1.Define the term economics and economy and write the types of economy.
2.what are the measure of economic development?
3.define sustainable development?
4.what are the challenges for India in attaining SDGs.? 5.What is inclusive growth?
6.write the sector of economy?
ECONOMICS AND ECONOMY:
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☆ ECONOMICS:
Economics is a social science concerned with the production, distribution, and consumption of goods and services. It studies how individuals, businesses, governments, and nations make choices on allocating resources to satisfy their wants and needs, trying to determine how these groups should organize and coordinate efforts to achieve maximum output.Economics can generally be broken down into macroeconomics, which concentrates on the behavior of the aggregate economy, and microeconomics, which focuses on individual consumers and businesses.
JS mill defined economics as the practical science of the production and distribution of wealth. Alfred Marshall said that Economics is a study of mankind in the ordinary business of life.in the words of Marshall ,Economics is on the one side a study of wealth and on the other and more important side a part of the study of man. Lionel Robbins said Economics is the science that studies human behaviour as a relationship between ends and scarce means which have alternative uses. basic assumptions of Robbins contains that the end are various. the term end mean wants. human wants are unlimited .means are limited .means like time, money and resources are limited .we can put time and money to alternative uses. for example through time is limited we can use it for different purposes .we can use time for earning money ,or we may enjoy it as a Leisure . all wants are not of equal importance.
Despite this view, economics has been pejoratively known as the “dismal science,” a term coined by Scottish historian Thomas Carlyle in 1849.He used it to criticize the liberal views on race and social equality of contemporary economists like John Stuart Mill, though some sources suggest Carlyle was actually describing the gloomy predictions by Thomas Robert Malthus that population growth would always outstrip the food supply. In fact Economics is a social science that deals with the creation of wealth from scarce resources: the production and distribution of goods and services of consumptions; the behaviour, interaction and well-being of the group involved in the above activities; there is a trade off involved in production and consumption. economics as a subject has been divided into two main parts:1. micro economics 2.macro economics.
• Micro economics:
Microeconomics is the study of the choices that individuals and business makes the way these choice interact in market and the influence of governments.Microeconomics shows conditions under which free markets lead to desirable allocations. It also analyzes market failure, where markets fail to produce efficient results.While microeconomics focuses on firms and individuals, macroeconomics focuses on the sum total of economic activity, dealing with the issues of growth, inflation, and unemployment and with national policies relating to these issues.Microeconomics also deals with the effects of economic policies on microeconomic behavior and thus on the aforementioned aspects of the economy. Particularly in the wake of the Lucas critique, much of modern macroeconomic theories has been built upon microfoundations—i.e. based upon basic assumptions about micro-level behavior. www.vinayiasacademy.com
• macro economics:
Microeconomics is the study of the performance of the national economy and the global economy.
It focuses on the aggregate changes in the economy such as unemployment, growth rate, gross domestic product and inflation.
Macroeconomics analyzes all aggregate indicators and the microeconomic factors that influence the economy. Government and corporations use macroeconomic models to help in formulating of economic policies and strategies.
Macroeconomics deals with the performance, structure, and behavior of the entire economy, in contrast to microeconomics, which is more focused on the choices made by individual actors in the economy (like people, households, industries, etc.The two main areas of macroeconomic research are long-term economic growth and shorter-term business cycles.Macroeconomics, as it is in its modern form, is often defined as starting with John Maynard Keynes and the publication of his book The General Theory of Employment, Interest and Money in 1936. Keynes offered an explanation for the fallout from the Great Depression, when goods remained unsold and workers unemployed. Keynes’s theory attempted to explain why markets may not clear.
☆ ECONOMY:
The economy is according to the Oxford Learner’s Dictionary,’ the relationship between production, trade and the supply of money in a particular country or region. and it is effective management of the resources of a community or system.
