Differences between economic growth and economic development When compared to economic development as we are to witness shortly, economic growth is a simpler and narrower subject (Acemoglu, 2009). According to the presented definitions, economic growth is a constant and sustained increase in a countries output graded as national.
The increase is depicted on the growth indicators such as education quality of citizens, how healthy a nation is, the technological adaptation rates and quantity of improvement recorded in the way technology is applied (Weil 2005).
The most common way of looking at economic growth is through the sustained improvement in the value of goods and services which are under current production in the contemporary operational environments. When a record increase is made on a country’s GDP, we pronounce an economic growth (Weil 2005).
GDP is the measure used because it shows the sum total of consumption, investments, government expenditure and the net export over a single financial period; they are used for financial forecasting (Friedman 2005).
This mode does not represent an informal size of economy; the rate at which environmental depletion through pollution takes place is likely to discourage growth aspects. Economic development on its part is a numerical indicator which uses numbers in gauging the economic well being of a country through it citizens who are the beneficiaries (Song & Woo 2008).
While economic growth bases its measurements on quantity, economic development is a measure of quality which applies in the context of morality. It is therefore vivid when living standards rise, also when the people realize and increase in their self- esteem and freedom in their operations hence wider options on choices.
Apart from GDP, Human Development Index(HDI) is also a tool used to determine Economic Development since this aspect covers even other factors affecting productivity like literacy levels and life expectancy of a countries population (Nafziger 2006).
Economic development supports economic growth definition and calculation by widening the opportunities in the economy’s productive sectors like health, education, employment and environment since in indicates the per capita income of every individual in a country (Song & Woo 2008).
Economic development busts the living standards through provision of basic requirements of life like health services, shelter, food and education (Nafziger 2006). Therefore, Economic Development is termed to major their concerns on sustainability measures. It is therefore prudent to mention that economic growth is an ingredient required for economic development though it is not needed singly.
Problems concerning measuring economic development and applicable cases Through National Income Accounting an economy maintains a record of its performance to help know how the economy is operating. The limitations of measuring economic development revolve around the setbacks shown by the measures used like the GDP and the HDI.
The measures are less accurate since they only measure Economic Development based on production value as opposed to the actual population; this is irrespective of the fact that the whole population is involved in consumption (McKibben 2007). Economic development describes efficiency on production effectiveness of the population.
If production alone was used in India to measure Economic development, India would today be the most developed country in the whole world since it has the largest GDP (Nafziger 2006). GDP as a measure of growth hence development does not include transactions which are non-market in nature in as much as they are representations of production roles.
This presents a difficulty in valuing production activities that are non- market in nature such as domestic farming in as much as they represent production. Others include cases where individuals do their own laundry and also painting their own houses.
This is applicable for developing countries such as Bangladesh whose economies’ are largely made up of the non-market items hence understatement of their GDP’s with non-market figures. GDP calculation also has the inability of involving adverse effects such as externalities and diseconomies of large-scale production (Stiglitz, Sen & Fitoussi 2010).
Most economies still fails to recognize pollution and environmental hazards which are the greatest components and hence attracts high costs hence posing environmental threat. While the values of negative externalities are incorporated in GDP calculations the costs of the bad side effects are never inculcated resulting into inaccuracies of GDP to show economic development.
Therefore, it is important that the value of externalities be deducted from that of the GDP for it to be relied upon (Stiglitz, Sen & Fitoussi 2010). This is because the proposed replacements such as Net Economic Welfare (NEW) and Measure of Economic Welfare (MEW) failed to pick given the bad effects such as pollution cannot be ignored.
The method of development calculation also fails to clearly differentiate between items produced and the quantity produced, specifically; it does not have the ability of noting all that is produced by an economy (Song & Woo 2008).
This is witnessed in cases where in comparing GDP’s of $480 and $659 of two countries, we would conclude the first country is more developed not knowing that the GDP of $659 is mainly composed of luxurious commodity which is against the spirit of social welfare and therefore unjustifiable Conclusion It is very therefore important to note that there is never a more reliable and more suitable measure that is placed for GDP measurement and translate them to Economic Development.
This therefore leaves us with economic development that is defined in a non-clear way since methods like Human Development index pose a challenge of difficulty in data collection (Okpaji 2008).
References
Acemoglu, D 2009, Introduction to modern economic growth, Princeton University Press: Princeton.
Friedman, BM 2005, The moral consequences of economic growth, Knopf: New York.
McKibben, B 2007, Deep economy: the wealth of communities and the durable future, Times Books: New York.
Nafziger, EW 2006, Economic development (4th ed.), Cambridge University Press: Cambridge.
Okpaji, A 2008, Economic Progression at our time, Economic Times, 23(48), 97.
Song, L & Woo, WT 2008, China’s dilemma: economic growth, the environment and climate change, Anu E Press: Canberra.
Stiglitz, JE, Sen, A & Fitoussi, J 2010, Mismeasuring our lives why GDP doesn’t add up, New Press: New York, N.Y.
Weil, DN 2005, Economic growth, Addison-Wesley: Boston.