25 Mark Essay Technique - GDP and the Standard of Living

Summary

This educational video script guides students on crafting a compelling essay on the relationship between GDP per capita and living standards. It emphasizes the importance of not solely focusing on GDP per capita, introducing the 'Pecan Pie' method for essay writing. The script discusses the significance of GDP per capita in reducing poverty and funding public services, while also highlighting its limitations, such as overlooking inequality and not reflecting non-economic aspects of well-being. The video suggests considering alternatives like median household income for a more comprehensive measure of living standards.

Takeaways

• 📊 The video discusses the importance of GDP per capita as a baseline measure for living standards, adjusted for purchasing power parity (PPP).
• 📈 It emphasizes that increasing GDP per capita is crucial for reducing extreme poverty and achieving development goals, using China's economic progress as an example.
• 🔍 The video highlights the potential pitfalls of focusing solely on GDP per capita, such as overlooking issues like relative poverty, inequality, and social cohesion.
• 🌐 It points out that higher GDP per capita can enable more people to afford life-sustaining goods and services, and reduce long-term costs associated with malnutrition.
• 💼 The script introduces the 'pecan pie' approach to essay writing, which involves making a point, explaining it, contextualizing it, and then evaluating it.
• 📉 The video critiques the use of GDP per capita as an exclusive indicator of living standards, noting its limitations in reflecting real living standards and the need for broader economic and social well-being measures.
• 🏛️ It mentions the Howard-Dalton model of growth to explain the role of savings and investment in economic growth, and how increased GDP per capita can influence this.
• 💡 The video suggests considering median real disposable incomes and other indicators like the Genuine Progress Indicator (GPI) and Human Development Index (HDI) for a more comprehensive view of living standards.
• 🌟 It concludes by advocating for a focus on the middle of the income distribution and median household income as a more accurate measure of living standards than GDP per capita.
• 📚 The script is part of a series aimed at helping students structure and build good answers to essay questions, particularly for exams.

Q & A

What is the main topic of the video script?

The main topic of the video script is the discussion of whether countries should focus solely on raising GDP per capita to improve living standards.

What is the key word in the essay question according to the script?

The key word in the essay question is 'solely', which emphasizes the extent to which GDP per capita should be the focus.

What is the PECAN PIE approach mentioned in the script?

The PECAN PIE approach is a method for writing essays that involves making a point, explaining it briefly, building contextualized analysis, and then evaluating that point.

Why is GDP per capita considered a baseline measure for living standards?

GDP per capita is considered a baseline measure for living standards because it measures the inflation-adjusted value of goods and services produced within a country over a year, adjusted for purchasing power parity to account for cost of living variations between countries.

What is the significance of China's progress in improving material living standards as mentioned in the script?

China's progress is significant as it exemplifies how increasing GDP per capita can lift a country from low to upper-middle-income status, reduce extreme poverty, and achieve development goals.

What are the potential downsides of focusing solely on GDP per capita as an indicator of living standards?

Focusing solely on GDP per capita might lead to the neglect of relative poverty, inequality, and other social issues, as well as overlooking non-economic aspects of well-being.

How does the script suggest that GDP per capita can contribute to human development?

The script suggests that higher GDP per capita can lead to increased consumption, job creation, higher tax revenues for public services, and potentially the development of a welfare state, all of which contribute to human development.

What is the role of the Howah Dermah model of growth in the script's discussion?

The Howah Dermah model of growth is used in the script to emphasize the importance of savings funding investment, which in turn can grow a country's capital stock and support further increases in real GDP and incomes.

Why might increased GDP per capita not necessarily lead to increased investment, according to the script?

The script suggests that increased GDP per capita might not lead to increased investment if financial institutions are inefficient at allocating capital to productive uses, or if gains from rising incomes lead to capital flight rather than domestic investment.

What alternative indicators are mentioned in the script to complement or improve upon GDP per capita?

The script mentions the Genuine Progress Indicator (GPI), which accounts for environmental costs and benefits, and the Human Development Index (HDI), which is adjusted for gender and income inequality, as alternative indicators to complement or improve upon GDP per capita.

What is the final recommendation made in the script regarding the focus on living standards?

The final recommendation in the script is to focus on progress in the middle of the income distribution and to consider median household income as a main measure of living standards instead of GDP per capita.

