Comparison of the Economic Ideas of GDP Growth - Essay Example

? Comparison Ideas of GDP Growth In development of a or an organisation, there are different aspects oflife that cause the growth. On the other hand, there are various ideas that people use to predict development in an institution and these determines the various strategies they implement to realise productivity and maximise the profit margin. Some of the common ideas that are used to predict development and growth in different organisations or countries include the United Nations Development Programme’s (UNDP’s) human development ideas, the neoclassical view of utility and the macroeconomic idea. These offer different explanations to development and trends of growth that an institution may have gone through or the ones it may experience in the future. These ideas of explanations have different factors on which they focus so that they can validate their argument about growth of economy and increase the Gross Domestic Product (GDP). Using these ideas, different people have given various prediction of the performance of a particular institution in the economy but some of the explanations have been disputed and contradicted by the other theorists who use different explanations for similar situations (Sen, 1983, p. 754). These offer some form of explanation to the growth of economy but in some cases, they are similar. An evaluation of these will offer an insight into how growth in GDP occurs in an economy of a country (United Nations Development Programme, 2000 p. 5-8). The UNDP idea of human development as a determinant for growth of economy explains that management of abilities of the people is important because it influences their involvement in economic activities. According to the UNDP’s human development idea, economic growth happens in situations where people have wide areas for making choices. This means that according to them, development starts at the level of enhancing people’s capabilities so that they can have freedom to participate in as many economic activities as they could. The abilities of a person to do as many economically viable things contributes to the increase in chances of participation so that he or she will not be idle in a time that he or she can be productive (Nussbaum, 2000, p. 27). The human development idea of the UNDP emphasises some factors like education, life expectancy, gross national income and other issues that are standardised in the three main factors as a measure of people’s capability. The idea is that those who have a long life, have attained high education in a country that has high gross national income are likely to be very productive. This is because these people will be able to choose different economic activities that can bring income for their own as well as contribute to the economy of their country. On the other hand, it implies that if a person lives a short life, have low education attainment in a country that has low gross national income he or she is likely to be very unproductive. This is because they will contribute to very little benefit to the country in which they live since they have very few choices to make in the pool of economic activities available to all people. The human development idea of the UNDP emphasises the importance of both resources and capability to exploit them so that they can increase the income or benefit to the people and consequently impact the national economy. According this idea, availability of resources without capability to exploit them has no advantage to the people who have them (United Nations Development Programme, 2000, p. 12). The neoclassical view of utility is an idea that presents a different perspective into the explanation of development or the economic growth of individuals and consequently that of the country. The idea of the neoclassical view of utility explains that people’s preferences are important in determining the things they can do in the economy to increase their individual income and consequently that of the country. This means that a person in an economy can make choices of the things he or she can do at any particular time even with the availability of opportunities. However, the theorists also argue that utility is importance of preference of individuals involved because preference only does not guarantee that the economic activity a person prefers, will be acted upon. These idealists therefore, place utility as a more important thing than preference in their determination of the choices people can make in the economy. In this respect, the utility is the factor that people need to consider in their determination of the things that they can do in the economy. As opposed to the UNDP‘s human development idea, the neoclassical view of utility makes the assumptions that individuals have available opportunities and resources from which they can choose (Anderson, 2002, p. 212). The idea of the neoclassical view of utility emphasises that what people do is the most important in the growth of the GDP of a region because even if people have capability and there are resources and they do not utilise them, there will be no change in economy growth rate. This idea is relevant to explain why economic growth of a region or country can be fast or slow. This is because what people do may have high or low economic value and therefore, an economy can change by making a certain choice in preference to another. Although people have their own preferences for various things they can do, if they do not act on what they prefer, the preferences have no economic significance (Anderson, 2002, p. 219-223). The macroeconomic idea of constant growth of GDP is an important way of explaining the development of a country or an individual. This idea focuses on the performance of the larger economy as a factor in determining the growth of individuals. The macroeconomic idea is focused on the factors of the economy because it does not perform at the same rate at all the times in all places. This is because at one time, the economy is at very high rate of growth in which the rates of exchange are high and at other times, the rates are very low and therefore, the economy is not likely to grow fast (Broad and Cavanagh, 2009, p. 43). The macroeconomic idea of constant GDP growth targets to determine the point at which the economy is performing so that the idealists can explain why the economy is likely to grow or to retrogress. Using this idea, the economic growth is not dependent on the opportunities’ availability and what people prefer and do or even their capabilities. Economic performance of one person is dependent on the performance of the larger economy where the condition may be good and therefore, the contribution of such an individual will be felt in the general economy or it may be poor and therefore, it will influence adversely the GDP (Broad and Cavanagh, 2009, p. 116). The various ideas of explaining the development have different areas of emphasis because the theorists who advocate for them feel strongly that these are the things that ought to form the pillars of growing economy. Although the factors that the different idealists have can influence the growth of GDP, theorists differ because they argue that if what they emphasise are observed, the economy can grow at a higher rate than when they are ignored. For the UNDP’s human development, capability is important to enhance economic growth, to the neoclassical view of utility, what people choose to do is important and according to the macroeconomic idea of constant growth, the economic performance of the wider economy is key in determining growth in an individual or institution. References Anderson, T., (2002). The Political Economy of Human Rights. Journal of Australian Political Economy. Volume 1 Number 50. Pp 200-227. Broad, R., & Cavanagh, J. (2009). Development redefined: How the market met its match. Boulder: Paradigm Publishers. Nussbaum, M. C. (2000). Women and human development: The capabilities approach. Cambridge: Cambridge University Press. Sen, A., (1983). Development: Which Way Now? The Economic Journal, Volume 1 Number 93. Pp 745-762. United Nations Development Programme, (2000). Human development report 2000. New York: Oxford University Press. Read More