A given economy is the result of a set of processes that involves its culture, values, education, technological evolution, history, social organization, political structure and legal systems, as well as its geography, natural resource endowment, and ecology, as main factors. These factors give context, content, and set the conditions and parameters in which an economy functions. In other words, the economic domain is a social domain of human practices and transactions. It does not stand alone.
The economy covers all activities related to production, consumption and trade of goods and services in an area formed by economic agents. economic agents can be individual, business ,organisations or governments.
A market-based economy is one where goods and services are produced and exchanged according to demand and supply between participants (economic agents) by barter or a medium of exchange with a credit or debit value accepted within the network, such as a unit of currency. A command-based economy is one where political agents directly control what is produced and how it is sold and distributed. A green economy is low-carbon, resource efficient and socially inclusive. In a green economy, growth in income and employment is driven by public and private investments that reduce carbon emissions and pollution, enhance energy and resource efficiency, and prevent the loss of biodiversity and ecosystem services.A gig economy is one in which short-term jobs are assigned or chosen via online platforms. New economy is a term referred to the whole emerging ecosystem where new standards and practices were introduced, usually as a result of technological innovations.
A given economy is the result of a set of processes that involve its culture, values, education ,Technology evolution ,history, social organisation ,political structure and legal system ,Geography, natural resources endowment ,Ecology ,etc.that is why no two economics are the same .the scientific study of the economy and the factors affecting the economy are called economics.
■ TYPES OF ECONOMY :
Based on the Criterion of degree of individual freedom and profit motive, economics are classified as :
- capitalist economy
- socialist economy
3.mixed economy
• capitalist economy:
A capitalist economy is an economic system in which the production and distribution of commodities take place through the mechanisms of free markets. It is also called as market economy aur free trade economy .each individual be it a producer ,consumer or resource owner has considerable economic freedom.
So a capitalist economy is a liberal economy. This means only the free market will determine the supply, demand, and prices of the products. There is no direct government intervention other than to control monopolistic practices in the economy.
As we said earlier a capitalist economy is the most predominant in the current global economy. USA, UK, Germany, Japan, Singapore all are classic examples of capitalist economies.
The right to private property is an important feature of capitalism. individuals have the right to buy and own property. there is no limit and they can own any amount of property .they also have legal right to use their property in any way they like. profit is the only motive for the functioning of capitalism .there is freedom of choice to both Producers and Consumers. market forces like demand, supply and price are the signals to direct the system .as most of the basic economic problems are expected to be solved by marketing forces, the government has minimal role in the economy.
Price mechanism is like an invisible hand that controls the workings of a capitalist economy. The forces of supply and demand will determine the prices and the level of productions in the economy. The government will not have any interference in this matter. In a capitalist economy, every farmer trade or Industrialist can increase the productivity to meet his own self interest .this in turn leads to increase in income, saving and investment. capitalist Mein create extreme inequalities in income and wealth. the inequality may lead to monopoli .Mega corporate units replaced smaller units of production .they ultimately emerge as multinational corporation or trans National Corporation. they often Hike prices against the Welfare of consumers .capitalism encourages make animation and autumn automation. this results in an employment particularly in labour a surplus economy. as stringent labour laws are enacted for the Exclusive property profit -motive of capitalist. fire And Higher policy becomes the order of the day. as the profit margin in basic social sectors ,like literacy ,Public Health, poverty, drinking water ,etc.,is low, capitalist do not want to invest in them.
• socialist economy:
In a socialist economy,the means of production are owned and operated by state. All decisions regarding production and distribution are taken by the central planning authority .the socialist economy is also called a planned economy or command economy .the government plays an active role. social welfare is given importance, and equal opportunity is given to all.
A socialist economic system is characterized by social ownership and operation of the means of production that may take the form of autonomous cooperatives or direct public ownership wherein production is carried out directly for use rather than for profit.Socialist systems that utilize markets for allocating capital goods and factors of production among economic units are designated market socialism. When planning is utilized, the economic system is designated as a socialist planned economy. Non-market forms of socialism usually include a system of accounting based on calculation-in-kind to value resources and goods.
