Monday, March 8, 2010
Wednesday, January 27, 2010
Definitions of Economics
One of the earliest and most famous definitions of economics was that of Thomas Carlyle, who in the early 19th century termed it the "dismal science." According to a much-repeated story, what Carlyle had noticed was the anti-utopian implications of economics. Many utopians, people who believe that a society of abundance without conflict is possible, believe that good results come from good motives and good motives lead to good results. Economists have always disputed this, and it was to the forceful statement of this disagreement by early economists such as Thomas Malthus and David Ricardo that Carlyle supposedly reacted.
Another early definition, one which is perhaps more useful, is that of English economist W. Stanley Jevons who, in the late 19th century, wrote that economics was "the mechanics of utility and self interest." One can think of economics as the social science that explores the results of people acting on the basis of self-interest. There is more to man than self-interest, and the other social sciences--such as psychology, sociology, anthropology, and political science--attempt to tell us about those other dimensions of man. As you read further into these pages, you will see that the assumption of self-interest, that a person tries to do the best for himself with what he has, underlies virtually all of economic theory.
At the turn of the century, Alfred Marshall's Principles of Economics was the most influential textbook in economics. Marshall defined economics as
"a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of wellbeing. Thus it is on one side a study of wealth; and on the other, and more important side, a part of the study of man."
Many other books of the period included in their definitions something about the "study of exchange and production." Definitions of this sort emphasize that the topics with which economics is most closely identified concern those processes involved in meeting man's material needs. Economists today do not use these definitions because the boundaries of economics have expanded since Marshall. Economists do more than study exchange and production, though exchange remains at the heart of economics.
Most contemporary definitions of economics involve the notions of choice and scarcity. Perhaps the earliest of these is by Lionell Robbins in 1935: "Economics is a science which studies human behavior as a relationship between ends and scarce means which have alternative uses." Virtually all textbooks have definitions that are derived from this definition. Though the exact wording differs from author to author, the standard definition is something like this
"Economics is the social science that examines how people choose to use limited or scarce resources in attempting to satisfy their unlimited wants.
Scarcity and Choice
Scarcity means that people want more than is available. Scarcity limits us both as individuals and as a society. As individuals, limited income (and time and ability) keep us from doing and having all that we might like. As a society, limited resources (such as manpower, machinery, and natural resources) fix a maximum on the amount of goods and services that can be produced.
Scarcity requires choice. People must choose which of their desires they will satisfy and which they will leave unsatisfied. When we, either as individuals or as a society, choose more of something, scarcity forces us to take less of something else. Economics is sometimes called the study of scarcity because economic activity would not exist if scarcity did not force people to make choices.
When there is scarcity and choice, there are costs. The cost of any choice is the option or options that a person gives up. For example, if you gave up the option of playing a computer game to read this text, the cost of reading this text is the enjoyment you would have received playing the game. Most of economics is based on the simple idea that people make choices by comparing the benefits of option A with the benefits of option B (and all other options that are available) and choosing the one with the highest benefit. Alternatively, one can view the cost of choosing option A as the sacrifice involved in rejecting option B, and then say that one chooses option A when the benefits of A outweigh the costs of choosing A (which are the benefits one loses when one rejects option B).
The widespread use of definitions emphasizing choice and scarcity shows that economists believe that these definitions focus on a central and basic part of the subject. This emphasis on choice represents a relatively recent insight into what economics is all about; the notion of choice is not stressed in older definitions of economics. Sometimes, this insight yields rather clever definitions, as in James Buchanan's observation that an economist is one who disagrees with the statement that whatever is worth doing is worth doing well. What Buchanan is noting is that time is scarce because it is limited and there are many things one can do with one's time. If one wants to do all things well, one must devote considerable time to each, and thus must sacrifice other things one could do. Sometimes, it is wise to choose to do some things poorly so that one has more time for other things.
Positive and Normative
Economists make a distinction between positive and normative that closely parallels Popper's line of demarcation, but which is far older. David Hume explained it well in 1739, and Machiavelli used it two centuries earlier, in 1515. A positive statement is a statement about what is and that contains no indication of approval or disapproval. Notice that a positive statement can be wrong. "The moon is made of green cheese" is incorrect, but it is a positive statement because it is a statement about what exists.
A normative statement expresses a judgment about whether a situation is desirable or undesirable. "The world would be a better place if the moon were made of green cheese" is a normative statement because it expresses a judgment about what ought to be. Notice that there is no way of disproving this statement. If you disagree with it, you have no sure way of convincing someone who believes the statement that he is wrong.
Economists have found the positive-normative distinction useful because it helps people with very different views about what is desirable to communicate with each other. Libertarians and socialists, Christians and atheists may have very different ideas about what is desirable. When they disagree, they can try to learn whether their disagreement stems from different normative views or from different positive views. If their disagreement is on normative grounds, they know that their disagreement lies outside the realm of economics, so economic theory and evidence will not bring them together. However, if their disagreement is on positive grounds, then further discussion, study, and testing may bring them closer together.
