Economics is the study of how individuals, governments, businesses, organizations, as well as countries use their limited resources effectively and efficiently to benefit from it to the maximum extent. It deals with manufacturization, distribution, and consumption of goods and services.
Economics addresses the questions such as what to produce, how to produce, and who will produce it. It is an important factor as it denotes the distribution of resources, social efficiency, consumer behavior, market failure, economic forecasts, opportunity costs, along with decisions.
Economic Growth vs Economic Development
The main difference between Economic Growth and Economic Development is that economic growth expresses the growth in the real national income, whereas, on the other hand, economic development expresses the improvement in the living standards of the population of the respective country.
Economic growth is the increase in the goods and services produced per person over some time, whereas, economic development is the increase in output along with improvement in the social, as well as the political welfare of the population within a nation.
Comparison Table Between Economic Growth and Economic Development (in Tabular Form)
| Parameter of Comparison | Economic Growth | Economic Development |
|---|---|---|
| Meaning | Economic growth refers to the rise in the value of everything that is produced within the economy. | Economic Development refers to the process of improvement in the quality of life, and living standards. |
| Indicators | Economic growth is indicated by the increase in gross domestic product (GDP), or gross national product (GNP). | Economic development is indicated by the quality of living standards, increase in life expectancy, human development, etc. |
| Scope | The scope of the economic growth is narrow as compared to the scope of the economic development. | Economic development has a broader scope as compared to Economic growth. |
| Reflects | Economic growth covers quantitative aspects, and reflects the national income. | Economic development considers the qualitative aspects, and reflects not only national income, but also the overall development of the nation. |
| Measurement | Economic growth measures the real gross domestic product or gross national product. | Economic development measures the development, human development index, human poverty index, and physical quality of life index. |
What is Economic Growth?
Economic growth measures the real national income i.e. GDP. GDP (gross domestic product) is a measure of the national income, national output, or national expenditure. It denotes the total volume of the goods, and services produced in the country, or a nation.
Economic growth creates more profits for businesses. As a result, stock prices rise, which in turn increases the capital to invest, and purchase more resources, as well as hire more human resources/ employees. Consumers having more money to buy additional goods and services, increases the economic growth. All the countries wish to achieve positive economic growth as it leads to more money, which is the ultimate goal of businesses, whereas, government benefits from the increased tax revenue, either the government spends more, cuts taxes, or both
There are two measures of Economic growth:
- GDP i.e. Gross domestic product
- GNP i.e. Gross national product
Different methods such as gross domestic product and gross national product can be employed to assess the economic growth. While the gross domestic product indicates the value of goods, and services manufactured by the country, the gross national product not only measures the value of goods, and services but also the investments from the foreign countries. Although gross domestic product is the measure commonly used to measure the growth of the country, it fails to keep the well-being of the nation.
What is Economic Development?
Economic Development refers to the improvement in the quality of goods, and services, organization of the production, improvement in quality of life, and the structured changes. It denotes the creation and distribution of wealth.
It is a qualitative aspect, and reflects the composition, and the distribution of national income. Moreover, economic development is a continuous, and planned process, it refers to the gradual, and steady change. Economic development is the solution to the problems of under-developed countries. It is a prerequisite for development.
The measures of Economic Development are the following:
- Gross Domestic Product
- Literacy level
- Health level
- Life expectancy rate
- Environmental rate
- Quality of housing
Main Differences Between Economic Growth and Economic Development
- Economic growth refers to the monetary growth of an economy, whereas, on the other hand, economic development refers to the overall development of the quality of life, living standards, etc.
- Economic growth is a uni-dimensional approach which only deals with the growth of the economy, whereas, the economic development is a multi-dimensional approach that takes both growth, as well as the quality of life of the economy.
- Economic growth is an automatic process that may or may not require the government’s intervention, whereas, on the other hand, economic development requires the government’s intervention as all the development policies are laid down by the government.
- Economic growth denotes more output, while, on the other hand, economic development denotes better living conditions.
- Economic growth does not take distribution of income into concern, on the contrary, economic development takes the distribution of income into concern.
Conclusion
Economic growth and economic development might sound similar but there are two different concepts, with distinct meanings, as well as applications. While economic growth is a quantitative concept, economic development is a qualitative concept.
Economic growth is a short-term process that applies to the developed nations, while the latter i.e. economic development is a long-term process, and applies to developing economies. In simple words, the economic growth indicates the rise in the national income per capita, while the economic development indicates the improvement in the quality of life.
References
- https://journals.sagepub.com/doi/abs/10.1177/000271626736900110
- https://notendur.hi.is/gylfason/_borders/pdf/dp2594.p