1. Change and Constraints Outline Change Economic Systems Toffler and Three Waves Kondratiev and his Supercycles Open Society System Theory Constraints Population Growth Income Distribution

2. Economic Systems http://en.wikipedia.org/wiki/Economic_system

3. Toffler and Three Waves http://en.wikipedia.org/wiki/Toffler Compare: Huntington, Marx

4. Kondratiev and his Supercycles http://en.wikipedia.org/wiki/Kondratiev_wave

5. Change and Open Society http://en.wikipedia.org/wiki/Open_society Compare: Marxism, Fukuyama

6. System Theory http://en.wikipedia.org/wiki/System_Theory

7. System Theory One of thousands of models of a social system One of thousands of models of a social system Social system develops through interactions Social system develops through interactions (Source: Hayami: Development Economics)

8. Population Growth In the history of advanced economies, population growth was endogenous – induced by accelerated economic growth In the history of advanced economies, population growth was endogenous – induced by accelerated economic growth Population explosion is exogenous Population explosion is exogenous Theory of demographic transition – four phases Theory of demographic transition – four phases (Source: Hayami: Development Economics)

9. Population Growth Model 1: Malthus – a natural instinct to maximize the number of children: Is this assumption valid now? Model 1: Malthus – a natural instinct to maximize the number of children: Is this assumption valid now? Model 2: Model 2: What are the utilities and disutilities of having children? What are the utilities and disutilities of having children? Can you interpret the diagram for the early stage of industrialization (from 0 to 1) and for the advanced modern society? Can you interpret the diagram for the early stage of industrialization (from 0 to 1) and for the advanced modern society? Both models give the same results for the early stage of development (economic growth increases population) Both models give the same results for the early stage of development (economic growth increases population) (Source: Hayami: Development Economics)

10. Income Distribution Lorenz Curve Lorenz Curve Gini Coefficient Gini Coefficient (Source: Hayami: Development Economics)

11. Income Distribution The inverted U shape hypothesis The inverted U shape hypothesis (Source: Hayami: Development Economics)

12. Income Distribution Is the inverted U shape hypothesis relevant in time, too? Is the inverted U shape hypothesis relevant in time, too? (Source: Hayami: Development Economics)

13. Income Distribution Major deviation are former socialist economies, during transition, danger arises for Gini coefficient to move upwards Major deviation are former socialist economies, during transition, danger arises for Gini coefficient to move upwards

14. Income Distribution Attempts of redistribution of income and assets Attempts of redistribution of income and assets Taxes and transfers (not effective in developing economies) Taxes and transfers (not effective in developing economies) Land reform – effective only in beneficial social and political conditions Land reform – effective only in beneficial social and political conditions Taxation of land assets in proportion to the asset value – requires establishment of a land registry system Taxation of land assets in proportion to the asset value – requires establishment of a land registry system