low levels of living and low per capita incomes
Question 2: low levels of living and low per capita incomes are usually associated together. Countries with low per capita incomes usually show low levels of living standard or vice versa. Criteria of low levels of living involve most aspects of society and its members, such as health, education, housing, etc. low per capita income is usually expressed in monetary figures, such as GDP per capita or GNP per capita. World Bank defines low income countries (LICs) as “GNP per capita of less than $976 in 2008” (Todaro and Smith, 2011:39).compare to high income countries ($11,456 or more), this is substantially low income per capita. It is unusual to see a country as a whole, has a low of living with high levels of per capita income. Three objectives of development that are discussed in page 22 of Economic development, all strive towards to better living, and better living requires certain amount monetary means.
However, by referring to Human Development Index (HDI), we can get a sense of the levels of living. HDI measures “national socioeconomic development, based on combining measures of education, health, and adjusted real income per capita” (Todaro and Smith, 2011:48). Using HDI, it is very hard to find countries with low level of living with high income per capita.
Question: 8: Todaro and Smith claims that “high rates of growth have been sustained by the interplay between mass applications of many new technological innovations based on a rapid advancement in the stock of scientific knowledge and further aIDitions to that stock of knowledge made possible by growing surplus wealth” (2011:76). Social and institutional innovations can be considered as the final tangible applications and evidence of the scientific and technological innovations. Developing scientific and technological innovations enables most countries to move forward on their economic statue. An advanced technology puts the country with information advantage compare to other countries without scientific or technological innovation. Usually highly developed countries have advanced science or technology due to active research and development (R &D). This could require social or institutional infrastructures, such as universities or government institutions that promote tech or science development. Those advanced infrastructure usually increase the productivity of the country and heavy investment on educations, which can be considered as social and institutional advancement, bring the technological and scientific inventions and innovations.
The U.S’s higher education institutions are heavily invested and most of top research universities are located in the U.S.. Investing in education produce workers with much more information and skills, moreover, advanced research facilities or advanced institution systems enable researchers to complete their task much more efficiently.
Question 10: Todaro and Smith defineseconomic institutions as “Humanly devised constraints that shape interactions in an economy, including formal rules embodies in constitutions, laws, contracts, and market regulations, plus informal rules reflected in norms of behavior and conduct, values, customs, and generally accepted ways of doing things” (2011:84).As defined by Todaro and Smith, good economic institutions have capability of enforcing their influence, without so much restriction, in economic sectors. Moreover, those institutions should be independent and transparent while exercising their duty.
Government oversight institutions, regardless of their fields, can be considered as economic institutions. Their role on investigating wrong doing or foul plays of economic activities can be considered as good economic institutions. Moreover, law institutions have judicial power to restrict wrong doings. Comparatively many advanced economic countries have well-established government oversight and judicial institutions, compare to developing nations. In advanced economies, their economic institution systems are much more organized and systemized than developing countries. Those institutions makes harder for someone to cheat while conducting business activities and harder for people to cheat within economic institutions.
Many developing countries lack economic institutions than developed nations. In developing nations, it is comparatively easy to deceive economic institutions because those economic institutions simply do not have enough power to “shape interactions in an economy” (Todaro and Smith, 2011:84). One of the roots of the problem with developing countries not having good economic institutions is general people’s conception that those good institutions are not necessary to bring economic growth. If people developing nations do not feel it is necessary to establish those good institutions, they will not begin the process of establishing those institutions.
One of way to change people’s mind is to educate them and provide better information that those economic institutions can help the developing nation to be advanced, especially economically. If majority of people have those information, they will elect government officials to implement those institutions. Education is very crucial, not just for establishing economic institutions, but also long term economic growth. We already have seen some evidence in countries, such as China and India. Although they still have long way to go, heavy investment in education in those countries helped rapid economic growth by providing better informed and more productive workers. As their economy grows, many economic institutions are established to managing the economic growth. Therefore, aggressively engaging in education will help developing nations to establish better economic institutions.
Todaro, Michael P., and Stephen C. Smith. Economic Development. Essex: Pearson, 2011.