output.

3. The third way we can increase our effective stocks of a natural resource is, of course, by technological changes that
facilitate recycling. Say, for example, that a new recycling technique allows copper to be reused before it is scrapped and
that no such reuse was economical before. Then this technique has doubled the effective reserves of copper (aside from
any resources used up in the recycling process). It is important to note, however, that recycling adopted without regard
for economic considerations can actually waste resources rather than save them. For example, some researchers have
found that combustion of municipal garbage to generate electricity sometimes actually uses up more energy than it
produces.

I. PRODUCTION POSSIBILITY CURVE (PPC)

Economic growth is the process of increasing the economy's ability to produce goods and services. It is achieved by
increasing the quantity or quality of resources. The production possibility curves is a hypothetical representation of the
amount of two different goods that can be obtained by shifting resources from the production of one, to the production
of the other. The curve is used to describe a society’s choice between two different goods.

The PPC indicates the production possibilities of two commodities when resources are fixed. This means that the
production of one commodity can only increase when the production of the other commodity is reduced, due to the
availability of resources. Therefore, the PPC measures the efficiency in which two commodities can be produced
together, helping managers and leaders decide what mix of commodities are most beneficial. The PPC assumes that
technology is constant, resources are used efficiently, and that there is normally only a choice between two commodities.

Production possibilities, which analyzes the alternative combinations of two goods that an economy can produce with
given resources and technology, indicates economic growth with an outward shift of the production possibilities curve.
The general method of achieving economic growth is by increasing the quantities or qualities (Q and Q) of the resources.

With existing resources and technology, the economy can produce any combination of crab puffs and storage sheds up to
or on the production possibilities curve. However, it cannot produce any combination of production beyond the curve,
such as point M. While point M cannot be reached today with existing resources and current technology, it can be
reached tomorrow through economic growth. Growth expands the frontier, causing it to shift outward. Point M can be
reached when economic growth expands the frontier. Once the process is completed, point  M lies on the new production
possibilities curve. Another success story achieved through the miracle of economic growth.
 SIGNIFICANCE of PPC
The production possibility curve is of much importance in explaining some of the basic facts of human life like the
problems of unemployment, of technological progress, of economic growth, and of economic efficiency.

1. Economic Growth:
By relaxing the assumptions of the fixed supply of resources and of short period, the production possibility curve helps us
in explaining how an economy grows. The supplies of resources like land, labour, capital and entrepreneurial ability are
fixed only in the short run. Development being a continuous and long run process, these resources change over time and
shift the production possibility curve outwards as shown in Fig. 5.11. If the economy is stagnant at, say point 5, economic
growth will shift it to point A on the production possibility curve PP, and a further increase in the resources may shift the
production possibility curve towards the right to P1P1 The economy will produce at point C. Why point С? Because when
there is economic growth, the economy will have larger quantities of both consumer and capital goods than before.

2. Economizing Resources:
The production possibility curve tells us about the basic fact of human life that the resources available to mankind in
terms of factors, goods, money or time are scarce in relation to wants, and the solution lies in economising these
resources. As aptly put by Samuelson, “Economic scarcity refers to the basic fact of life that there exists only a finite
amount of human and non-human resources, which the best technical knowledge is capable of using to produce only a
limited maximum amount of each and every good, as shown by the Production Possibility Frontier. And thus far, nowhere
on the globe is the supply of goods so plentiful or the tastes so limited that the average man can have more than enough
of everything he might fancy.”

3. Economic Efficiency:
The production possibility curve is also used to explain what Prof. Dorfman calls the “three efficiencies: (i) Efficient
selection of the goods to be produced, (ii) Efficient allocation of resources in the production of these goods and efficient
choice of methods of production, (iii) Efficient allotment of the goods produced among consumers.” These are in fact the
central problems of an economy which are related to what Samuelson calls “what, how and for whom” to produce.

II. WHAT IS GROWTH? GROWTH VS DEVELOPMENT

Definition of Economic Growth

Economic Growth is defined as the rise in the money value of goods and services produced by all the sectors of the
economy per head during a particular period of time. It is a quantitative measure that shows the increase in the number
of commercial transactions in an economy.
Economic growth can be expressed in terms of gross domestic product (GDP) and gross national product (GNP), that
helps in measuring the size of the economy. It lets us compare in absolute and percentage change, i.e. how much an
economy has progressed since last year. It is an outcome of the increase in the quality and quantity of resources and
advancement of technology.

