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CBEB 1108

MANAGERIAL ECONOMICS

CHAPTER 6: ECONOMICS GROWTH


(THEORIES)

LECTURER: ENCIK
MOHAMED HISHAM BIN
HANIFA
JOANNE OOI JHO YEN CEB140078
LAU SZE CHING CEB140054
YIP SIN YEE
CEB140141

LAU SZE
CHING
Deputy
Governor,
Monetary
Autority of
Singapore

JOANNE OOI
CFO of
International
Monetary
Fund
Organization

YIP SIN YEE


Chief
Executive
Officer,
The Edge

Discuss
the
economic
growth theories. Which of
them do you most agree
with? Is economic growth
always good?

Classical Growth
Theory

The growth of real GDP per person is


temporary .
"subsistence level
equilibrium level
Contain population growth
Issues:
1. Malthusian theory: population growth is
part of the problem.
2. Resource limited

b. NEOCLASSICAL GROWTH ECONOMICS.

Neoclassical economics developed from the classical economics


dominant in the 18th and 19th centuries.
- will be accomplished with the proper amounts of the three
driving forces: labor, capital and technology.
- When a new technology becomes available, the labor and capital
need to be adjusted to maintain growth equilibrium.
- Technological change influences the economic growth rate but not
vice versa.
- the standard of living will all become equal.
-

advances in health care that extend lives.

ISSUES:
All economies have access to the same technologies
and capital is free to roam the globe, seeking the
highest available real interest rate.
The theory argues that economic growth will not
continue unless there continues to be advances in
technology.

New Growth Theory


GDP per person will
because of profit
pursuit
Knowledge increasing returns non-rival
good
Higher standard of living
Innovation quantity &quality of final goods
Artificial resource base scarcity
Investment in Human Capital, R&D, Education
Issues :Government close door policy R&D, education ,
innovation
Innovation negative social impact
Copyright Infringement
Hard to measure Innovation/Knowledge Literacy
Rate Index

Which of them do you most agree with?


New Growth Theory
- New Growth Theory emphasizes that economic growth results from the
increasing returns associated with new knowledge.
Knowledge drives growth.
o Ideas can be infinitely shared and reused, human can accumulate them
without limit.
o The theory helps us make sense of the ongoing shift from a resourcebased economy to a knowledge-based economy.
o New knowledge are critical to shaping the growth of nations,
communities and individual firms.

Special Characteristics of knowledge


Knowledge plays an important role in making growth possible.

Knowledge is critical to economic growth. Knowledge is subject to


increasing returns because it is a non-rival good.
They are not subject to what economists call diminishing returns.
As we accumulate more and more ideas, knowledge about how the world
works, and how to extract greater use out of the finite set of resources
with which the world is endowed, we enable the economy to develop
further.

Is economic growth
always good?
Yes, if it is in accordance to New
Growth Theory which emphasize on
innovation and creativity to boost the
economy provided without harming
the environment or affecting the
stakeholders.
A central proposition of New Growth
theory is that, unlike land and
capital, innovation is not subject to
diminishing returns.

That is all from


us!
Thank You!