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Global Economic Growth Your Role In This Emerging Phenomenon

Date post:12-Nov-2014
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Speaking to a crowd of more than 1,000 students and other members of the University of Texas at Austin community, Dean Tom Gilligan used colorful charts and detailed graphs to explore trends in prosperity and poverty around the world. He explained how gross domestic product (GDP) is used as a measurement tool, how “real GDP” and “GDP per capita” are calculated, and how these figures are used to compare economies across regions, across populations and across the world.
  • 1. Global Economic Growth Your Role in This Emerging Phenomenon Dean Thomas W. Gilligan
  • 2. State of Global Poverty
    • World Bank Analysis on Poverty
      • http://devdata.worldbank.org/atlas-mdg/
    • Significant fraction of humans live in extreme poverty
      • This poverty has dire consequences
    • Rate at which this poverty is falling varies widely across regions
      • Some areas are improving swiftly (e.g., China)
      • Some areas are hard cases (e.g., Africa)
    • Surprisingly, its mostly very good news
      • 80/20 versus 20/80 ( The Bottom Billion , P. Collier)
  • 3. Purpose of Tonights Lecture
    • Trends in Global Economic Prosperity
      • Measuring Economic Prosperity
      • Economic Prosperity and Human Well-Being
      • Some Facts about Economic Prosperity in the Developed and Emerging World
    • Key Determinants of Economic Growth
    • Challenges to Economic Growth
      • Economic Growth and Income Inequality
      • Economic Growth and the Environment
    • Your Part in Emerging Global Prosperity
      • Great chance to make a BIG difference
  • 4. Measurement of Economic Prosperity
    • Gross Domestic Product (GDP)
      • Value of all goods and services produced and sold through market exchange?
        • At a particular point in time?
          • Admits dynamic comparisons
            • Growth rate computations
        • Within a particular location or industry?
          • Admits geographic and sectoral comparisons
            • Relative market performance
    • Fairly controversial (conceptually)
      • What does it mean? Are people better off with more active markets? (more later)
      • What does it not measure?
  • 5. Gross Domestic Product (GDP) Expenditure Approach to GDP Accounting: United States, 2008 Source: U.S. Bureau of Economic Analysis National Spending Identity: GDP = C + I + G + (EX IM) Types of Expenditure Billions of Dollars % of GDP Personal Consumption C 10,057.9 70.51 Gross Private Investment I 1,993.5 13.98 Government Spending G 2,882.4 20.20 Exports EX 1,859.4 13.04 Imports IM 2,528.6 17.73 Gross Domestic Product GDP 14,264.6 100.00
  • 6. Historical Trends in U.S. GDP
    • How has the U.S. economy grown and its components changed over time?
    • The answer requires some caveats:
      • Must adjust for changes in inflation
        • Lets use prices in some base year to compute real GDP across many different years
          • Accounts for GDP changes due to price differences
      • Must adjust for changes in population
        • Lets divide GDP by population to compute a GDP per capita
          • Accounts for GDP changes due to entirely to population growth
  • 7. U.S. Economy Over Time Source: Economic Report of the President The CAGR of Real GDP Per Capita over the 1967-2007 period was 2%
  • 8. Geographic Trends in GDP
    • How different are economies over the globe?
    • The answer requires a currency standard or conversion to compare GDPs
      • One could use existing exchange rates (ERs)
        • Biased by relative prices of intl traded stuff
      • One could use exchange rates that represent relatively equal purchasing power across nations
        • Purchasing Power Parity (PPP): Currency ratio (i.e., exchange rate) that implies rough equality of buying power across two countries.
          • PPPs are typically close but not identical to ERs
  • 9. GDP Per Capita in Developed World Source: U.S. Department of Labor, Bureau of Labor Statistics
  • 10. GDP Per Capita in BRIC Countries Source: Organization for Economic Cooperation and Development
  • 11. Money and Human Well-Being
    • Does Money Guarantee Happiness?
      • We know miserable people of substantial means
    • Does Money Preclude Happiness?
      • If you believe this I volunteer to help
    • Might Money Contribute to Well-Being?
      • How can it? Where should we look?
        • Health outcomes
          • Longevity Does wealth contribute to length of life?
          • Child Welfare Does wealth reduce infant mortality?
        • Self-Assessed Satisfaction
          • Are people with more income happier?
  • 12. Per Capita GDP and Life Expectancy Source: Maddison, 2007
  • 13. GDP Per Capita and Childhood Health
  • 14. GDP Per Capita and Satisfaction
  • 15. Facts About Economic Prosperity
    • GDP Per Capita Varies Enormously Among Nations
    • GDP Per Capita Varies Enormously within Most Nations
    • Current high levels of GDP Per Capita are a relatively recent phenomenon
    • GDP Per Capita Growth Varies Widely in the Recent Capitalist Epoch
      • There have been growth successes
      • There have been growth failures
  • 16. Prosperity Varies Across Nations
  • 17. Prosperity Varies Within Nations - USA
    • The 90 th percentile in household income is over 11 times that of the 10 th percentile. The 10 th percentile household income is $12,162 in 2007 dollars.
    • Net household income adjusts gross income for taxes, capital gains and losses, non-cash governmental transfers, the EITC, employee health benefits and differences in the size of persons per quintile.
    Sources: U.S. Census Bureau for Gross Income and the Heritage Foundation for Net Income.
  • 18. High GDP Per Capita is a Modern Event
  • 19. GDP Per Capita Growth Various Greatly
  • 20. What Causes GDP Per Capita Growth? Source: Cowen & Tabarrok
  • 21. Innovation and GDP Growth
    • Technical Knowledge Matters
      • Innovations raise labor and capital productivity
      • Great inventions over time
        • wheel, writing, padded horse collar, mechanical clock, movable type, steam engine, textile manufacturing, network electricity, mass production, transistor, ARPANET, polymerase chain reaction
      • Scientific Revolution, 1550-1750
        • Major implications for navigation, understanding of the earths environment (e.g., weather, geology, etc.), medicine, and other important disciplines
      • Industrial Revolution (textiles, energy, metallurgy)
      • Equip per head grew by multiple of 250, 1820-2000
  • 22. Organization and GDP Growth
    • Composition Matters
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