Definition of Economic Development

Economic Development is defined as the process of increase volume of production along with the improvement in
technology, rise in the level of living, institutional changes, etc. In short, it is the progress in the socioeconomic structure
of the economy.
Human Development Index (HDI) is the appropriate tool to gauge the development in the economy. Based on the
development, the HDI statistics rank countries. It considers the overall development in an economy regarding the
standard of living, GDP, living conditions, technological advancement, improvement in self esteem needs, creation of
opportunities, per capita income, infrastructural and industrial development and much more.

BASIS ECONOMIC GROWTH ECONOMIC DEVELOPMENT

Concept Narrow Broad
Scope Increase in the indicators like Improvement in life expectancy rate, infant
GDP, per capita income etc. mortality rate, literacy rate and poverty
rates.
Term Short term process Long term process
Applicable to Developed Economies Developing Economies
How it can be measured? Upward movement in national Upward movement in real national income.
income.
Which kind of changes Quantitative changes Qualitative and qualitative changes
are expected?
Type of process Automatic Manual
When it arises? In a certain period of time. Continuous process.

Hence, the basic differences between economic growth and development are explained in the points given below:
 Economic growth is the positive change in the real output of the country in a particular span of time economy.
Economic Development involves rise in the level of production in an economy along with the advancement of
technology, improvement in living standards and so on.
 Economic growth is one of the feature of economic development.
 Economic growth is an automatic process. Unlike economic development, which is the outcome of planned and result
oriented activities.
 Economic growth enables an increase in the indicators like GDP, per capita income, etc. On the other hand, economic
development enables improvement in the life expectancy rate, infant mortality rate, literacy rate and poverty rates.
 Economic growth can be measured when there is a positive change in the national income, whereas economic
development can be seen when there is an increase in real national income.
 Economic growth is a short term process which takes into account yearly growth of the economy. But if we talk about
economic development it is a long term process.
 Economic Growth is applicable to developed economies to gauge to the quality of life, but as it is an essential
condition for the development, it applies to developing countries also. In contrast to, economic development is
applicable to developing countries to measure progress.
 Economic Growth results in quantitative changes, but economic development brings both quantitative and qualitative
changes.
  Economic growth can be measured in a particular period of time. As opposed to economic development is a
continuous process, so it can be seen in the long run.

Example
To understand the two terms economic growth and economic development, we will take an example of a human being.
The term growth of human beings simply means the increase in their height and weight which is purely physical. But if
you talk about human development, it will take into account both the physical and abstract aspects like maturity level,
attitudes, habits, behavior, feelings, intelligence and so on.
In the like manner, growth of an economy can be measured through the increase in its size in the current year in
comparison to previous years, but economic development includes not only physical, but also non-physical aspects that
can only be experienced like improvement in the lifestyle of the inhabitants, increase in individual income, improvement
in technology and infrastructure, etc.

After the above discussion, we can say that economic development is a much bigger concept than economic growth. In
other words, economic development includes economic growth. As the former uses various indicators to judge the
progress in an economy as a whole, the latter uses only specific indicators like gross domestic product, individual income
etc.

III. INVENTION
Invention Is the Mother of Economic Growth
One reason “dismal science” aptly describes economics is that it so often winds up in a zero-sum trade-off of diminishing
returns. That gets depressing when the global economy is in a sorry state, as it is now. But the situation is not as bleak as
it seems. There is a magical engine for economic growth i.e. Invention.It is the process by which the human mind creates
new ideas with practical consequences. Invention is magical because the magnitude of the output can exceed by almost
infinite measure the magnitude of the inputs. A single great idea can generate enormous transformations, economic and
otherwise. Unlike almost all other forms of human economic activity, inventing is not limited by a law of diminishing
returns. It comes with no dismal trade-offs.

Invention and its weaker cousin, innovation, are ultimately the source of all wealth and luxuries. In the age of Kindles and
smartphones, we are surrounded by obviously invented products. But “traditional” society, too, was built by the

IV. CASE STUDY

CASE STUDY #1 – Industry Revolution and Economic Growth

Ever since the Industrial Revolution, world demand for power and raw materials has grown at a fantastic rate. One
respected observer estimates that humankind “has consumed more aluminum, copper, iron and steel, phosphate rock,
diamonds, sulfur, coal, oil, natural gas, and even sand and gravel over the past century than over all earlier centuries put
together,” and goes on to write that “the pace continues to accelerate, so that today the world annually produces and
consumes nearly all mineral commodities at record rates” 

