Critique of Growth Ecological Economics

Question: Discuss about the Critique of Growth Ecological Economics. Answer: Introduction: The monetary value of all the completed commodities and services that is produced within a border of a country in a specified time is termed as Gross Domestic Product. GDP can be calculated on both quarterly and annual basis. GDP is considered as a wide measurement of a overall economic activity of a nation (Coyle 2016). Real GDP is mostly used to measure the standard of living however; real GDP can be deceptive for several causes. In other words, real GDP does not include household production as well as production activities that are mostly performed by a homeowner. This omission generates a major measurement problem as these tasks are considered as an imperative component of the work of an individual. Real GDP also neglects the background economy as well as those economic activities that are legal but unreported. The measurement of health of an individual as well as life expectancy is also included by real GDP. It also excludes damages caused by environment. It does not recognize the extent of political freedom as well as social justice enjoyed by the citizens of a nation. It has been examined that the statistics of GDP does not comprise the underground or unofficial economy. For example, real GDP accounts for the total market value of all commodities and services that are produced in Australia aft er the deduction of cost of commodities and services (Daly 2013). Unemployment is considered as a phenomenon that takes place when an individual is actively exploring for a job however; he is not able to find a work. It is often used as a measure of the health of the economy. Unemployment rate is considered as the most recurrent measure of unemployment. For example, in Australia, the seasonally adjusted rate of unemployment increased to 5.7 percent in the year 2016 that was recorded to be slightly above market consensus. Government regulation mostly gives rise to unemployment. As per the labor laws, employees should get a certain amount of wages as well as other health insurance benefits from the employers. Increased competition between trades leads to unemployment. One of the key historical reasons that lead to unemployment is raised automation that is referred to as increased technology, which displaces workers. Unemployment also arises due to disparity of skills in the labor market that are generally caused by occupational immobility, which aris es due to difficulties in learning new skills. Structural change in the economy also leads to unemployment. In other words, the decline of coalmines, for example will lead to unemployment among coal miners due to lack of competition (Hobson 2013). Figure: Real Wage Unemployment (Source: Created by Author) The graph shows the occurrence of real wage unemployment that takes place in a competitive market. Q2 indicates the supply of labor that is greater at W2 as compared to the demand for labor at Q. The factors, which makes unemployment unavoidable, mostly comprises of the individuals who enters the workforce searching for a job at a point of time. However, on the other hand, it also becomes unavoidable due to some individuals who stop searching for a job when they are not able to find any. The existence of depressed workers mostly makes unemployment unavoidable (Valletta 2013). Consumer Price Index is considered as a measurement that analyzes the weighted average of prices of a basket of goods and services of customers. A price level is the measurement of present prices of commodities that are produced in an economy within a specified period. On the other hand, inflation is defined as the rate at which general price level for commodities and services increases whereas; purchasing power of currency decreases. Inflation increases with the augment in the average level of prices of goods and services. This is mostly because; the cost of living relies on the average level of prices for both goods and services. Increase in economic movement acts as a key inflationary trigger. As a result, it is highly agreed that increase in average prices for goods and services leads to inflation (Tiwari, Mutascu and Andries 2013). Aggregate demand is also termed as domestic final demand that describes the total demand for goods and services in an economy at a given period. The aggregate demand curve is plotted with price level on the vertical axis and real output on the horizontal axis. Figure: Aggregate Demand (Source: Created by Author) The aggregate demand curve describes the relationship between two factors such as, the quantity of output that is demanded as well as aggregate level of price. The aggregate demand curve symbolizes the overall quantity of all commodities that is demanded by the economy at diverse level of prices. The aggregate level of price is mostly measured by the consumer price index (Gal 2013). There are mostly three reasons that lead to downward sloping aggregate demand curve. The major reason is the wealth effect. The aggregate demand curve is illustrated under the assumption of the fact that government holds the supply of money constant. As the level of price increases, the wealth of the economy as estimated by the supply of money diminishes in value as the purchasing power of money falls. An aggregate demand curve is shown in the following diagram. The vertical axis shows the level of price of all final commodities and services (Godin 2014). Figure: Aggregate demand curve slopes downwards (Source: Created by Author) The wealth effect leads to an inverse relationship between the level of price and real GDP that leads to downward sloping aggregate demand curve. The second reason that leads to downward sloping demand curve is the interest rate effect. As the level of price rises, firms necessitate more money in order to handle their transaction. With the increase in rate of interest, spending that is receptive to interest rate reduces. The third reason that leads to downward sloping aggregate demand curve is the effects of net export. As the domestic level of price increases, abroad made commodities becomes comparatively reasonable so that the demand for imports rises (Jain, Tantri and Thirumalai 2016). Aggregate supply is mostly described as the total supply of commodities and services that firms in a national economy are eager to sell at a specified level of price. On the other hand, long-run is the conceptual period in which there are no fixed cost of production. The aggregate supply curve gets affected by capital, technology as well as labor in the long-run. The long-run aggregate supply curve changes the slowest of the three ranges of the aggregate supply curve and as a result, it is termed as static. Figure: Vertical LAS Curve (Source: Created by Author) The long-run aggregate supply curve is vertical that reflects the principle of the economists regarding the fact that aggregate demand changes only due to a temporary change in total output of an economy. It also indicates a prospective output and it also shows that it leads to increase in input prices. An example of circumstances that leads to shift in the long-run curve towards the right is the increase in population as well as increase in physical capital shock. Figure: Upward Sloping SAS Curve (Source: Created by Author) The short-run aggregate supply curve takes place when increase in price leads to increase in quantity. The sticky-wage model and the sticky-price model helps to explain the cause behind the upward-sloping short-run aggregate supply curve. the curve is mostly upward sloping due to the fact that firms always tends to increase the level of price with rise in demand. For example, the decrease in wages as well as augment in physical capital leads to short-run aggregate supply (Stiglitz and Rosengard 2015). References Coyle, D., 2016. Economics: GDP in the dock.Nature,534(7608), pp.472-474. Daly, H., 2013. A further critique of growth economics.Ecological economics,88, pp.20-24. Gal, J., 2013. 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