While production growth and industrialization have lifted living standards globally, unrestrained growth poses environmental risks. Some key points: - Industrialization and economic growth are relatively new phenomena historically. Most countries grew quickly after industrializing. - Higher production and GDP per capita are generally associated with lower poverty, but environmental impacts must be addressed. - Productivity gains, through more/better capital, skills, technology and resource use, are important for growth and living standards. But policies are needed to encourage sustainable practices. - There are no simple answers, as both economic development and environmental protection are important objectives. Balanced and innovative solutions are needed.

1. Is Production Growth the Key to
Saving the Environment and
Ending Poverty?
(hint: yes and no…)
0

2. 1Source: http://www.visualcapitalist.com/2000-years-economic-history-one-chart/

3. Industrial Revolution and Growth are “New”
2Source: http://www.visualcapitalist.com/2000-years-economic-history-one-chart/

4. Countries Can Grow Quickly
3

5. 4
Source: Dallas Federal Reserve Bank

6. 5Source: carpe diem blog

7. 6
Source: Dallas Federal Reserve Bank

8. 7
Source: Dallas Federal Reserve Bank

9. Potential Output
 Potential Output – the highest level of real GDP
that can be sustained over the long run
8

10. Actual vs. Potential
9

11. Rules Based Policy?
Discretion Rules Based

12. 11

13. 12

14. 13

15. 14

16. 15

20. Production and Growth
(~ch 12)
19

21. Objectives:
 Living standards?
 Productivity matters?
 What determines productivity?
 Policies to affect growth?
20

22. A typical family with all their possessions in
the U.K., an advanced economy
GDP per capita: $36,010
Child mortality rate: 0.5%
High school enrollment: 98%
DavidReed-fromMATERIALWORLD

23. A typical family with all their possessions in
Mexico, a middle income country
GDP per capita: $15,390
Child mortality rate: 1.6%
High school enrollment: 71%
PeterMenzel/menzelphoto.com

24. A typical family with all their possessions in
Mali, a poor country
GDP per capita: $1,040
Child mortality rate: 17.6%
High school enrollment: 31%
PeterMenzel/menzelphoto.com

25. Groceries!

26. Mexico
25

27. Great Britain
26

28. USA
27

29. Australia
28

30. Germany
29

31. Italy
30

32. Canada
31

33. France
32

34. Japan
33

35. China
34

36. Poland
35

37. Kuwait
36

38. Mongolia
37

39. Turkey
38

40. Mali
39

41. India
40

42. Bhutan
41

43. Chad
42

44. Ecuador
43

45. Guatemala
44

46. Need a Little Help…
 Suppose you have a new puppy and are going to
build a fence, what do you need?
45

47. Production and Productivity
 How do we increase production?
 Production Function
 Reduce poverty?
 Need more GDP per capita
 Productivity – output per unit of labor
46

48. Labor (L)
 Quantity of labor
47
Source: disabledworkerlaw.com

49. Physical Capital (K)
 Stock of equipment and structures
48Source: joblottools.co.uk

50. Human Capital (H)
 Knowledge and skills workers acquire through
education, training, and experience (skills!)
49
Source: vannw.org

51. Natural Resources (N)
 Nature’s inputs into production
 Water, land, mineral deposits…
50
Source: snapon.com

52. Technology (A)
 Society’s understanding of the best ways to
produce g&s
51
Source: disabledworkerlaw.com

53. Technology tells us how to combine inputs
to make output
X =

54. X =

55. =X

56. ( , , , )f=

57. ( , , , )
( , , , )f=
f=
NHKLAY
Production Function