Outlines

00:00

📈 Introduction to Essay Planning on Living Standards

The paragraph introduces an essay planning series focusing on structuring answers to exam questions about living standards. It presents a specific question about whether countries should focus solely on raising GDP per capita to improve living standards. The speaker emphasizes the word 'solely' as key and suggests not rushing to a conclusion, instead advocating for a methodical approach known as the 'Pecan Pie' method. This method involves making a point, explaining it briefly, providing contextualized analysis, and then evaluating that point. The speaker proposes starting with a clear introduction defining GDP per capita as a baseline measure of living standards, adjusted for purchasing power parity to account for cost of living variations between countries.

05:02

🌏 The Importance and Limitations of GDP Per Capita

This paragraph delves into the significance of GDP per capita in reducing extreme poverty, using China's economic progress as a case study. It highlights how China's GDP per capita relative to the United States has significantly increased, lifting the country out of poverty and achieving development goals. However, the paragraph also points out the potential pitfalls of focusing solely on GDP per capita, such as increased inequality, using China's rising Gini coefficient as evidence. The speaker suggests using a Lorenz curve diagram to visually support the argument about the relationship between economic growth and inequality.

10:04

💼 The Role of GDP in Human Development and Economic Growth

The speaker discusses how an increase in GDP per capita can lead to higher consumption, job creation, and ultimately, higher tax revenues for public services. The paragraph introduces the concept of a chain of reasoning to demonstrate the flow of income from individuals to the government. However, it also evaluates this argument by presenting examples where high GDP per capita does not necessarily translate into improved human development, such as Equatorial Guinea and Qatar. The paragraph concludes by discussing the Howard-Dalton model of growth, which emphasizes the role of savings and investment in economic growth, and the potential issues with financial institutions' efficiency in channeling savings into productive investments.

15:05

📉 Critiquing GDP as the Sole Measure of Well-being

In this paragraph, the speaker argues that GDP per capita is an inadequate measure of human well-being and suggests focusing on median real disposable incomes instead. They critique GDP for potentially overlooking the shadow economy, the value of unpaid work, and the negative impacts of longer working hours on quality of life. The paragraph also addresses the issue of GDP increasing due to defensive spending, such as on insurance or pollution cleanup, which does not necessarily contribute to welfare. The speaker suggests looking at alternative indicators like the Genuine Progress Indicator (GPI), the Human Development Index (HDI), and the emphasis on years of healthy life expectancy over just life expectancy. The paragraph concludes by advocating for a multidimensional approach to measuring well-being that goes beyond material welfare.

📚 Conclusion and Final Thoughts on Essay Planning

The final paragraph summarizes the essay planning approach, emphasizing the importance of not solely relying on GDP per capita as a measure of living standards. The speaker suggests using median household income as a more accurate indicator and references the Legatum Institute's Prosperity Index and Bhutan's Gross National Happiness Index as examples of alternative measures. The paragraph reinforces the multidimensional nature of well-being and encourages focusing on progress in the middle of the income distribution. It concludes by encouraging students to continue exploring essay planning and to check the YouTube channel for more resources.

Keywords

💡Living Standards

Living standards refer to the level of comfort, material well-being, and quality of life of people in a country. In the video, the discussion revolves around how countries can improve these standards, with a particular focus on the role of GDP per capita as a measure. The video suggests that while GDP per capita is a significant indicator, it should not be the sole focus, as other factors like poverty, inequality, and access to basic services also contribute to living standards.

💡GDP Per Capita

GDP per capita stands for Gross Domestic Product per capita and is a measure of a country's economic output per person. It is used as a baseline to assess living standards in the video. The script argues that while increasing GDP per capita can help reduce extreme poverty and improve material living conditions, as seen in China's case, it may not necessarily reflect other important aspects of well-being such as inequality or access to public services.

💡Purchasing Power Parity (PPP)

Purchasing Power Parity (PPP) is an economic theory that compares different countries' currencies through a 'basket of goods' approach to find out how many dollars you would need in one country to live the same lifestyle as in another. In the video, PPP is mentioned as a way to adjust GDP per capita to take into account variations in the cost of living between countries, making it a more accurate measure for international comparisons.

