ECON 200 Lecture Notes - Lecture 30: Economic Stability
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ECON 200 Full Course Notes
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Document Summary
When people fear their capital may be stolen by criminals or confiscated by a corrupt government, there is less investment, including from abroad, and the economy functions less efficiently result: lower living standards. Political instability (e. g. , frequent coups) creates uncertainty over whether property rights will be protected in the future. Economic stability, efficiency, and healthy growth require law enforcement, effective courts, a stable constitution, and honest government officials. Inward-oriented policies (e. g. , tariffs, limits on investment from abroad) avoiding interaction with other countries. Outward-oriented policies (e. g. , the elimination of restrictions on trade or foreign investment) promote integration with the world economy. Trade has similar effects as discovering new technologies it improves productivity and living standards. Countries with inward-oriented policies have generally failed to create growth and countries with outward-oriented policies have often succeeded. Technological progress is the main reason why living standards have risen. Knowledge is a public good because ideas can be shared freely increasing the productivity of many.
