Presentation on Economic Growth Theory by Mudondo Kumbaine Justine.pptx

presentation

1. Economic growth theory in educational planning By Mudondo Kumbaine Justine 24/u/ gmed /16165

2. BACKGROUND Economic growth theory dates back to the 18th century. it was propounded by Adam Smiths. Smith published a book “Wealth of nations” several theories of economic growth came up. Many classical and neoclassical economists contributed to these theories. However , each of the economic growth theory had some limitations. The limitations revolved around aspects like: labour , wages, employment, population growth, inflation, capital among others

3. INTRODUCTION Smith , was the founder of the classical school of economics. In the Wealth o f Nations Adam Smith was concerned with the forces that govern the relative levels of prosperity among countries and that cause differences between countries. He discussed the advantages of the division of labour and its dependence on the scale of activity and the extent of the market .

4. Definition: Economic growth theory in educational planning is: the application of economic principles to optimize resource allocation and investment in education, with the goal of promoting economic growth and development. It emphasizes the role of education in driving economic growth and development. It plays a significant role in educational planning, highlighting the importance of education in driving economic growth and development. contd

5. aSSUMPTIONS It is based on some assumptions: Education increases human capital Human capital contributes to economic growth Investment in education yield positive returns

6. Classical economists These saw the determinants of economic growth in investments and improving productive capacity . They thought economic growth was linked to supply NOTABE THEORISTS OF EONOMIC GROWTH THEORY

7. Classical economists include: Adam Smith According to his theory, division of labour is the main factor of economic growth. Smith appreciates the role of technology in the process of economic growth Productivity was the criterion for welfare rather than per capita. contd

8. contd Smith pointed out that: there are natural harmonies in economic life which he described as the force of the invisible hand which stabilizes the market. Free market economy where forces of demand and supply are left to operate freely to attain market equilibrium

9. contd Thomas Malthus In his theory, it was assumed that population grows geometrically while food supply grows arithmetically. a s population increases, agricultural productivity decreases due to limited land and resources He identified and recommended two types of checks Preventive checks [birth control] Positive checks [war, famine, disease]

10. contd Malthus also believed that economic growth would eventually stagnate due to population pressure. His theory is relevant to economic growth because he argues that economic growth limited by by resource constraints that’s land and labour . Proposed that economic growth would follow a cylical partten of growth, stagnation and decline. Believed that population growth would keep wages low, as labour supply exceed demand.

11. contd David Ricardo he suggested that the driver of economic growth was the theory of comparative advantage. Which suggests that a nation should concentrate its resources solely in industries where it is most internationally competitive and trade with other countries to obtain products no longer produced nationally . The theory also explored the role of technology and innovation in fostering economic growth.

12. contd Theodore Schultz emphasized the role of education in economic development . Key factor influencing economic growth include: Human capital Technological progress Institutional factors, and Invstiment in education and healthcare

13. contd John Stuart Mill the increase in capital leads to an increase in labor demand, that the stable population causes an increase in real wages, which stimulates long-term population growth . If the accumulation of capital is faster than the increase in the workforce, both of these processes can, in principle, last forever.

14. contd Neoclassical Economists: The neoclassical growth theory was developed by Robert Solow. He identified three factors of economic growth; as land , labour and capital . Education is seen as a way to improve labour quality . it also emphasizes Technology and innovation and the role of capital accumulation, labour , and technological progress in economic growth .

15. contd Gary Becker highlighted importance of human capital in economic growth. This is because Education develops skills, knowledge and competences. His theory suggests that investments in education increase the productivity and earnings of individuals, which in turn boosts economic growth. It states that investing in education to develop human capital, leads to increasing productivity and consequently economic growth. And that Education enhances cognitive skills, improving productivity and economic efficiency.

16. contd Modern Economists Joseph Schumpeter emphasized role of entrepreneurship and innovation . Schumpeter introduced into the economics the term "innovation" and in a new way considered the significance of the entrepreneur in terms of economic growth.

17. Limitations of the economic growth theory Smith failed to give the precise relationship between extended specialization and economic productivity. His economic theory was not so rich in addressing issues related to income distribution. Solow’s model could not give a hint on the origin of technological progress. He stated that o the economy technological progress in growth and competition was only rediscovered by him in 1950s. Yet , for experienced people, technological progress has always been there; as an “endogenous” not an “exogenous” factor as he suggested.

18. Limitations ( contd ) It does not record the volume of production obtained from the informal market, known as the "black market“. Economic growth also does not take into account changes in the amount of time spent on work. Does not cater for the negative processes associated with economic activities, such as environmental pollution, its progressive degradation, or noise pollution.

19. contd The neoclassical ideology is criticized for the neglecting the "historical" perspective. incompetence in explaining the differences in global growth rates.

20. Relevance of economic growth theory to the education sector: Leads to capital development. This is because economic growth theory emphasizes the importance of human capital in driving economic growth. Investment in education: Educational investments are critical for economic growth, as they enhance productivity and increase economic competitiveness. Skill formation: Economic growth theory highlights the need for education systems to produce skilled workers, adaptable to changing labour demands. Innovation and technological progress: Education fosters innovation, entrepreneurship, and technological advancements, driving economic growth.

21. Prioritize investment in education – Educational planners should focus on improving quality education to enhance human capital and economic growth. Focus on developing relevant skills. Improve educational quality and accessibility. Vocational training: integrate vocational training to address skill mismatches and labour market needs. Align education with labour market needs. STEM education – Emphasise STEM education to drive innovation and technological progress. Encourage life long learning Implications of the economic growth theory to policy planners