The first one, titled, “hyper patrimonial society”(Piketty 247), highlights the generic method of wealth accumulation, usually dominated by unequal societies. The second method of wealth accumulation, which Piketty notes as, “hyper meritocratic society”, highlights the peak of income hierarchy dominated by a very high income of labor rather than inherited wealth. (Piketty 265). Ironically, Piketty, himself, criticizes the truly “ meritocratic” nation of such a society and extends to the idea of a world with super managers being more adequate. Such form of society, recently emerged in the US, is , according to Piketty, “the peak of the income hierarchy dominated by very high incomes from labor rather than by inherited wealth” ( Piketty 265).
He argues that Europe was ‘a power-based civilization’ and believes that Europe dominated other civilizations because Europe was innovative. Landes does acknowledge the fact that civilizations such as China were inventive, but he believes that they were not innovative enough to become the leading civilization – inventive means having a new idea for a product or process and innovative means practically applying the new inventions into products or services. In Landes’ book, The Wealth and Poverty of Nations, he gives us multiple examples of which he explains this argument. One of the
In comparison, a person with a higher level of income is likely to save this additional income rather than spend it. In other words, lower and middle income taxpayers have a higher marginal propensity to consume. This consumption (purchasing) of consumer goods is important, especially during economic slowdown, to spur economic activity. Therefore, increasing taxes for the wealthy instead of the middle class is favourable for the economy. Another argument refutes the claim that lower taxes for the rich encourage them to invest more which brings about economic growth.
Joint problem-solving arrangements: Which included routines associated with adjustment and coordination that, despite economists predictions, were more efficient than market-based mechanisms of coordination. The notion that economic action is embedded in social structure has revived debates about the positive and negative effects of social relations on economic behavior. While most organization theorists hold that social structure plays a significant role in economic behavior, many economic theorists maintain that social relations minimally affect economic transacting or create inefficiencies by shielding the transaction from the market (Peterson and Rajan, 1994). In this regard, Granovetter's (1985) embeddedness argument has emerged as a potential theory for joining economic and sociological approaches to organization theory. As presently developed, however, Granovetter's argument lacks its own concrete account of how social relations affect economic exchange.
Comparative advantage is the theory that free trade between two or more countries will increase consumption and is of mutual benefit to both countries. Each country should export a good for which it has a comparative advantage over and export surplus production in exchange for goods produced in another country which has a comparative advantage for the good. This is under the assumption that there is differences in labour productivity in both countries. According to Comparative advantage even a country with a comparative disadvantage will gain from specialising in most efficient goods. According to Adam Smith (1776) Wealth of Nations, absolute advantage is the ability of a country to produce more than other countries but with less resources.
According to Adam Smith 1776) in…... a country has an absolute advantage in producing the product when it is more efficient in making that product than any other country. If two countries specialise in producing different products and trade amongst themselves, both these countries will have more of both products available to them for consumption (in which each has an absolute advantage) 2.2. Neoclassical Trade theory This is also known as Comparative Advantage. (David Ricardo1817) stated that if one country has an absolute advantage in producing two products over another country, trading with that other country will still yield more output for both countries than if the more efficient producer did everything for themselves. The country with
Resting at the core of neoclassical theory, it is one of the most influential concepts in International Trade Theory. It is based on the hypothesis that trade openness promotes greater economic growth elaborating on Adam Smith’s proposal that free trade could be advantageous to all countries by introducing the idea of specialisation. Previously, countries aimed to produce everything which they needed domestically while imposing heavy taxes to keep out foreign goods. Ricardo proposed the idea of specialisation as a way to persuade countries that inter-country trade was mutually beneficial and was the most efficient way of promoting economic growth. In other words, a country gains by specialising in the production of the goods which cost them the least and exporting the surplus produce to other countries in exchange for goods with higher production costs for them.
Gross investment is the total amount that the economy spends on both new capital goods and replacement (depreciated) capital goods while net investment is only the total amount of economy spent on new capital goods. In short, net investment is total gross investment minus total depreciation. The importance of having a positive net investment for an economy is it allows more spending. Firms are able to purchase more capital goods. Therefore, their productive capacity will increase as they are able to produce more goods and services.
ECONOMIC GROWTH The major objective of macroeconomic policies for every nation is to attain sustainable economic growth together with price stability. The importance given to price stability when conducting monetary policy amongst other things is to stimulate sustainable economic growth as well as strengthening the purchasing power of the local currency. The question of whether or not inflation is detrimental to economic growth has recently been a subject of strong argument to policy makers and macroeconomists. The bone of contention is that whether inflation is necessary for economic growth or it is harmful to economic growth. The effects of inflation on economic growth are more or less certainly biased towards that view that inflation is detrimental to the growth of an economy.
Globalization is benefitting even those who really do not appreciate it. The benefits of globalization far outweigh the disadvantages. Those nations that embrace this new trend will experience higher economic growth rates. References Bridges, G 2002, "Grounding Globalization: The Prospects and Perils of Linking Economic Processes of Globalization to Environmental Outcomes". Economic Geography 78 (3): 361–386 Hurst E 2008,Social Inequality: Forms, Causes, and consequences, 6th ed., pp.41.