1. Economic Growth How do we measure it?

2. Today’s Agenda Objective: To determine what is the best way to measure a countries success. Essential Skill: To explicitly assess information and draw conclusions.

3. Ranking Countries How to measure a countries success

4. Directions Each student gets a sheet with statistics for a given country Task is to match your statistics sheet correctly with its country If more than one student is a station –compete as to who is right (if your information is exactly the same-you are both right!-or wrong!)

5. Terms GDP GDP per capita % of government seats taken by women % of government spending on education # of cellphones per 1000 people obesity Free press score Traffic & commute rating

6. Range of the Top 22 GDP ($514 billion -15.6 trillion) GDP per capita ($3,800-51,700) % of women in government (4.1% -47.3%) % of government spending in education (8.96-25.61%) # of cellphones (258-1342) Obesity (1.9-33%) Free press score (10-92) Traffic & Commute (68-259)

7. Discuss Complete the reflection sheet from this activity. Think about what surprised you or what you already knew This completed worksheet will be turned in today

8. Happy Planet Index

9. Take an ipad Flip your reflection sheet over and use the website Happy Planet Index to answer the questions You have to click on a few different options/tabs

10. The World Economy Total GDP (2013): $87T Population (2013):7.1B GDP per Capita (2013): $13,100 Population Growth (2013): 1.0% GDP Growth (2013): 2.9% GDP per capita is probably the best measure of a country’s overall well being

11. Figure 39.2: P. 454

12. Figure 39.4: P. 456

13. RegionGDP% of World GDP GDP Per Capita Real GDP Growth United States$17T20%$53,0001.6% European Union$16T18%$35,0000.1% Japan$4.7T5%$36,3002.0% China$13T15%$9,8007.7% Ghana$90B.1%$3,5007.9% Ethiopia$118.2B.13%$1,3007.0% Note. However, that growth rates vary significantly across countries/regions. Do you see a pattern here? Source: CIA World Factbook (2013 Estimates)

14. At the current trends, the standard of living in China will surpass that of the US in 25 years! Or, will they? Per Capita Income That is, can China maintain it’s current growth rate?

15. Some countries, however, don’t fit the normal pattern of development Sudan GDP: $107B (#73) GDP Per Capita: $5,100 (#159) GDP Growth: -2.3% (#213) Macau GDP: $51.6B (#98) GDP Per Capita: $88,700 (#3) GDP Growth: 11.9% (#5) So, what is Sudan doing wrong? (Or, what is Macau doing right?) At current trends, Per capita income in Macau will triple to $273,000 over the next decade. Over the same time period, per capita GDP in Sudan will drop by roughly 25%to $4,000!!!

16. Generally speaking, productivity growth has been declining since WWII Annual Growth

17. IncomeGDP/CapitaGDP Growth Low< $1,0456.3% Middle$1,045 - $12,7464.8% High>$12,7463.2% As a general rule, low income (developing) countries tend to have higher average rates of growth than do high income countries The implication here is that eventually, poorer countries should eventually “catch up” to wealthier countries in terms of per capita income – a concept known as “convergence” Source: World Bank (2013 estimates)

18. Developing countries are well below their steady state and, hence should grow faster than developed countries who are at or near their steady states – a concept known as absolute convergence Examples of Absolute Convergence (Developing Countries) China (GDP per capita = $6,300, GDP Growth = 9.3%) Armenia (GDP per capita = $5,300, GDP Growth = 13.9%) Chad (GDP per capita = $1,800, GDP Growth = 18.0%) Angola (GDP per capita = $3,200, GDP Growth = 19.1%) Examples of Absolute Convergence (Mature Countries) Canada (GDP per capita = $32,900, GDP Growth = 2.9%) United Kingdom (GDP per capita = $30,900, GDP Growth = 1.7%) Japan (GDP per capita = $30,700, GDP Growth = 2.4%) Australia (GDP per capita = $32,000, GDP Growth = 2.6%)

19. Some countries, however, don’t fit the traditional pattern. Developing Countries with Low Growth Madagascar(GDP per capita = $900, GDP Growth = - 2.0%) Iraq (GDP per capita = $3,400, GDP Growth = - 3.0%) North Korea (GDP per capita = $1,800, GDP Growth = 1.0%) Haiti (GDP per capita = $1,200, GDP Growth = -5.1%) Developed Countries with high Growth Hong Kong (GDP per capita = $37,400, GDP Growth = 6.9%) Iceland (GDP per capita = $34,900, GDP Growth = 6.5%) Singapore (GDP per capita = $29,900, GDP Growth = 5.7%) Qatar (GDP Per Capita = $179,000, GDP Growth = 16.3%)

20. South Korea South Korea ranks 35th out of 179 nations in terms of economic freedom “Business freedom remains strong and serves as a source of vibrant economic growth. The competitive regulatory framework facilitates dynamic entrepreneurial activity. Business formation and operating rules are efficient and allow innovation. … Private property is secure, and expropriation is highly unlikely …”

21. North Korea And nation number 179? That would be North Korea: “The state continues to regulate the economy heavily through central planning and control. Entrepreneurial activity remains virtually impossible. … Property rights are not guaranteed. Almost all property, including nearly all real property, belongs to the state, and the judiciary is not independent. … As the main source of employment, the state determines wages.”

22. Global Economic Freedom Rankings: http://www.heritage.org/index/ranking http://www.heritage.org/index/ranking

24. Most countries follow the “usual” pattern of development 1 Developing countries have very little capital, but A LOT of labor. Hence, the price of labor is low, the return to capital is very high 2 High returns to capital attract a lot of investment. As the capital stock grows relative to the labor force, output, consumption, and real wages grow while interest rates (returns to capital fall) 3 Eventually, a country “matures” (i.e. reaches its steady state level of capital). At this point, growth can no longer be achieved by investment in capital. Growth must be “knowledge based” – improving productivity!

25. TED Talk http://www.ted.com/talks/hans_rosling_shows _the_best_stats_you_ve_ever_seen?languag e=en http://www.ted.com/talks/hans_rosling_shows _the_best_stats_you_ve_ever_seen?languag e=en