💡Extreme Poverty

Extreme poverty is defined by the World Bank as living on less than $1.90 per day at international prices. The video uses the reduction of extreme poverty as an example of how GDP per capita can be an important indicator of improving living standards. It is noted that countries like China have made significant strides in reducing poverty, as evidenced by the increase in GDP per capita.

💡Inequality

Inequality refers to the unequal distribution of resources, income, or wealth among a population. The video discusses how focusing solely on GDP per capita might overlook increasing relative poverty and inequality within a country. It uses China's rising Gini coefficient as an example to illustrate the potential negative social impacts of growing inequality despite economic growth.

💡Human Development Index (HDI)

The Human Development Index (HDI) is a summary measure of key dimensions of human development, including life expectancy, education, and per capita income. The video mentions HDI rankings to argue that high GDP per capita does not automatically translate into high HDI rankings, indicating that other factors beyond economic growth are crucial for overall human development.

💡Contextualized Analysis

Contextualized analysis in the video refers to the process of examining economic data within the specific social, political, and historical context of a country. This approach is used to evaluate the impact of GDP per capita on living standards, taking into account factors like poverty reduction, inequality, and access to public services.

💡PECAN PIE Approach

The PECAN PIE approach is a method for structuring an essay, where 'PE' stands for Point, 'CAN' for Contextualized Analysis, and 'PIE' for Point, Illustration, and Evaluation. The video uses this approach to build arguments around the importance of GDP per capita in improving living standards and then evaluates the limitations and downsides of relying solely on this indicator.

💡Genuine Progress Indicator (GPI)

The Genuine Progress Indicator (GPI) is an alternative to GDP that aims to provide a more accurate measure of a country's well-being by accounting for economic, social, and environmental factors. The video suggests that GPI could be a more comprehensive indicator than GDP per capita, as it adjusts for factors like income distribution, environmental costs, and the value of household work.

💡Median Income

Median income refers to the middle value in a list of incomes when they are arranged in ascending order. The video suggests considering median income instead of GDP per capita to better understand living standards, as it can provide a clearer picture of the typical income levels and is less affected by extreme values at the top of the income distribution.

💡National Capital

National capital in the video refers to the total stock of resources, both physical and human, that a country has. It is mentioned in the context of how increasing GDP per capita can lead to higher savings and investment, which in turn can grow the country's capital stock. However, the video also points out that not all countries efficiently allocate these increased incomes to productive investments.

Highlights

Introduction to the essay plan series focusing on structuring answers to 25 mark questions.

Topic discussed: Living standards and the role of GDP per capita.

Emphasis on the keyword 'solely' in the essay question.

Explanation of GDP per capita as a baseline measure for living standards.

Introduction to the PECAN PIE approach for essay writing.

First point: Importance of increasing GDP per capita for basic living standards.

Example of China's progress in improving material living standards.

Evaluation of the potential neglect of inequality when focusing solely on GDP per capita.

Second point: GDP per capita allows more people to afford life-sustaining goods.

Critique of relying solely on GDP per capita for human development improvements.

Third point: High GDP can raise private savings and investment for future economic growth.

Evaluation of the efficiency of financial institutions in allocating capital.

Fourth point: GDP per capita is an inaccurate indicator of living standards.

Discussion on the flaws of GDP as an indicator and potential adjustments.

Final reasoning comment advocating for a multi-dimensional approach to well-being.

Conclusion favoring median household income as a better measure of living standards.

Encouragement to check the YouTube channel for more essay plans and exam preparation.