Economists can confine themselves to positive statements, but few are willing to do so because such confinement limits what they can say about issues of government policy. Both positive and normative statements must be combined to make a policy statement. One must make a judgment about what goals are desirable (the normative part), and decide on a way of attaining those goals (the positive part). Economists often see cases in which people propose courses of action that will never get them to their intended results. If economists limit themselves to evaluating whether or not proposed actions will achieve intended results, they confine themselves to positive analysis. (You should realize that although economists can speak with special authority on positive issues, even the best can be wrong.) However, virtually all economists prefer a wider role in policy analysis, and include normative judgments as well. On normative issues economists cannot speak with special expertise. Put somewhat differently, addressing most normative issues ultimately depends on how one answers the following question: "What is the meaning of life?" One does not study economics to answer this question.
Most statements are not easily categorized as purely positive or purely normative. Rather, they are like tips of an iceberg, with many invisible assumptions hiding below the surface. Suppose, for example, someone says, "The minimum wage is a bad law." Behind that simple statement are assumptions about how to judge whether a law is good or bad (or normative statements) and also beliefs about what the actual effects of the minimum wage law are (or positive statements).
Macro Economics and Micro Economics
Micro Economics
The branch of economics that analyzes the market behavior of individual consumers and firms in an attempt to understand the decision-making process of firms and households. It is concerned with the interaction between individual buyers and sellers and the factors that influence the choices made by buyers and sellers. In particular, microeconomics focuses on patterns of supply and demand and the determination of price and output in individual markets.
The field of economics is broken down into two distinct areas of study: microeconomics and macroeconomics. Microeconomics looks at the smaller picture and focuses more on basic theories of supply and demand and how individual businesses decide how much of something to produce and how much to charge for it. People who have any desire to start their own business or who want to learn the rationale behind the pricing of particular products and services would be more interested in this area.
Macro Economics
Macroeconomics, on the other hand, looks at the big picture (hence "macro"). It focuses on the national economy as a whole and provides a basic knowledge of how things work in the business world. For example, people who study this branch of economics would be able to interpret the latest Gross Domestic Product figures or explain why a 6% rate of unemployment is not necessarily a bad thing. Thus, for an overall perspective of how the entire economy works, you need to have an understanding of economics at both the micro and macro levels.
Macro- and microeconomics, and their wide array of underlying concepts, have been the subject of a great deal of writings. The field of study is vast; here is a brief summary of what each covers: Microeconomics is the study of decisions that people and businesses make regarding the allocation of resources and prices of goods and services. This means also taking into account taxes and regulations created by governments. Microeconomics focuses on supply and demand and other forces that determine the price levels seen in the economy. For example, microeconomics would look at how a specific company could maximize it's production and capacity so it could lower prices and better compete in its industry.
Macroeconomics, on the other hand, is the field of economics that studies the behavior of the economy as a whole and not just on specific companies, but entire industries and economies. This looks at economy-wide phenomena, such as Gross National Product (GDP) and how it is affected by changes in unemployment, national income, rate of growth, and price levels. For example, macroeconomics would look at how an increase/decrease in net exports would affect a nation's capital account or how GDP would be affected by unemployment rate.
While these two studies of economics appear to be different, they are actually interdependent and complement one another since there are many overlapping issues between the two fields. For example, increased inflation (macro effect) would cause the price of raw materials to increase for companies and in turn affect the end product's price charged to the public.
Distinction between Microeconomics and Macroeconomics
Microeconomics Macroeconomics
1.
Microeconomics focuses on the decisions of individual units, no matter how large.
1.
Macroeconomics concentrates on the behavior of entire economies, no matter how small.
2.
Micro economists might look at a single company’s pricing and output decisions.
2.
Macroeconomists study the overall price level, unemployment rate and other things that we call economic aggregates.
MACROECONOMICS:A General Overview
Finance is based on economics. Therefore, to properly understand financial markets and their behavior one must first understand economics. Economics at its core is concerned with the production, distribution, trade and consumption of goods and services. To put this in human terms we can say that economics is the science that arises out of the interplay between limited resources and unlimited human wants and needs.
There are two basic ways to view economics. There is the broad and distant view, which attempts to view things in aggregate for a society at large. We call this view “Macroeconomics”. Macroeconomics is concerned with the status of the economy as a whole. Thus, it looks at overall employment of a general population or overall income of a nation as opposed to a more focused view of a population segment or specific industry. This view is helpful because it is only by this kind of analysis that we can see the general trends which a society or nation is following. Macroeconomic theory and analysis is employed most often by Governments and institutions, which have a responsibility to make policies and decisions which affect the economy as a whole.
Some terms you may have heard of which concern themselves with the macroeconomic view of the economy are Gross National Product, Inflation, Consumer Price Index and Fiscal Policy. The meaning of each of these is listed below.
Gross National Product – This is the most common measure of economic productivity for an aggregate population. GNP is defined as the total value of all goods and services produced in final form during a specific period of time (usually 1 year).
Inflation – Inflation is defined as a condition of generally increasing prices. The term used for measuring these prices can vary according to the desires of the individual, government or institution doing the evaluation.
