Objectives of Economic Growth and Development

2094 Words Dec 28th, 2010 9 Pages
Objectives of Economic Growth and Development

Economic growth is defined by, among other things, material capital formation, human capital formation and the creation of innovation. Put another way, economic growth is determined by the amounts and types of capital and labor that are invested, and how they are utilized for production. The objective of economic growth through economic policy is not necessarily GDP or GNP maximization but maybe enhancing and improving quality of life or other values that cannot be measured by GDP. If we limit our outlook to economic growth itself, the questions of what to assume as the objective of economic growth and how to measure it is decided by people. It is possible and desirable, to have a scheme
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Following David Ricardo and his theory was John Stuart Mill who pointed out three principal gains from trade in his Principles of Political Economy. The three principal gains from trade were: 1) direct economical advantages of foreign trade, 2) indirect effects of trade which must be counted as benefits of a higher order, 3) the economical benefits of commerce are surpassed in importance by those of its effects which are intellectual and moral. Although these theories and gains develop a nice foundation for a struggling nation to turn to increasing trade to resolve its stunted economic growth and development, they also pre-suppose some fundamental factors, mainly geographic location. Looking deeper, one can see that if a nation were to increase its trade, it must first have the capacity to do so and the ability to get the goods to and from markets. Many economists who support this view of trade integration argue that a nation’s ability to posses the above criteria is easier now than before because of the technological advancements of the internet and communication methods. However, we must keep in mind that capital is needed for such technological advancements and the institutions to maintain them. Thus we can see that a nation can increase its income by trade but also that income is needed to