As a term, socialist economics may also be applied to the analysis of former and existing economic systems that were implemented in socialist states such as in the works of Hungarian economist János Kornai. 19th-century American individualist anarchist Benjamin Tucker, who connected the classical economics of Adam Smith and the Ricardian socialists as well as that of Pierre-Joseph Proudhon, Karl Marx and Josiah Warren to socialism, held that there were two schools of socialist thought, namely anarchist socialism and state socialism, maintaining that what they had in common was the labor theory of value. The right to private property is limited. all properties of the country are owned by the state .most of the economic policy decisions are taken by a centralised planning authority .there is stability in the system because the production and consumption of goods and services are well regulated .the state provides free education, cheap and congenial housing, public health amenities and social security for the people. there is a state Monopoly, but it produces quality goods at reasonable price. there is no concentration of wealth. people in socialist economic system work out of Fear Of Higher authorities .the system does not give any initiative for the people to work hard there is no freedom of occupation. the consumer’s choice is very limited. everything is rigid and technological changes are limited. gradually in the absence of competition the system may be inefficient - • Mixed economy:
- A mixed economy is variously defined as an economic system blending elements of market economies with elements of planned economies, free markets with state interventionism, or private enterprise with public enterprise. In a mixed economy, both public and private institution exercise economic control. the public sector functions as a socialist economy and the private sector as a free Enterprises economy .a mixed economy possesses the freedom to hold private property ,to earn profit, to consume, produce and distribute and to have any occupation .if these freedoms affect public welfare adversely, they are regulated and controlled by the state.
In most cases, particularly with reference to Western economies, the term mixed economy refers to a capitalist economy characterized by the predominance of private ownership of the means of production with profit-seeking enterprise and the accumulation of capital as its fundamental driving force.[4] In such a system, markets are subject to varying degrees of regulatory control and governments wield indirect macroeconomic influence through fiscal and monetary policies with a view to counteracting capitalism’s history of boom/bust cycles, unemployment and income disparities. In this framework, varying degrees of public utilities and essential services are provided by government, with state activity often limited to providing public goods and universal civic requirements. This includes healthcare, physical infrastructure and management of public lands.[4][5] This contrasts with laissez-faire capitalism, where state activity is limited to providing public goods and services as well as the infrastructure and legal framework to protect property rights and enforce contracts. Mixed economy is expected to retain only the merits of the two system. for instance ,the government is expected to allow private investment, but the government also controls monopolies. planning of government direct the relative roles of public and private sector and their respective jurisdictions. it has been seen that the co-ordination between the public and private sector remains poor in a mixed economy. the lack of policy co-ordination result in economic fluctuations. again there is every chance that the public sector works inefficiently. there is too much of red tapism and corruption leading to delays in decision making and project implementation.
Alternatively, a mixed economy can refer to a socialist economy that allows a substantial role for private enterprise and contracting within a dominant economic framework of public ownership. This can extend to Soviet-type planned economies that have been reformed to incorporate a greater role for markets in the allocation of factors of production.
● ECONOMIC GROWTH VS ECONOMIC DEVELOPMENT:
Economic growth refers to an increase over time in a country real output of goods and services or real output per capita income
. it is a quantitative measure that shows the increase in the number of commercial transactions in an economy. growth relates to a gradual increase in one of the components of gross domestic product consumption ,government spending, investment and net exports. economic growth is a more relevant metric for progress and development countries. but it’s widely used in all countries because growth is necessary condition for development.A country’s general economic health can be measured by looking at that country’s economic growth and development. Let’s take a separate look at what indicators comprise economic growth versus economic development.
Let’s first examine economic growth. A country’s economic growth is usually indicated by an increase in that country’s gross domestic product, or GDP. Generally speaking, gross domestic product is an economic model that reflects the value of a country’s output. In other words, a country’s GDP is the total monetary value of the goods and services produced by that country over a specific period of time.
