7/13/2004

Economics and Human Development

I recently read an article at the following URL: http://www.freetheworld.com/press070803.html
I was very curious as to how much correlation there was between economic freedom, GDP and human development. In this article it reads: "The more economically free a country, the greater the level of human development enjoyed by its citizens." It also quotes Laureate Milton Friedman who said, "Freeing people economically unleashes individual drive and initiative and puts a nation on the road to economic growth."

It does seem only natural to me, that allowing people to pursure their dreams through creative thinking and entrepreneurship could only increase economic growth. So, the question is, why don't all countries pursure this idea? Would their desire for control and power override a countries well-being? or is it just ignorance?

Also, as I thought about this article, I wondered if you could look in history and correlate any improvements in the economy with the invention of economists, because these people, especially at first, would seem to be very influential. Just a thought.

11 comments:

Lizzie said...
This comment has been removed by a blog administrator.
Rolf Tiblin said...

I would like to answer your question as to why don't all countries pursure this idea? Unfortunately things are not quite this simple. There are numerous factors involved. One would be that some countries lack the productivity to raise their level of economic growth. Another would be linked to poor education. Education plays a key role in the ability to reap the most from technology and application of creativity, which in return boosts the economy. Further, poorly educated people have a tendency to rely on others for subsistance and therefore limit their ability to grow and be creative. The last and most important reason countries fail to have the econmoic growth possible is directly linked to that countries leadership. If a leader can keep citizens dependent on government then he/she maintains all the power and wealth. The leadership has everything to gain and the citizens can only be subject to the will of their leaders.
Makes one realize how lucky we are the founders of this country figured this out over 200 years ago! We're still benefiting from it today.

kavindavis said...

I would like to further add to Rolf Tiblin comment. I spent two years in Brazil, and it was there that I realized the true value of education and I saw first hand that why we are so far advanced. In Brazil you dont have to go to school, some kids in Amarica might think thats not all that bad, but its very good that we have to go. Becouse now in Brazil you have lots of people who cant read, and if you cant read think how easy it is to learn eneything for yourself, you have to take everyones word for it. And for those who do get through high school, and want to go on to college, you have to take a test, and its only in the field you want to study. And along with you and probibly 2000 more people they will probibly except 100 to 200 people that take the test. So if human capital is esential to growth then they for shure have a problem to work out.

Boris said...

In regards to your comment about economists throughout history, there are a lot of them, and they did have a profound impact on the world. One person in particular, Adam Smith, is considered by many to be the most influencial person in bringing about what we now know as “modern economics.” His work took place in the late 1700s, a time when a huge economic increase was just around the corner. Who knows how much his ideas contributed to the growth that began in the early 1800s?

I would imagine that there are many more very influential economists from every culture. And yes, I do think that they are, and will continue to be, very important and influential people throughout history.

Lizzie said...

It seems natural to me too that allowing people to pursue their dreams through creative thinking and entrepreneurship would increase economic growth. This seems to go along perfectly with the “Romer” way of thinking. It seems that pride, or at least the belief that what each country is doing is correct and everybody else is wrong, is a huge obstacle on the path to economic growth and productivity for those countries. Of course, we did learn in class today the policies that promote growth. They are: 1) encouraging saving and investing, 2) controlling population growth (done individually and not forced by gov’t for best results), 3) encouraging education, 4) creating institutions that promote technological development, 5) promoting basic research and finally, 6) promoting openness to trade and idea. I tend to lean towards the idea that it is love-of-self rather than love-of-country that leads to a countries economic demise.

kamm said...

I really enjoyed reading this blog. I agree with the ideas that giving more economic freedom to the people will enhance human development and unleash initial drive and initiative. I think that one of the reasons many countries aren't open to this idea is because of the power that many governments have, and their unwillingness to give any of that power back to the people. If the leaders of these governments were interested in increasing the economic growth of the nation, I'm sure many of them would be willing to try this theory. Because most of these leaders are hungry for more power, they don't care how much their country is developing and growing economically, as long as they stay rich.

Anonymous said...

"I was very curious as to how much correlation there was between economic freedom, GDP and human development."

The truth is that there is a very very poor correlation between "economic freedom" and GDP. See Lindert's paper :" Why the Welfare State looks like a Free Lunch ?" ( http://www.international.ucla.edu/ccgr/article.asp?parentid=3584 )

Besides, there isn't a very strong correlation between GDP and human development. See the US' human development index.

Senator Miller said...

Well, anonymous, the writer of that paper has some excellent points. Thanks for showing that. I still agree with Mr. Friedman though, and it's still in my belief that institutions are the cause of growth in an economy, one of which is the liberty and other factors that promote creative technological growth.

metromut said...

The thought of when a country is economically free stimulates and adds to Human development makes sense. When a country is economically depressed people rely on the basic standards to live. Relying more on basic instincts than upper developed thought such as entrepreneurship. When they have food, and shelter readily availble to them they are able to explore, take intiative and unleash ideas and productivity that adds to a countries economic growth.

Dr. Tufte said...

Spelling problems in Rolf Tiblin's and Kavindavis' comments.

Fundamentally, I don't think this discussion is about freedom. The problem isn't freedom. There are a lot of free places that aren't rich. Rather, the issue is bureaucratic overreach. I may be cynical, but most people don't get involved in government out of the goodness of their own hearts - they get involved because they think they can make better decisions about other people than those people can themselves. And sometimes they can - many parents do this every day. To me, the real question is what are the limits on bureaucrats doing that, and how are bureaucrats punished for bad decisions?

Dr. Tufte said...

One last thought - Marx was arguably an economist, and he probably did more damage to human society than anyone in history.