Class Summary #6 for class on 9/14/11

As explained at the very beginning of class by Prof. Rizzo, today's class presented a "detailed history of how standards of living have changed over time, and what exactly that history teaches us as economists."

Prof. Rizzo showed us a detailed powerpoint presentation to teach us about this history. In the early 1,000 years of our documented history, the average individual income barely changed. In the past few years, however, individual income has really begun to increase.

Part of the reason for this increase is the influx in new technologies that have come about in our world today. But as Prof. Rizzo points out, having new technologies is not sufficient to guarantee economic growth.

A very interesting fact Prof. Rizzo shared with us was that back in the year 1500, America's gross domestic product (GDP) great at 1.2%. Our economy has really grown a lot since then, but consider this: If our GDP was still 1.2% today, the average american would have the same income as those people who live in the poorest countries in the world.

Then, Prof. Rizzo went on to answer the question of how exactly do we get rich in our society today? The answer to this is:

Here is a picture of Singapore, a country with one of the
highest GDPs of any other country in the entire world.

1. Mass production
• If someone produces more stuff, it won't impoverish other people. This shows that having more people in our population won't cause less people to get rich.
2. Trading things is imperative to get rich
• Trading things to get other things that you need/don't have is important because doing so allows one to create great things. This won't impoverish anybody either.

The only way to impoverish other people is by receiving things with out any type of benefit to the person who gives you something. For example, if one asks his/her parents for a lot of toys/items, the child is impoverishing the parents because the parents are receiving no type of benefit by giving their child a boatload of items.

Later on, Prof. Rizzo explained how there are two major events in our economic history that have affected what/how much we could produce in this world.

1. 5,000 years ago- The Agricultural Revolution. This event vastly improved our growth thanks to all we could produce.
2. Industrial Revolution of 1800

An issue that is widely considered by economists is that of our world population- 6.85 billion. In reality though, population pressure is a laughable worry and should not be a real concern despite what people might say.

Consider this: if every person in the world lived in Texas, there would be the same population density of Boston or Westchester County, which exemplifies that we have plenty of room for more people to live in the world.

Not to mention that our world GDP of 65 trillion is growing much more rapidly than the world population. In 1960, the world GDP was 13 trillion and in just 50 years, that number has increased significantly. The way things are going, that should continue to be the case.

It is also important to note that population growth is a measurement of how stable and good an economy is, because of the fact that if a population continues to thrive, then an economy must be working well to support all of those people.

Here is a picture of Ghana, a country in Africa. Clearly,
living conditions here are different than those in Singapore.

Some final important notes we discussed in class:

The difference between extensive and intensive growth is as follows:

1. Extensive growth: helping/supporting the world population and therefore, living conditions for the general/average person doesn't improve much.
2. Intensive growth- Individual/personal growth. This is the reason why we go to college, so that someday, we have a lot of intensive growth and can live affluent lifestyles.

The reason why from 1000-1800 there was not really a great income growth is because most of the new technologies developed during that time period ended up spurring extensive growth as opposed to intensive growth. The technologies, for example, went towards hosing/feeding the general public.

One final interesting fact we learned about in class was how early on in civilization, in the year 0 specifically, the financial differences between countries and its income were miniscule. By 1820, there was a bigger difference and finally, in today's day and age, the difference between the richest and poorest is a large one.

The richest countries-Australia and USA have an average-American income that is 554.7% more than the world average. Back in the year 0, one would probably not notice differences between countries in terms of how everything looks in each country. But not, if you traveled from a very wealthy country to a very poor one, you would see many differences.

And some final proof that we are getting wealthier as time goes on in America:

In 1970, 27% of people lived on a dollar or less per day. Now, that figure is at 6%. 

Also, the UA is currently 75 times richer than the poorest countries in the world. Back in 1960, that figure was 51 times and back in 1870, that figure was just 9 times.