For example, let’s say that a special berry grows naturally only in the country of Utopia. Natives to Utopia have used this berry for many years, but recently, a wealthy German traveler discovered the berry and brought samples back to Germany. His German friends also loved the berry, so the traveler funded a large berry exporting business in Utopia. The new berry exporting business hired hundreds of Utopians to farm, harvest, wash, box and ship the berries to grocers in Germany.
In one calendar year, the berry exporting business added over one million dollars to Utopia’s GDP because that’s the total value of the goods and services produced by the new berry exporting business. Since Utopia’s GDP increased, this means that Utopia experienced economic growth.
In the United States, our periods of large economic growth are mostly associated with new technology. The Industrial Revolution and the development of the Internet are two examples. When new developments bring an increase in output capacity, economic growth usually follows.
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Economic development:
A country’s economic development is usually indicated by an increase in citizens’ quality of life. ‘Quality of life‘ is often measured using the Human Development Index, which is an economic model that considers intrinsic personal factors not considered in economic growth, such as literacy rates, life expectancy and poverty rates.
While economic growth often leads to economic development, it’s important to note that a country’s GDP doesn’t include intrinsic development factors, such as leisure time, environmental quality or freedom from oppression. Using the Human Development Index, factors like literacy rates and life expectancy generally imply a higher per capita income and therefore indicate economic development. Economic development implies an upward movement of the entire social system in terms of income, saving and investment along with progressive changes in socio economic structure of country. development relates to growth of human capital index ,is a decrease in inequality figures and structural changes that improve the general population quality of life economic development is more relevant to measure progress and quality of life. Economic development is more relevant to measure progress and quality of life in developing Nations. development must be conceived for as a multi-dimensional process involving major change in a social structure ,popular attitudes and national institution as well as the acceleration of Eco -growth the eradication of poverty and reduction of inequality of wealth. in contrast ,economic development applies to developing countries to measure progress ;and economic growth result in quantitative
changes, but economic development brings both quantitative and qualitative changes. growth of an economy can be measured through the increase in its size in the current year in comparison to previous year, but economic development includes not only physical but also non physical aspect that can only be experienced and like improvement in the lifestyle of inhabitants, increase in individual income, improvement in technology and infrastructure, etc.
■ MEASURE OF ECONOMIC DEVELOPMENT:
Economic development is a broader concept than economic growth. Development reflects social and economic progress and requires economic growth. Growth is a vital and necessary condition for development, but it is not a sufficient condition as it cannot guarantee development. The term economic development is a multi-faceted concept, embodying not just national income and its growth, but also achievements on other fronts such as reductions in infant mortality ,higher life expectancy ,advances in literacy rates, widespread access to Medical and Health Services and so on. per capita income is sometimes used as an indicator for overall economic development, but should not be indefinite in defined conceptually with development in the broaders sense.
1.Human Development Index
- physical quality of life index
- 2.quality of life index
- gross national happiness
- .world happiness report
- human poverty index
- inequality adjusted Human Development Index
- gender Development Index
- gender inequality index
- .good country index
- Human Development Index:
The HDI was created to emphasize that people and their capabilities should be the ultimate criteria for assessing the development of a country, not economic growth alone. The HDI can also be used to question national policy choices, asking how two countries with the same level of GNI per capita can end up with different human development outcomes. These contrasts can stimulate debate about government policy priorities.
The Human Development Index (HDI) is a summary measure of average achievement in key dimensions of human development: a long and healthy life, being knowledgeable and have a decent standard of living. The HDI is the geometric mean of normalized indices for each of the three dimensions.
The health dimension is assessed by life expectancy at birth, the education dimension is measured by mean of years of schooling for adults aged 25 years and more and expected years of schooling for children of school entering age. The standard of living dimension is measured by gross national income per capita. The HDI uses the logarithm of income, to reflect the diminishing importance of income with increasing GNI. The scores for the three HDI dimension indices are then aggregated into a composite index using geometric mean. Refer to Technical notes for more details.
