Economic growth and sustainability — common mistakes

In your essays, always evaluate the term 'economic growth'. Distinguish between short-run and long-run growth, and critically assess its desirability. Use the concept of sustainability to argue that while growth can increase living standards, it may come with significant environmental costs and inter-generational trade-offs that are not captured by GDP data.

Not necessarily. While traditional industrial growth has been highly polluting, the relationship is not fixed. 'Green growth' models propose that technological innovation, a shift towards a service-based economy, and strong environmental regulations can allow growth to occur while reducing or 'decoupling' it from environmental damage. For example, growth in the renewable energy sector or the digital economy has a much smaller environmental footprint than growth in heavy manufacturing.

The approximate real GDP growth rate is the nominal growth rate minus the inflation rate. So, 5% - 3% = 2%. This means that while the monetary value of output grew by 5%, the actual volume of goods and services produced only grew by approximately 2%. The remaining 3% was just an increase in the average price level.

Yes, this is a common scenario. GDP is a narrow measure of output and does not account for income distribution, health, education, or environmental quality. A country might have a high GDP per capita due to oil exports, for example, but suffer from vast inequality, poor public services, and severe pollution. Economic development is a broader concept that includes improvements in overall welfare and quality of life, for which GDP is only one, often imperfect, indicator.