Consumer Price Index – The CPI is a measure of how much prices have increased or decreased as compared to a baseline years prices. The prices used in arriving at this figure are standard goods and services determined by the evaluator. Thus, the CPI for the United States might vary greatly as compared the CPI for a country from the Middle East.
Fiscal Policy – Fiscal Policy is essentially the manner in which a government achieves economic objectives through government spending and taxation. Fiscal policy is the alternative to Monetary Policy.
Monetary Policy – Monetary Policy is essentially the practice of a government managing the supply of money to achieve economic objectives. The United States uses the Federal Reserve System to either increase or decrease the supply of money, which in turn effects the overall economic environment as a whole.
The principles of Macroeconomics are important in analyzing and understanding longer-term trends and aggregate market behavior. Therefore, for the individual managing his own portfolio it may be helpful to know the current fiscal policy and how it may affect the value of any government bond holdings. One of the ways the government will manage fiscal policy is to buy back these bonds or issue more depending on their objective. This is just one example of the way in which Macroeconomics affects the individual investor.
.
Macroeconomic objectives
1. MAXMISE THE LEVEL OF NATIONAL INCOME:
Broadly, the objective of macroeconomic policies is to maximise the level of national income,
providing economic growth to raise the utility and standard of living of participants in the economy. There are also a number of secondary objectives which are held to lead to the maximisation of income over the long run. While there are variations between the objectives of different national and international entities, most follow the ones detailed below:
2. SUSTAINABILITY –
a rate of growth which allows an increase in living standards without undue structural and environmental difficulties.
3. FULL EMPLOYMENT-
where those who are able and willing to have a job can get one, given that there will be a certain amount of frictional and structural unemployment.
4.PRICE STABILITY –
when prices remain largely stable, and there is not rapid inflation or deflation. Price stability is not necessarily the same as zero inflation, but instead steady levels of low-moderate inflation is often regarded as ideal. It is worth noting that prices of some goods and services often fall as a result of productivity improvements during periods of inflation, as inflation is only a measure of general price levels. However, inflation is a good measure of 'price stability'. Zero inflation is often undesirable in an economy. ("Internal Balance" is used to describe a level of economic activity that results in full employment with no inflation.)
5.EXTERNAL BALANCE- Balance - equilibrium in the Balance of payments without the use of artificial constraints. That is, exports roughly equal to imports over the long run.
6.EQUITABLE DISTRIBUTION OF INCOME AND WEALTH - a fair share of the national 'cake', more equitable than would be in the case of an entirely free market.
7.INCREASING PRODUCTIVITY - more output per unit of labour per hour
One of the earliest and most famous definitions of economics was that of Thomas Carlyle, who in the early 19th century termed it the "dismal science." According to a much-repeated story, what Carlyle had noticed was the anti-utopian implications of economics. Many utopians, people who believe that a society of abundance without conflict is possible, believe that good results come from good motives and good motives lead to good results. Economists have always disputed this, and it was to the forceful statement of this disagreement by early economists such as Thomas Malthus and David Ricardo that Carlyle supposedly reacted.
Another early definition, one which is perhaps more useful, is that of English economist W. Stanley Jevons who, in the late 19th century, wrote that economics was "the mechanics of utility and self interest." One can think of economics as the social science that explores the results of people acting on the basis of self-interest. There is more to man than self-interest, and the other social sciences--such as psychology, sociology, anthropology, and political science--attempt to tell us about those other dimensions of man. As you read further into these pages, you will see that the assumption of self-interest, that a person tries to do the best for himself with what he has, underlies virtually all of economic theory.
At the turn of the century, Alfred Marshall's Principles of Economics was the most influential textbook in economics. Marshall defined economics as
"a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of wellbeing. Thus it is on one side a study of wealth; and on the other, and more important side, a part of the study of man."
Many other books of the period included in their definitions something about the "study of exchange and production." Definitions of this sort emphasize that the topics with which economics is most closely identified concern those processes involved in meeting man's material needs. Economists today do not use these definitions because the boundaries of economics have expanded since Marshall. Economists do more than study exchange and production, though exchange remains at the heart of economics.
Most contemporary definitions of economics involve the notions of choice and scarcity. Perhaps the earliest of these is by Lionell Robbins in 1935: "Economics is a science which studies human behavior as a relationship between ends and scarce means which have alternative uses." Virtually all textbooks have definitions that are derived from this definition. Though the exact wording differs from author to author, the standard definition is something like this
"Economics is the social science that examines how people choose to use limited or scarce resources in attempting to satisfy their unlimited wants.
Scarcity and Choice
Scarcity means that people want more than is available. Scarcity limits us both as individuals and as a society. As individuals, limited income (and time and ability) keep us from doing and having all that we might like. As a society, limited resources (such as manpower, machinery, and natural resources) fix a maximum on the amount of goods and services that can be produced.
Scarcity requires choice. People must choose which of their desires they will satisfy and which they will leave unsatisfied. When we, either as individuals or as a society, choose more of something, scarcity forces us to take less of something else. Economics is sometimes called the study of scarcity because economic activity would not exist if scarcity did not force people to make choices.
