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Basic economics questions on development?


Anderson
(@anderson)
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It would be great if you could answer these 2 questions. Please include explanations!

1) Why are some countries richer and economically more productive than other nations?

2) What are the advantages/disadvantages of a planned economy and what are the advantages of a free market?

Please help me


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metrics
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There is no one correct answer.  If you read Jared Diamond he would mention that early on the regions that first cultivated agriculture and moved past the hunter gather stage built up resistance from germs that would eliminate populations.  If you have a strong and steady population your nation can flourish into a stronger economy.  If you read something like from Ha-Joon Chang then you would understand it was by industrialization that nations became more developed. 

Sometimes the policies of a nation can determine if the country will grow into a developed status.  For example, the countries of South Korea and Japan were extremely poor coming out of World War 2.  The governments of those countries invested heavily into a dynamic comparative advantage (sorta like comparative advantage but its an industry that the country sees that it could dominate in future years).  Today South Korea and Japan are leaders in the electronics industry as well as other key industries.


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On your question of planned vs capitalism.  The advantages of planned economies is that the government can invest in industries they view will have a comparative advantage in the future.  For example, a small country today may not be the leader in automobile manufacturing but believe that if they invest capital and labor towards these industries they will build a strong industry.  Free market capitalism has the advantage of rewarding the very best in the field.  Only the best restaurants, automobile manufacturers, railroads, etc survive.  The reward system is set to always improve the well being of the economy.  

The downside of planned economy is that there is no punishment for failure, also typically taxes are a burden in this form of government.  Downside to capitalism is that it is difficult to invest in industries that are not profitable.  Countries may form Dutch Disease, where they only invest in a hot commodity such as Tulips, but ignore the rest.  Then when a crash hits that economy, the entire nation is ruined.


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beautybird
(@beautybird)
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Posted by: @anderson

1) Why are some countries richer and economically more productive than other nations?

 

I just want to share regarding this. Some countries are richer and economically more productive than other nations because elite nations intentionally limit the capacity of smaller nations to grow as explained in the book of Ha-Joon Chang in which I agree. Less weaker countries could mean less market for elite ones.


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Johnsmiith
(@johnsmiith)
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Ok, so you just copied and pasted.

Development economics has to do with how to make underdeveloped countries grow into developed countries.

You see we still don't know which factors of production are responsible for making counties grow, so development economics deals with this topic head-on. It uses everything we know about the economy and comes up with a theory or defined plan to turn a developed country into a developed country.


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PDavis
(@pdavis)
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It really just boils down to government power over the market vs market freedom over the economy. When you take something like capitalism, for example, it functions entirely based on a free-market system or supply and demand. It has been proven to be an ever-expanding economic system that has worked and continues to work. Not all countries function under a free-market and thus, are not as wealthy. 


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