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Standard of Living

To understand standard of living remember the following key points:

  1. The basic reason that countries have a high standard of living is that they produce (per capita) many valuable goods and services. Poor countries do not produce (per capita) many valuable goods and services.
  2. Increasing productivity means producing more goods and services from the same amount of scarce productive resources. Countries must increase their productivity in order to attain a higher standard of living.
  3. If one country becomes wealthier, it does not mean that some other country has become poorer. Countries can grow and become wealthier together.
  4. Countries that have large populations and lack natural resources are not necessarily poor.

There are several basic ways to increase productivity and help raise standards of living:

  1. Increased amounts of capital: To achieve high levels of productivity, workers must have an adequate supply of capital. A farmer using a tool such as a hoe is more productive than a farmer using only his hands.
  2. Improvements in technology: Improvement in technology is probably the most important factor in increasing productivity. A farmer who uses a Global Positioning System (GPS) satellite to apply fertilizer on a tractor is much more productive than a farmer who uses only a hoe, even if the farmer using the hoe may work a lot harder.
  3. Improvement in the quality of labor: Labor that is better trained and educated is more productive than unskilled labor. The increase in skills that one gets from education and training is called human capital. By being in school, you are increasing your human capital, and, therefore, your productivity.

The key idea for you to understand is this: in order to attain a higher standard of living for their people, poorer countries must increase their productivity.

Video #1: Global population growth, box by box

Watch Hans Rosling's TED talk Global Population Growth, Box by Box (10:04) to gain a basic understanding on the differences in standard of living around the world.

From this video you should have learned that a higher standard of living means an increase in access to food, leisure, and healthcare.

Video #2: The magic washing machine

Watch Hans Rosling's TED talk The Magic Washing Machine (9:15) to hear him talk about the invention he feels has freed people to be more productive and increase their standard of living.

Video #3: Clean toilets for the world's poor

Why is a high standard of living important? Countries that have high levels of productivity have high standards of living. People have many goods and services, healthcare is good, and there is a high life expectancy.

Watch Clean Toilets for the World's Poor (6:27) below to learn why a high standard of living makes a society more healthy.

Open Clean Toilets for the World's Poor | PBS NewsHour (6:27) in a new tab

PBS NewsHour | Clean Toilets for the World's Poor: Video downloaded from PBS LearningMedia, http://www.pbslearningmedia.org. Rights to use this asset expire on 12/31/2099. Asset Copyright © 2010. Source: PBS Newshour. See full license.

Question A: What has helped more to solve the problem of Kenya's toilet shortage: public (government) rules or private investment?

Video #4: Poison water in Flint affects everyone's health and poisons public trust

Watch Poison Water in Flint Affects Everyone's Health—Especially Kids (11:12) from PBS below.

Open Poison Water in Flint Affects Everyone's Health—Especially Kids | PBS NewsHour in a new tab

PBS NewsHour | Poison Water in Flint Affects Everyone's Health—Especially Kids. Video downloaded from PBS LearningMedia, http://www.pbslearningmedia.org. Rights to use this asset expire on do not expire. Asset Copyright © 2015. Source: PBS NewsHour. See full license.

Question B: What are government officials doing to solve this problem?

Tragedy of the Commons

Video #5: Tragedy of the Commons

Watch Chalk Talk: Tragedy of the Commons (1:51) from Science360.

Question C: How does the Tragedy of the Commons develop?

Article #1: Tragedy of the Commons

Next, read Tragedy of the Commons by Garrett Hardin from The Library of Economics and Liberty.

As you read, answer the following questions:

  • "The herds exceeded the natural 'carrying capacity' of their environment, soil was compacted and eroded, and 'weedy' plants, unfit for cattle consumption, replaced good plants." Question D: Who died as a result of the tragedy of the commons?

  • "The tragedy of the commons also arose in the savings and loan (S&L) crisis." Question E: What was made into a commons?

  • Question F: What can help the tragedy of the commons on our congested highways?

  • "Fish populations in the oceans have been decimated because people have interpreted the 'freedom of the seas' to include an unlimited right to fish them. The fish were, in effect, a commons." Question G: What remedy does the author recommend governments do to stop tragedy of the commons with overfishing?

  • Question H: What rules do governments impose that the author does not support?