When there is scarcity and choice, there are costs. The cost of any choice is the option or options that a person gives up. For example, if you gave up the option of playing a computer game to read this text, the cost of reading this text is the enjoyment you would have received playing the game. Most of economics is based on the simple idea that people make choices by comparing the benefits of option A with the benefits of option B (and all other options that are available) and choosing the one with the highest benefit. Alternatively, one can view the cost of choosing option A as the sacrifice involved in rejecting option B, and then say that one chooses option A when the benefits of A outweigh the costs of choosing A (which are the benefits one loses when one rejects option B).
The widespread use of definitions emphasizing choice and scarcity shows that economists believe that these definitions focus on a central and basic part of the subject. This emphasis on choice represents a relatively recent insight into what economics is all about; the notion of choice is not stressed in older definitions of economics. Sometimes, this insight yields rather clever definitions, as in James Buchanan's observation that an economist is one who disagrees with the statement that whatever is worth doing is worth doing well. What Buchanan is noting is that time is scarce because it is limited and there are many things one can do with one's time. If one wants to do all things well, one must devote considerable time to each, and thus must sacrifice other things one could do. Sometimes, it is wise to choose to do some things poorly so that one has more time for other things.
Positive and Normative
Economists make a distinction between positive and normative that closely parallels Popper's line of demarcation, but which is far older. David Hume explained it well in 1739, and Machiavelli used it two centuries earlier, in 1515. A positive statement is a statement about what is and that contains no indication of approval or disapproval. Notice that a positive statement can be wrong. "The moon is made of green cheese" is incorrect, but it is a positive statement because it is a statement about what exists.
A normative statement expresses a judgment about whether a situation is desirable or undesirable. "The world would be a better place if the moon were made of green cheese" is a normative statement because it expresses a judgment about what ought to be. Notice that there is no way of disproving this statement. If you disagree with it, you have no sure way of convincing someone who believes the statement that he is wrong.
Economists have found the positive-normative distinction useful because it helps people with very different views about what is desirable to communicate with each other. Libertarians and socialists, Christians and atheists may have very different ideas about what is desirable. When they disagree, they can try to learn whether their disagreement stems from different normative views or from different positive views. If their disagreement is on normative grounds, they know that their disagreement lies outside the realm of economics, so economic theory and evidence will not bring them together. However, if their disagreement is on positive grounds, then further discussion, study, and testing may bring them closer together.
Economists can confine themselves to positive statements, but few are willing to do so because such confinement limits what they can say about issues of government policy. Both positive and normative statements must be combined to make a policy statement. One must make a judgment about what goals are desirable (the normative part), and decide on a way of attaining those goals (the positive part). Economists often see cases in which people propose courses of action that will never get them to their intended results. If economists limit themselves to evaluating whether or not proposed actions will achieve intended results, they confine themselves to positive analysis. (You should realize that although economists can speak with special authority on positive issues, even the best can be wrong.) However, virtually all economists prefer a wider role in policy analysis, and include normative judgments as well. On normative issues economists cannot speak with special expertise. Put somewhat differently, addressing most normative issues ultimately depends on how one answers the following question: "What is the meaning of life?" One does not study economics to answer this question.
Most statements are not easily categorized as purely positive or purely normative. Rather, they are like tips of an iceberg, with many invisible assumptions hiding below the surface. Suppose, for example, someone says, "The minimum wage is a bad law." Behind that simple statement are assumptions about how to judge whether a law is good or bad (or normative statements) and also beliefs about what the actual effects of the minimum wage law are (or positive statements).
Macro Economics and Micro Economics
Micro Economics
The branch of economics that analyzes the market behavior of individual consumers and firms in an attempt to understand the decision-making process of firms and households. It is concerned with the interaction between individual buyers and sellers and the factors that influence the choices made by buyers and sellers. In particular, microeconomics focuses on patterns of supply and demand and the determination of price and output in individual markets.
The field of economics is broken down into two distinct areas of study: microeconomics and macroeconomics. Microeconomics looks at the smaller picture and focuses more on basic theories of supply and demand and how individual businesses decide how much of something to produce and how much to charge for it. People who have any desire to start their own business or who want to learn the rationale behind the pricing of particular products and services would be more interested in this area.
Macro Economics
Macroeconomics, on the other hand, looks at the big picture (hence "macro"). It focuses on the national economy as a whole and provides a basic knowledge of how things work in the business world. For example, people who study this branch of economics would be able to interpret the latest Gross Domestic Product figures or explain why a 6% rate of unemployment is not necessarily a bad thing. Thus, for an overall perspective of how the entire economy works, you need to have an understanding of economics at both the micro and macro levels.
Macro- and microeconomics, and their wide array of underlying concepts, have been the subject of a great deal of writings. The field of study is vast; here is a brief summary of what each covers: Microeconomics is the study of decisions that people and businesses make regarding the allocation of resources and prices of goods and services. This means also taking into account taxes and regulations created by governments. Microeconomics focuses on supply and demand and other forces that determine the price levels seen in the economy. For example, microeconomics would look at how a specific company could maximize it's production and capacity so it could lower prices and better compete in its industry.