The HDI simplifies and captures only part of what human development entails. It does not reflect on inequalities, poverty, human security, empowerment, etc. The HDRO offers the other composite indices as broader proxy on some of the key issues of human development, inequality, gender disparity and poverty
A fuller picture of a country’s level of human development requires analysis of other indicators and information presented in the statistical annex of the report.
At the international community seeks to define a new development agenda post- 2015 ,the Human Development approach remains useful to articulating the objective of development and improving people well-being by ensuring and equitable, sustainable and stable planet .The HD I is defined as the composite statics used to rank countries by level of Human Development. the first HD I was published in 1990 by the United Nations development programme. the HDI is a composite statistic of life expectancy ,education and income per capita. the indicators are used to Rank countries into four tiers of Human Development. a country scores higher HDI when the life expectancy at birth is longer, the education period is longer and the income per capita is higher. the HD I was developed by the Pakistani economist Mahbub Ul Haq working alongside Indian economist Amartya Sen, often framed in terms of wether people are able to be and do desirable things in their life , and was published by the UNDP . the HDI embodies Amartya sen’s capabilities approach to understanding human well-being, which emphasizes the importance of end over means presently, it rank 188 countries of the world.
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Three dimensions of HDI.
- Long and healthy life
The long and healthy life dimension is measured by life expectancy at birth. The life expectancy at birth is a statistical measure that an average individual is expected to live based on certain demographic factors such as the year of birth and current age. The long and healthy life dimension uses life expectancy at birth as its indicator , defined as the number of year a newborn infant could expect to live, if prevailing patterns of Ages specific mortality rates at the time of birth was to stay the same throughout the child’s life. the life expectancy index is calculated using the minimum value of 20 years and maximum value of 85 years. this maximum and minimum values are fixed goal post adopted in the 2014 HDI.
• knowledge:
This is a second dimension in the HDI. The indicators of education are the expected years of schooling and the mean years of schooling. According to the UN, the average maximum years of schooling is 18 years, while the mean maximum years of schooling is 15 years. The education component of the HDI is measured by two indicators: one mean year of schooling for adult age 25 years and older and second one the expected year of schooling for children of school entering age. estimate for means years of schooling are based on the duration of schooling and each level of education. expected years of schooling estimates are based on two factors:enrollment by age at all.levels of education and. and the number of children of school age in the population for each level of education. It is important to note that the duration of each level of education May differ from country to country ,and this is taken into account when calculating mean and expected year of his schooling. the two indicators are first normalised using a minimum value of zero and maximum value of 15 for mean year school and aged 18 for expected year of schooling as societies can exist without formal education ,the minimum value of zero is used for both education variables.
• Decent standard of living:
The standard of living is usually measured by the gross national income (GNI) per capita. The GNI indicates the total domestic and foreign output created by the residents of a certain country. The income component it is measured using the natural logarithm of gross national income per capita adjusted by PPP. for this component, the minimum value of PPP $100, this low value is justified by the considerable amount of unmeasured Subsistence and non market production in economy is close to the minimum, which is not captured in the official data.and the maximum value is set and PPP $ 75000.
The HDI takes the natural logarithm of income to reflect the diminishing importance of income along Richer country income is worth much more to a poor person than a rich one that is ,the ability to transform additional income into equivalently valuable functioning declines as income. the index is computed by normalising the natural logarithm of GNI with respect to the natural logarithm of the minimum and maximum values.
• Aggregation and weights:
After calculating the Indices for the three dimensions, the scores are aggregated into a composite index using a geometric mean, which is the cube root of the product of the three dimension indices. the Global HDI assigns equal weight to all three dimensions indices, as it has since 1990 the two education Sub indices. are also weighted equally .the choice of equal weights is based on the normative judgement that all three dimensions are equally important .the 2010 human development report introduced and IHDI. while the simple HDI remains useful it stated that the IHDI is the actual level of human development and the HDI can be viewed as an index of potential Human Development .
