Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Wednesday, January 05, 2005

Narrowing the Gap Between Rich and Poor Nations

During 2004, "the U.S. economy grew by a solid 4.3 percent, but ... developing countries experienced an explosive 6.1 percent economic growth." As this column points out, one reason for the more rapid growth in developing countries comes from the benefits of freer trade. [Thanks to JC for the tip].

Another explanation for the rapid growth in some economies has to do with government institutions that promote economic entrepreneurship. Here's something Tyler wrote about the changes in India. And here are Becker's thoughts about India:

India provides a good illustration. India remained very poor from its independence in 1947 until the late 1980’s. Some claimed that its slow rate of growth in per capita income was largely explained by a rapid growth in population that absorbed much of the increase in aggregate income. In response to this belief, some Indian women were forcibly sterilized to cut down their birth rates.

Fortunately, a small number of economists and politicians recognized that India’s real problem was not population, but terrible economic policies that overregulated labor and product markets, blocked domestic investments by native entrepreneurs, and discouraged imports of goods and foreign investments. Reductions in tariffs and import quotas, and greater encouragement to private investments introduced in 1991 by the then Finance Minister, Dr. Manmohan Singh (who is now Prime Minister), quickly produced a take off in India’s economy. Income has since been growing by over 6% per year, “despite” an increase in its population by more than 200 million persons that raised India’s total population to over one billion people.

UPDATE: Here is what Tyler just posted about India.

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