Macroeconomics, on the other hand, is the field of economics that studies the behavior of the economy as a whole and not just on specific companies, but entire industries and economies. This looks at economy-wide phenomena, such as Gross National Product (GDP) and how it is affected by changes in unemployment, national income, rate of growth, and price levels. For example, macroeconomics would look at how an increase/decrease in net exports would affect a nation's capital account or how GDP would be affected by unemployment rate.
While these two studies of economics appear to be different, they are actually interdependent and complement one another since there are many overlapping issues between the two fields. For example, increased inflation (macro effect) would cause the price of raw materials to increase for companies and in turn affect the end product's price charged to the public.
Distinction between Microeconomics and Macroeconomics
Microeconomics Macroeconomics
1.
Microeconomics focuses on the decisions of individual units, no matter how large.
1.
Macroeconomics concentrates on the behavior of entire economies, no matter how small.
2.
Micro economists might look at a single company’s pricing and output decisions.
2.
Macroeconomists study the overall price level, unemployment rate and other things that we call economic aggregates.
MACROECONOMICS:A General Overview
Finance is based on economics. Therefore, to properly understand financial markets and their behavior one must first understand economics. Economics at its core is concerned with the production, distribution, trade and consumption of goods and services. To put this in human terms we can say that economics is the science that arises out of the interplay between limited resources and unlimited human wants and needs.
There are two basic ways to view economics. There is the broad and distant view, which attempts to view things in aggregate for a society at large. We call this view “Macroeconomics”. Macroeconomics is concerned with the status of the economy as a whole. Thus, it looks at overall employment of a general population or overall income of a nation as opposed to a more focused view of a population segment or specific industry. This view is helpful because it is only by this kind of analysis that we can see the general trends which a society or nation is following. Macroeconomic theory and analysis is employed most often by Governments and institutions, which have a responsibility to make policies and decisions which affect the economy as a whole.
Some terms you may have heard of which concern themselves with the macroeconomic view of the economy are Gross National Product, Inflation, Consumer Price Index and Fiscal Policy. The meaning of each of these is listed below.
Gross National Product – This is the most common measure of economic productivity for an aggregate population. GNP is defined as the total value of all goods and services produced in final form during a specific period of time (usually 1 year).
Inflation – Inflation is defined as a condition of generally increasing prices. The term used for measuring these prices can vary according to the desires of the individual, government or institution doing the evaluation.
Consumer Price Index – The CPI is a measure of how much prices have increased or decreased as compared to a baseline years prices. The prices used in arriving at this figure are standard goods and services determined by the evaluator. Thus, the CPI for the United States might vary greatly as compared the CPI for a country from the Middle East.
Fiscal Policy – Fiscal Policy is essentially the manner in which a government achieves economic objectives through government spending and taxation. Fiscal policy is the alternative to Monetary Policy.
Monetary Policy – Monetary Policy is essentially the practice of a government managing the supply of money to achieve economic objectives. The United States uses the Federal Reserve System to either increase or decrease the supply of money, which in turn effects the overall economic environment as a whole.
The principles of Macroeconomics are important in analyzing and understanding longer-term trends and aggregate market behavior. Therefore, for the individual managing his own portfolio it may be helpful to know the current fiscal policy and how it may affect the value of any government bond holdings. One of the ways the government will manage fiscal policy is to buy back these bonds or issue more depending on their objective. This is just one example of the way in which Macroeconomics affects the individual investor.
.
Macroeconomic objectives
1. MAXMISE THE LEVEL OF NATIONAL INCOME:
Broadly, the objective of macroeconomic policies is to maximise the level of national income,
providing economic growth to raise the utility and standard of living of participants in the economy. There are also a number of secondary objectives which are held to lead to the maximisation of income over the long run. While there are variations between the objectives of different national and international entities, most follow the ones detailed below:
2. SUSTAINABILITY –
a rate of growth which allows an increase in living standards without undue structural and environmental difficulties.
3. FULL EMPLOYMENT-
where those who are able and willing to have a job can get one, given that there will be a certain amount of frictional and structural unemployment.
4.PRICE STABILITY –
when prices remain largely stable, and there is not rapid inflation or deflation. Price stability is not necessarily the same as zero inflation, but instead steady levels of low-moderate inflation is often regarded as ideal. It is worth noting that prices of some goods and services often fall as a result of productivity improvements during periods of inflation, as inflation is only a measure of general price levels. However, inflation is a good measure of 'price stability'. Zero inflation is often undesirable in an economy. ("Internal Balance" is used to describe a level of economic activity that results in full employment with no inflation.)
5.EXTERNAL BALANCE- Balance - equilibrium in the Balance of payments without the use of artificial constraints. That is, exports roughly equal to imports over the long run.
6.EQUITABLE DISTRIBUTION OF INCOME AND WEALTH - a fair share of the national 'cake', more equitable than would be in the case of an entirely free market.
7.INCREASING PRODUCTIVITY - more output per unit of labour per hour
Thursday, October 22, 2009
Gender Empowerment measures
Gender Empowerment Measures
The Gender Empowerment Measure (GEM) is a measure of inequalities between men's and women's opportunities in a country. It combines inequalities in three areas: political participation and decision making, economic participation and decision making, and power over economic resources. It is one of the five indicators used by the United Nations Development Programme in its annual Human Development Report.
