Promoting Education: is the investment in human capital-is at least as important

as investment in physical capital for a country's long-run economic success.

- You can see there’s a gap between wages of educated and uneducated workers
- Investment in human capital, like investment in physical capital, has an
opportunity cost: when students are in school, they forgo the wages they could
have earned as members of the labor force
- Conveys positive externalities: is the effect of one person's actions on the well-
being of a bystander. An educated person, for instance, might generate new ideas
about how best to produce goods and services. If these ideas enter society's pool
of knowledge so that everyone can use them, then the ideas are an external
benefit of education
- Poor countries faces the problem which is Brain Drain: when highly skilled and
educated people leave their home country to work and live in another country
- Ex: Poor countries to send their best students abroad to earn higher degrees.
However, those students who have spent time abroad may choose not to return
home  reduce the poor nation's stock of human capital
Health and Nutrition
- The term human capital usually refers to education which is the investment in
people: expenditures that lead to a healthier population
- Healthier workers are more productive: more energy, better focus
- Wages reflect a worker’s productivity: employers are willing to pay more for
employees who contribute more value to the company
- Right investments in the health of the population: on slide
- Historical trends: Long-Run Economic Growth lead to better living standard
which means people can afford better food, leading to better nutrition and health
improved. And you see better nutrition results in taller and healthier people,
healthier (taller) workers tend to be more productive, so they often earn higher
wages
- The link between health and wealth is a vicious circle: Poor countries are poor
in part because their populations are not healthy, and their populations are not
healthy in part because they are poor and cannot afford adequate healthcare and
nutrition
- But this fact (vicious circle) opens the possibility of a virtuous circle: Policies
that lead to more rapid economic growth would naturally improve health
outcomes, which in turn would further promote economic growth.
Property Rights and Political Stability
- Another way policymakers can foster economic growth is by protecting property
rights and promoting political stability:
 Property rights refer to the ability of people to exercise authority over the
resources they own: Imagine you own a small farm. If you know that your
ownership of the land is secure and no one can take it away from you
without fair compensation, you’re more likely to invest in improving your
farm. This might include buying better equipment, planting more crops, etc.
These investments increase your farm’s productivity and contribute to the
overall economy.
 Enforcing property rights is the responsibility of the courts: Through the
criminal justice system, the courts discourage theft. And also, through the
civil justice system, the courts ensure that buyers and sellers live up to their
contracts.
 Property rights prerequisite for the price system to work (durable policy
to ensure for investment)
 Example: Owning a House
Property Rights: When you buy a house, you have secure ownership of that
property.
Price System: Because you own the house, you can sell it, rent it out, or
improve it. The price of the house is determined by market supply and
demand.
Market Function: If people couldn't securely own houses, they wouldn't
invest in buying or improving them. This would disrupt the housing market
and the prices wouldn’t reflect true value.
Lack of property rights: can be a major problem. In many countries, the system of
justice does not work well. Contracts are hard to enforce, and fraud often goes
unpunished
- In some extreme cases, the government not only fails to protect property rights
but also violates them. Companies often have to bribe officials to do business
 Corruption (tham nhũng)
- Another threat to property rights is political instability. When revolutions and
coups are common, there is doubt about whether property rights will be
respected in the future
- If a revolutionary government might confiscate the capital of some businesses,
domestic residents have less incentive to save, invest, and start new businesses.
At the same time, foreigners have less incentive to invest in the country
Free Trade
- Some poor countries have tried to achieve more rapid economic growth by
pursuing inward-oriented policies. These policies aim to increase productivity and
living standards within the country by avoiding interaction with the rest of the
world. (produce all the goods it consumes, produce all its own capital goods,
instead of importing state-of-the-art equipment from other countries)
- With the need of protection from foreign competition to thrive and grow, they
advance the infant-industry argument, this argument sometimes leads to trade
restrictions like tariffs  cause adverse effect on economic growth
- To prove this, we move to the next part (Outward-oriented policies) when
countries integrate into the world economy and do international trade in goods
and services in order to foster economic growth
Example: Vietnam's Economic Growth
Background: Vietnam transitioned from a centrally planned economy to a
market-oriented one with "Đổi Mới" reforms in 1986.