Are our natural resources truly being gobbled up by an insatiable industrial world? Table 1 presents some estimates of
known world reserves of five important nonfuel minerals (tin, copper, iron ore, lead, and zinc). Clearly, even though the
mining of these minerals between 1950 and 2000 used up much more than the known 1950 reserves, the known supplies
of these minerals were greater in 2000 than in 1950. This increase in presumably finite stocks is explained by the way
data on natural resources are compiled. Each year, the U.S. Geological Survey (USGS) estimates the amounts of reserves:
the quantities of mineral that can be economically extracted or produced at the time of determination (as inTable 1).
Those quantities can and do rise in response to price rises and anticipated increases in demand. As previously discovered
reserves of a resource grow scarce, the price rises, stimulating exploration that frequently adds new reserves faster than
the previously proven reserves run out.
Clearly, data on reserves do not show whether a resource is about to run out. There is, however, another indicator of the
scarcity of a resource that is more reliable: its price. If the demand for a resource is not falling, and if its price is not
distorted by interference such as government intervention or international cartels, then the resource’s price will rise as
its remaining quantity declines. So any price rises can be interpreted as a signal that the resource is getting scarcer. If, on
the other hand, the price of a resource actually falls, consistently and without regulatory interference, it is very unlikely
that its effective stock is growing scarce.

Table 1: World Reserves and Cumulative Production of Selected Minerals: 1950–2000 (millions of metric
tons)

Mineral 1950 Reserves Production 1950–2000 2000 Reserves

Tin 6 11 10

Copper 100 339 340

Iron Ore 19,000 37,583 140,000

Lead 40 150 64

Zinc 70 266 190

Sources:  National Commission on Supplies and Shortages, 1976; and U.S. Geological
Survey,  http://www.usgs.gov.

H. J. Barnett and Chandler Morse (1963) found that the real cost (price) of extraction for a sample of thirteen minerals
had declined for all but two (lead and zinc) between 1870 and 1956. William Baumol et al. (1989) calculated the price of
fifteen resources for the period 1900–1986 and found that until the “energy crises” of the 1970s, there was a negligible
upward trend in the real (inflation-adjusted) prices of coal and natural gas and virtually no increase in the price of crude
oil. Petroleum prices catapulted in the 1970s and 1980s under the influence of the Organization of Petroleum Exporting
Countries (opec). After that, as Figure 1 shows, real oil prices returned to their historical levels, until 2003, when oil prices
increased significantly again. While the longer-term prospects for these prices are uncertain, new energy-producing
techniques such as nuclear fusion, along with the increasing use of renewable energy sources such as wind power, solar
power, and hydrogen fuel cells, may be able at least to offset the upward pressure on energy prices.

Figure 1
Sources: Oil prices: U.S. Department of Energy, Energy Information Administration, Annual Energy Review 2003 and
Petroleum Marketing Monthly, Nov.2004 (http://www.doe.gov); Implicit price deflator, Bureau of Economic Analysis
(http//www.bea.gov).
Note:  Prices are crude oil domestic first-purchase prices in constant 2000 dollars, calculated using GDP implicit price
deflators.

The price history of nonfuel minerals is even more striking, with the prices of almost all exhibiting a generally declining
(though fluctuating) trend after correction for inflation. Zinc, for example, which cost $2,021 (in 2000 dollars) per ton in
1900, had dropped to $1,226 in 2000 (with many peaks and valleys in between). The price of lead fell overall over the
century, with its 2000 price at $961 per ton compared with $2,083 in 1900. The real price of iron ore, which increased for
most of the twentieth century, has now returned to its pre–World War II levels. Real copper prices have fluctuated wildly,
with no upward trend. And for some minerals, such as aluminum, inflation-adjusted prices today are far lower than they
were one hundred years ago (U.S. Geological Survey). The USGS mine production composite price index, which provides
an overall snapshot of mineral prices, declined throughout the twentieth century, dropping from 185 in 1905 to 100 in
2000 (USGS, Economic Drivers of Mineral Supply,2002, p. 63). This is hardly evidence of imminent exhaustion.

CASE STUDY #2 : Invention and the American Economy

(R. David Simpson is a fellow in RFF’s Energy and Natural Resources Division. This article was adapted from his introduction
to the new RFF book Productivity Change in Natural Resource Industries, which he edited.)
(Nathan Myhrvold, the former chief strategist and chief technology officer at Microsoft Corp. and the founder and chief
executive officer of Intellectual Ventures, is a Bloomberg View columnist. The opinions expressed are his own.)