Methodology
Calculating the GEM involves several steps. Firstly percentages for females and males are calculated in each of three areas.
The first area is the number of parliamentary seats held.
The second area is measured by two sub-components:
a) legislators, senior officials, and managers, and
b) professional and technical positions.
The third area is measured by the estimated earned income (at purchasing power parity US$).
The Gender Empowerment Measure (GEM) is a measure of inequalities between men's and women's opportunities in a country. It combines inequalities in three areas: political participation and decision making, economic participation and decision making, and power over economic resources. It is one of the five indicators used by the United Nations Development Programme in its annual Human Development Report.
Methodology
Calculating the GEM involves several steps. Firstly percentages for females and males are calculated in each of three areas.
The first area is the number of parliamentary seats held.
The second area is measured by two sub-components:
a) legislators, senior officials, and managers, and
b) professional and technical positions.
The third area is measured by the estimated earned income (at purchasing power parity US$).
Sunday, October 11, 2009
India Slips on Human Development Index
India slips on human development index
New Delhi: Developed countries can finance the rising burden of their ageing population far better if they allow more migration from countries like India, says the Human Development Report 2009, the flagship publication of the United Nations Development Programme.
“The growing labour abundance of developing countries suggest that we are entering a period when increased migration will benefit not only them (migrants) but will also be advantageous for the populations of destination countries”, it says.
The report has, therefore, criticised the trend to shut the labour market from migrants in the wake of the global recession, saying this has hurt the economies of the recipient countries. Without migration, the report says, dependency ratios (the percentage of people depending on the wage earner) by the year 2050 will rise to 78, instead of 71. In developing countries it will peak at 55 at the same time.
On the same lines, it has also suggested cities like Mumbai should develop facilities for migrants from rural areas like temporary ration cards and education opportunities for their children.
The annual HDI report has established itself as the most comprehensive measure of how economies have performed compared with the limited development scorecard offered by the rate of growth of the GDP.
On that score, India has slipped up by six positions to the 134th position among 182 countries. The score is based on the new income index developed by the World Bank. India’s score has been pulled down by its slower progress in education and health reforms compared with most nations.
The nation’s government expenditure on health as a percentage is only 3.4% in 2006 compared with 8.3% in Sri Lanka and 6.8% in Vietnam. Similarly, the public expenditure on education as percentage of total government expenses is 10.7% over the years 2000 to 2007.
Therefore, according to the report, life expectancy at birth, at 63.4 years, in India is worse than Egypt, Lebanon or Albania.
This is because the improvement in the growth rates of the country has not impacted its distribution. India’s HDI ranking is six rungs lower than the country’s per capita income ranking in PPP dollar terms, in sharp contrast to neighbours like Bangla-desh, which has a HDI ranking higher by 9 rungs, China 10 rungs and Sri Lanka 14 rungs. “Overall, however, India has made steady progress on the human development index. Its value has gone up from 0.556 in 2000 to 0.612 in 2007,” according...
New Delhi: Developed countries can finance the rising burden of their ageing population far better if they allow more migration from countries like India, says the Human Development Report 2009, the flagship publication of the United Nations Development Programme.
“The growing labour abundance of developing countries suggest that we are entering a period when increased migration will benefit not only them (migrants) but will also be advantageous for the populations of destination countries”, it says.
The report has, therefore, criticised the trend to shut the labour market from migrants in the wake of the global recession, saying this has hurt the economies of the recipient countries. Without migration, the report says, dependency ratios (the percentage of people depending on the wage earner) by the year 2050 will rise to 78, instead of 71. In developing countries it will peak at 55 at the same time.
On the same lines, it has also suggested cities like Mumbai should develop facilities for migrants from rural areas like temporary ration cards and education opportunities for their children.
The annual HDI report has established itself as the most comprehensive measure of how economies have performed compared with the limited development scorecard offered by the rate of growth of the GDP.
On that score, India has slipped up by six positions to the 134th position among 182 countries. The score is based on the new income index developed by the World Bank. India’s score has been pulled down by its slower progress in education and health reforms compared with most nations.
The nation’s government expenditure on health as a percentage is only 3.4% in 2006 compared with 8.3% in Sri Lanka and 6.8% in Vietnam. Similarly, the public expenditure on education as percentage of total government expenses is 10.7% over the years 2000 to 2007.
Therefore, according to the report, life expectancy at birth, at 63.4 years, in India is worse than Egypt, Lebanon or Albania.
This is because the improvement in the growth rates of the country has not impacted its distribution. India’s HDI ranking is six rungs lower than the country’s per capita income ranking in PPP dollar terms, in sharp contrast to neighbours like Bangla-desh, which has a HDI ranking higher by 9 rungs, China 10 rungs and Sri Lanka 14 rungs. “Overall, however, India has made steady progress on the human development index. Its value has gone up from 0.556 in 2000 to 0.612 in 2007,” according...
