is able to provide instructional materials.

Proper Distribution of Resources Some resources are scarce or limited. The government must distribute these resources properly to its members. Balance of resources is achieved when all of its people are able to utilize them. Political Stability Good governance creates policies that improve the economy. Sometimes it is hindered by self-vested political motives, especially in the higher level of government. Political stability is a must if the government is serious in its economic campaign.

Incentives in Business By creating more business incentives, the government will attract more people to venture in business. this creates national economic growth

Economic Theories Laissez Faire Theory This theory states that the government should limit its power in the economic affairs of the country and leave it to the market experts. “Laissez Faire” is a French word meaning “leave us alone”. In this case, the business tends to be more efficient in competition

Keynesian Theory It is a theory that became so popular after World War II. Developed by British economist John Maynard Keynes, this theory focuses on macroeconomics. Contrary to “laissez faire”, it encourages government intervention in economic decisions. This theory works better in poorer countries than in richer ones. One disadvantage of Keynesian theory is that if the government in into graft and corruption, then the economic strategy and situations will be disastrous.

Invisible Hand theory It states that as an individual searches for the attainment of his personal goal, unknowingly, he promotes the best for all. This was advocated by one of the most influential British economist, Adam Smith during the 19th Century.

Ricardian Theory Developed by David Ricardo, this theory regards agriculture as a major factor in economic development. As a basic commodity, people cannot live without food. This advances the idea that land, as an important resource, should be used and maximized to the fullest to attain large harvest. This will result to the exportation of oversupplied agricultural products that will generate greater income for the country.

Socio-Psychological Theory It states that the formation of entrepreneurial values of the country can be traced in the social and cultural aspects of satisfying psychological wants. Kaldor Theory It states that the success in the country’s economy is brought about by modern innovations. Technological advancements of industries is of great advantage because it allows the production of products and services in bigger quantity.

Psychological Theory This theory refers to the motives and needs that brought economic growth. It can be attributed to the individual’s behavior, decisions, thoughts and actions. Sociological Theory Max Weber pioneered this theory that explains how western people succeeded in making their economy meet all the needs of the people, thus making their countries some of the richest in the world. according to this theory, success can be attributed to the emphasis of the Protestant people in hardwork and purposeful spending of money