Invention is also frequently overlooked where its role is subtle. In some parts of the world, new ideas arrive slowly and
mainly by importation, but they still have great impact. Subsistence farming in Africa, for example, may not seem to be an
invention-related activity, but it is. Three key inventions - - corn in Mesoamerica; the process of cultivating and detoxifying
cassava in South America; and pastoral cow herding in Central Asia - feed much of Africa. Those inventions were imported
and adapted long ago, and African subsistence farmers could not survive today without them. Moreover, that the poorer
parts of the world have adopted so few new ideas is not just a symptom of the economic problems there -- it is the root
cause.

It is interesting to look back at 19th-century America to see the transformative power of invention. The United States
remains competitive in world resource markets, despite geological disadvantages and a relatively long history of depletion.
American ease with innovation helps explain why. A generation ago, some prognosticators warned that Americans should
brace themselves for an era of scarcity. Back then, the U.S. was considered a lawless, developing country of subsistence
farmers. Early in the century, the country became embroiled in war with the greatest power of the time, and half a century
later it got tangled up in a brutal civil war. American government could be deeply corrupt (think of Tammany Hall in New
York City), and its state of development ranged crazily from European-influenced Manhattan to the anarchic Wild West.
Alexis de Tocqueville, who toured America at the time, shook his head at horrible urban slums, sweatshop child labor,
slavery and persecution (or worse) of the indigenous population.

At its best, America in the 19 th century was like Brazil today, although in many ways Brazil is far more civil and
sophisticated. At its worst, 19 th century America was the heart of darkness. And yet it was during this time that the U.S.
became the world’s greatest inventing nation. Samuel Morse helped create the telegraph; Eli Whitney, the cotton gin; and
Thomas Edison, the light bulb, phonograph and movies. Europe remained the center of learning, culture, technology and
industrial prowess, but within several generations, Europe found itself relying on the U.S. for high-tech inventions.
Talented inventors the world over flocked to the new hotbed of creativity -- Alexander Graham Bell from Canada, Nikola
Tesla and Charles Steinmetz from Europe, among many others. It was a stunning transformation. Imagine Brazil suddenly
becoming the world’s leading source of new technology, and you get the idea.

Perhaps the best example we found of necessity mothering invention is something called the solvent extraction-
electrowinning (Sx-Ew) process in copper mining. In the 1970s, U.S. mining companies had to reduce costs if they were to
survive competition from foreign suppliers. Developing the Sx-Ew technology was an important component of the latter
strategy. It enabled copper companies to “mine” the waste streams from their earlier operations; now they could extract
enough copper from mine tailings to make them viable ore sources.

With gasoline prices near historical lows one might not expect it, but some researchers are suggesting that a new era of oil
shortages is just around the corner. As Richard Kerr has reported (Science, 21 August 1998, pp. 1128–1131) these
researchers predict that the end of cheap oil is coming soon. They argue that since the most easily accessible petroleum
reserves are near exhaustion, costs of production will begin to rise. RFF researchers Joel Darmstadter and Michael Toman
challenge this assertion, however, as indicated in their letter of response (Science, 2 October 1998, pp. 47–48).

If inventing is the driver of economic growth, then it follows that those regions fostering the creation and exploitation of
new inventions will enjoy prosperity. The poster child for this phenomenon is Silicon Valley, where academic and
commercial inventors, assisted by venture capitalists and other supporting players, nurture the most dynamic
environment in the world for generating businesses.

SILICON VALLEY
What we now call Silicon Valley had origins as inauspicious as those of the U.S. more broadly. A sleepy agricultural area
with no industrial or business base worth mentioning, its most notable asset was a university set up by Leland Stanford, a
19th-century robber baron. And even that wasn’t unique: public universities grace every state, and private universities dot
the landscape, yet none has fostered an invention engine like Silicon Valley.

So, why did this area, and America more broadly, succeed in creating invention-friendly climates when others failed? The
secret remains maddeningly elusive. The track record of other places that have tried to set up their own versions of Silicon
Valley -- and there are many -- is poor. Policy makers have pulled all the levers they have, from lower tax rates to favorable
zoning laws to research-and-development support, but none of these really sparks invention. These incentives may attract
big companies, startups and venture capital, all of which are ingredients in an invention-based ecosystem, but they are not
sufficient to stimulate the magic.

I would like to report that someone has figured out a formula for harnessing the power of invention. Alas, that is not the
case. If someone can, it would be, in many respects, one of the most important inventions in history because it would
allow us to craft the economy we want.

CASE STUDY #3 : FOREST RESOURCES DEGRADATION ACCOUNTING IN MONGOLIA