How to calculate Human development Index
How to Calculate a Human Development Index
Instructions
Step 1
Understand the three major areas of development that the Human Development Index focuses on: health, education and income. Health focuses on longevity and the life expectancy of a country's residents at birth. Education measures adult literacy, as well as the percentage of residents enrolled in various levels of education. Finally, income measures the gross domestic product (GDP) of a country in U.S. dollars. Together, these factors show varying levels of development that can pinpoint specific areas that need work. For example, a country may seem developed to outside critics if it has a high GDP, but an HDI score may reveal that its health levels are low.
Step 2
Learn how countries are ranked in terms of their HDI scores. A score of "1" is a perfect score, meaning a country is as developed as possible. A score of "0" is given to a country with no level of development. Countries are ranked between the two extremes by decimal point to the thousandths place. Most countries in the West rank in the 70th to 80th percentile, marking a relatively high level of development.
Step 3
Calculate the health score in the Human Development Index. Visit the United Nations Statistics Division (link in the Resources section) and obtain the life expectancy at birth for the country in which you are interested. Subtract 25 (the lowest acceptable age of life expectancy, according to the UN) from this number. Divide the final amount by "85 -25." Write down the resulting quotient.
Step 4
Calculate the education score in the Human Development Index. Visit the UN Data page for gross enrollment ratio in tertiary and secondary education (link in the Resources section). Click the country you are interested in and obtain the gross enrollment number. Subtract "0" from this, then divide the total by "100." Write down the quotient.
Step 5
Obtain the literacy rate for your country from the UN Statistics Division (link in the Resources section). Divide the literacy rate by "100" and write down the quotient.
Step 6
Add 2/3 of the quotient in Step 4 with 2/3 of the quotient in Step 5. The resulting sum is the Human Development Index score for education.
Step 7
Calculate the Gross Domestic Product (GDP) score for your Human Development Index. Obtain the GDP number for your country from the UN Statistics Division (link in the Resources section).
Step 8
Input the GDP into the following equation, replacing "GDP" with the number listed in the statistics data: log(GDP) - log(100). Write down the total. Divide by log(40,000) - log(100). Write down the quotient.
Step 9
Calculate the total Human Development Index number for the country you've chosen by combining the data from the previous steps. The HDI is calculated by adding 1/3 of the quotient in Step 3, 1/3 of the quotient in Step 6, and 1/3 of the quotient in Step 8. The sum is the country's Human Development Index.
Instructions
Step 1
Understand the three major areas of development that the Human Development Index focuses on: health, education and income. Health focuses on longevity and the life expectancy of a country's residents at birth. Education measures adult literacy, as well as the percentage of residents enrolled in various levels of education. Finally, income measures the gross domestic product (GDP) of a country in U.S. dollars. Together, these factors show varying levels of development that can pinpoint specific areas that need work. For example, a country may seem developed to outside critics if it has a high GDP, but an HDI score may reveal that its health levels are low.
Step 2
Learn how countries are ranked in terms of their HDI scores. A score of "1" is a perfect score, meaning a country is as developed as possible. A score of "0" is given to a country with no level of development. Countries are ranked between the two extremes by decimal point to the thousandths place. Most countries in the West rank in the 70th to 80th percentile, marking a relatively high level of development.
Step 3
Calculate the health score in the Human Development Index. Visit the United Nations Statistics Division (link in the Resources section) and obtain the life expectancy at birth for the country in which you are interested. Subtract 25 (the lowest acceptable age of life expectancy, according to the UN) from this number. Divide the final amount by "85 -25." Write down the resulting quotient.
Step 4
Calculate the education score in the Human Development Index. Visit the UN Data page for gross enrollment ratio in tertiary and secondary education (link in the Resources section). Click the country you are interested in and obtain the gross enrollment number. Subtract "0" from this, then divide the total by "100." Write down the quotient.
Step 5
Obtain the literacy rate for your country from the UN Statistics Division (link in the Resources section). Divide the literacy rate by "100" and write down the quotient.
Step 6
Add 2/3 of the quotient in Step 4 with 2/3 of the quotient in Step 5. The resulting sum is the Human Development Index score for education.
Step 7
Calculate the Gross Domestic Product (GDP) score for your Human Development Index. Obtain the GDP number for your country from the UN Statistics Division (link in the Resources section).
Step 8
Input the GDP into the following equation, replacing "GDP" with the number listed in the statistics data: log(GDP) - log(100). Write down the total. Divide by log(40,000) - log(100). Write down the quotient.
Step 9
Calculate the total Human Development Index number for the country you've chosen by combining the data from the previous steps. The HDI is calculated by adding 1/3 of the quotient in Step 3, 1/3 of the quotient in Step 6, and 1/3 of the quotient in Step 8. The sum is the country's Human Development Index.
Human Development Index
Human Development Index
The UN Human Development Index (HDI) is a comparative measure of poverty, literacy, education, life expectancy, and other factors for countries worldwide. It is a standard means of measuring well-being, especially child welfare. The index was developed in 1990 by the Pakistani economist Mahbub ul Haq, and has been used since 1993 by the United Nations Development Programme in its annual report.