Strategy: Reduced trade barriers, attracted foreign investment, and promoted
exports.
Results: Rapid economic growth and improved living standards, with significant
GDP growth and becoming a middle-income nation
Amount of trade determined not only by government policy but also by
geography
- Countries with natural seaports find trade easier than those without this
resource (Singapore vs Laos)
- When Singapore is one of the busiest ports in the world with a global shipping
hub. Laos on the other hand, is a landlocked country, Laos faces significant
challenges in international trade due to its lack of direct access to the sea.
Research and Development
- Knowledge is a public good: That is, once one person discovers an idea, the idea
enters society's pool of knowledge and other people can freely use it
- The role of government is to encourage research and development: The US
government
 Sponsored research about farming methods and advised farmers how best
to use their land
 More recently, the U.S. government, through the Air Force and NASA, has
supported aerospace research; as a result, the United States is a leading
maker of rockets and planes.
 Encouraging research grants from the National Science Foundation and the
National Institutes of Health and with tax breaks for firms engaging in
research and development.
 Through the patent system, new drugs for instance, the inventor can apply
for a patent. With this patent, public good turn into a private good (recall
from monopoly)  increase in profit, encourage individuals and firms to
engage in research
- Ask the expert: This statement means that while we will continue to see new
inventions and technologies in the future, they probably won't be as
groundbreaking as those of the past. This means that the economy might not
grow as fast as it did in the past 150 years.
Population Growth
- A large population means there are more workers to produce goods and
services. (The size of the Chinese population is one reason China is such an
important player in the world economy)
- However, large population also refers to more consumers. So while a large
population means a larger total output of goods and services, it doesn’t mean a
higher standard of living for the typical citizen because more population will
consume more.
- Stretching natural resources: a theory of Thomas Robert Malthus
 Malthus argued that an ever-increasing population would continually strain
society's ability to provide for itself. As a result, mankind was doomed to
forever live in poverty.
 Malthus's theory was a pessimistic view of the future, what he means is
there would be more people than the available resources to support them.
 In other words, as the population grows, there will be more and more
people competing for the same amount of food, water, and other
resources. This would lead to widespread poverty, hunger, and misery
(However, Malthus just described the world correctly at the time when he
lived because technological advancements in agriculture and other
industries have allowed us to produce more food and improve living
standards. While famines still occur, they are often caused by factors like
poverty and political instability, not by a lack of food production)
- Modern theories of economic growth: Diluting the capital stock
 According to these theories, high population growth reduces GDP per
worker since larger number of workers forces the capital stock to be spread
more thinly.
 Each individual worker may have access to fewer tools and resources,
leading to lower productivity per worker
 Ex: US vs African countries, while the American population has risen only
about 1 percent per year, many poor African countries have rapid
population growth. This rapid growth makes it harder for these countries to
provide education and resources to their workers, limiting their
productivity
- Because of rapid population growth, there has been some solution (reducing) for
this:
 Government regulation: from 1980 to 2015, China allowed only one child
per family, couples who violated this rule would have to pay fines
 In countries with greater freedom, they increase awareness of birth control
techniques: medicine, devices or some other methods to prevent
pregnancy
 Another way is to apply one of the Ten Principles of Economics: People
respond to incentives. Providing equal opportunities for women (jobs,
education) can lead to smaller families, as educated women often choose
to have fewer children
 This can help less developed countries reduce population growth and
improve living standards
- Promoting technological progress
 Some economists have suggested that world population growth has been
an engine of technological progress and economic prosperity.
 The mechanism is simple: If there are more people, then there are more
scientists, inventors, and engineers to contribute to technological advance,
which benefits everyone.
- According to this theory, why Is so much of Africa Poor
 In 2017, GDP per person was only $3,489, just 23 percent of the world
average. It is not surprising, then, that sub-Saharan Africa has a high rate of
extreme poverty: 41 percent of its population lives on less than $1.90 per
day
 There no easy answer, but here are some of the factors that may help
explain this distressing phenomenon: on slide