The HDI measures the average achievements in a country in three basic dimensions of human development:
A long and healthy life, as measured by life expectancy at birth.
Knowledge, as measured by the adult literacy rate (with two-thirds weight) and the combined primary, secondary and tertiary gross enrollment ratio (with one-third weight).
A decent standard of living, as measured by gross domestic product (GDP) per capita at purchasing power parity (PPP) in USD.
Each year, countries are listed and ranked according to these measures. Those high on the list often brag about it, as a means of attracting talented migrants (economically, individual capital) or discouraging potential emigrants from leaving.
Human Development Index - Method used to calculate the Human Development Index
The Human Development Index (HDI) represents the average of the following three indices:
Life Expectancy Index =
Education Index =
Adult Literacy Index (ALI) =
Gross Enrolment Index (GEI) =
GDP Index =
LE: Life expectancyALR: Adult literacy rateCGER: Combined gross enrolment ratioGDPpc: GDP per capita at PPP in USD
The UN Human Development Index (HDI) is a comparative measure of poverty, literacy, education, life expectancy, and other factors for countries worldwide. It is a standard means of measuring well-being, especially child welfare. The index was developed in 1990 by the Pakistani economist Mahbub ul Haq, and has been used since 1993 by the United Nations Development Programme in its annual report.
The HDI measures the average achievements in a country in three basic dimensions of human development:
A long and healthy life, as measured by life expectancy at birth.
Knowledge, as measured by the adult literacy rate (with two-thirds weight) and the combined primary, secondary and tertiary gross enrollment ratio (with one-third weight).
A decent standard of living, as measured by gross domestic product (GDP) per capita at purchasing power parity (PPP) in USD.
Each year, countries are listed and ranked according to these measures. Those high on the list often brag about it, as a means of attracting talented migrants (economically, individual capital) or discouraging potential emigrants from leaving.
Human Development Index - Method used to calculate the Human Development Index
The Human Development Index (HDI) represents the average of the following three indices:
Life Expectancy Index =
Education Index =
Adult Literacy Index (ALI) =
Gross Enrolment Index (GEI) =
GDP Index =
LE: Life expectancyALR: Adult literacy rateCGER: Combined gross enrolment ratioGDPpc: GDP per capita at PPP in USD
Tuesday, October 6, 2009
Course structure of Basics of Human development For MBA - Ist semester
SCHOOL OF BUSINESS STUDIES
SHARDA UNIVERSITY, GREATER NOIDA
Instructor : Dr. Prem S. Vashishtha and Mr. Mridul Dharwal
Program: MBAS
Course: Basics of Human Development
Course Code: HUM 101
Credit: 3
Aim : The aim of the course is to provide the students with an overall understanding of the Key issues in human development related to underdevelopment, poverty and inequality, and to ensure that human development and growth are understood with a wide socio-economic and gender mainstreaming perspective. The basic issues are relevant to all societies and economic systems at different levels of development. However, these issues need immediate attention, particularly in the developing societies and market transition economies.
Course contents:
UNIT I
Economic growth and development :
Growth and Development : Meaning, Characteristics and Indicators
Human Development: Concept
Human Development: Paradigm shift in approach to development
UNIT-II
Human Development : Measurement and Issues :
Poverty, Inequality and Development
Human Poverty Index (HPI)
Human Development Index (HDI)
Gender aspects :
Gender related Development Index (GDI)
Gender Empowerment Measure (GEM)
UNIT III
Towards Sustainable Human Development :
Green GDP
Natural Resource Depletion and the Poor
Global Warming, Adaptation to climate change and the poor
UNIT IV
Role of State in Promoting Human Development :
Children and malnutrition
Education and skill formation
Financing of social sector schemes
Indian scenario
UNIT V
Governance Issues :
The role of Political freedom and concern with human development issues
Decentralized Governance and local decision making
Managing social sector programs in India
Books Recommended :
Amartya Sen : Development as freedom.
Jean Dreze and Amartya Sen : India Development and Participation. ( Oxford, Pub.)
Debraj Ray : Development Economics. (Oxford Pub.)
Amartya Sen : Action India, Economic Development and social opportunity.
Rudradutt and Sundram : Indian Economy (Latest Ed.)
S. K. Misra and V.K. Puri : Indian Economy (Latest Ed., Himalaya Publishing House)
A.P.Thirlwal:Growth and Development with special reference to Developing Economies. (Latest Ed.)
Michael P.Todaro:Economic Development in the Third world (Latest Ed.)
G.M.Meier:Leading Issues in Economic Development (Latest Ed., Oxford Pub.)
Reference Books :
India Development Report 2008 (Oxford Pub.)
World Development Report (Latest). (World Bank)
Human Development Report 2007/2008 (UNDP)
Human Development Report 2006 (UNDP)
Human Development Report 1990 (UNDP)
The Economic Survey-Government of India. (Ministry of Finance)
Five year plans of India. (Planning Commission)
Website address :
United Nation Development Programme ( http://www.undp.org)
World Bank (http://www.worldbank.org)
Planning Commission (http://www.planningcommission.nic.in)
India Budget (http://www.indiabudget.nic.in)
.
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