Transcripts

hi there and welcome to another in our

series of uh essay plans taking key

topics available

and thinking about how we would

structure

and build a good answer to a 25 mark

question

here's the topic today this is living

standards and the question is an

interesting one to raise standards of

living countries should focus solely on

raising gdp per capita to what extent do

you agree

keep in mind here of course that there

is always an evaluation hook

and i think the key word in this

question is going to be solely

and obviously you don't need to come to

a calibrated

reasoned justified conclusion at the end

and we'll do that in a few minutes once

we've focused on the

the approach that we favor here the

pecan pie approach to writing a 25 mark

essay question

so here's the question again to any

standard of living the country should

focus solely on raising

gdp per capita to an extent to agree

always good to make a very clear

introduction to the essay so i would

start by eliminating any waffle just

saying that the baseline measure for

living standards is real national income

real gdp capital adjusted for purchasing

power party

give a quick definition this measures

the inflation adjusted value goods and

services produced within the country

over a year measured in ppp adjusted

terms that takes tries to take into

account variations in the cost of living

between countries so gdp per capita is

your baseline measure

and then we're going to build uh four

peak and pi points so peak and pi

stands for point explained a brief very

brief explanation of the point you're

making let's start the paragraph then

you build contextualized analysis to go

with it

and then you try to evaluate that point

at the point included in the evaluation

and you keep doing this okay so you make

a point contextualized analysis

then evaluate and go back and do the

same again

let's see how this works first point is

that success

in increasing gdp per capita is

important for basic living stance

because it's a direct way of cutting

extreme poverty and of course the world

bank's preferred measure of poverty

extreme poverty is one dollar

90 a day ppp

then build the contextualized analysis

the analysis i'm going to build uses the

example of china

this is best exemplified by the progress

that china has made in improving

material living samples over the last

two decades or more

and depends how much data you have to

support your argument but i'm going to

use gdp per capita relatives united

states in china has gone up from just

five percent of u.s levels in 1992 to 25

percent in 2016. china's achieved upper

middle income status

uh and the world bank estimates that

chinese income capital rose from less

than a thousand dollars per capita in

1990

to just over 14 000 in 2015 and it was a

huge increase

china reached all of the millennium

development goals by 2015 and the

country is now lacking 90th

of 188 188 countries in hgi

here are building the argument that gdp

per capita is important because it lifts

people out of poverty

and helps to achieve

development goals

however

evaluation point however focusing

solely on gdp capital may cause us to

ignore

increasing relative poverty inequality

and i'm going to add in some data there

in china the genie coefficient which in

the index which is

0.3 in the 1980s to 0.53 2013. it's

coming down now but from a higher level

this is a big risk to social cohesion

and i'm also developing this evaluation

point

but also big gender and regional

inequalities particularly if you

understand your chinese economy between

coastal and interior

areas

so what's the point here

gdp per capita lifting it is important

to reduce extreme poverty

but we may be ignoring

inequality if we just focus on per

capita incomes

this might be in a moment to put in an

analysis diagram

to support your argument and the obvious

one to use will be a lens curve diagram

perhaps showing an outward shift of a

curve from relatively low inequality in

orange here to a much higher level of

inequality in green

make sure you practice these diagrams

well ahead of the exam so you can draw

them accurately and quickly at the same

time fully labeled

to make the point

now we go back to our second

peaking point

my second argument and by the way i'm

doing here i'm developing three points

for saying that gdp per capita is

important

in lifting living talents a rising real

gdp per capita is important as it allows

more people to afford life sustaining

goods such as health education

and it lowers the long-term costs of

malnutrition which we've been following

debates recently from world bank reports

you'll know is a

just an enormous cost on

growth and development in the long term

increasing gdp capital is key to

sustaining gains in human development

one chain of reasoning is that now this

is interesting focusing so one chain of

reasoning is that is signposting to the

examiner that you're going to build for

them a chain of who's in it there we go

higher capital incomes needs to increase

consumption which then helps to create

new jobs

thus providing a flow of factor incomes

for people in work

and if more people are earning regular

wages and higher incomes this will then

contribute to rising tax revenues for

government to pay for public services

including basic public american goods it

also allows the state to provide welfare

so

hopefully you can see the chain of

reasoning there that

higher per capita incomes is important

in giving

people

the incomes the factor incomes the

regular income from work

which flows and feeds through to the

government to help them fund basic

public americans

and perhaps the embryonic stages of a

welfare state

however evaluation

improved gdp capital does not guarantee

signs of improvements in human

development and then i'm taking a couple

of examples here equatorial guinea has a

capital income of over twenty thousand

dollars per head

but an hr ranking 138 well below that of

china for example

although the captain can be seven

thousand dollars higher it's a country

riddled with corruption and conflict

qatar is the richest country on the

planet

he per capita gdp but lies only 38th on

the hgi index that kind of contextual

awareness is gold dust

for an exam hopefully many of you will

have it

here's the data

this data is one of my favorite

tables it shows the countries

whose hgi outcome is actually

significantly below

their gni per capita ranking

equatorial gain it was mentioned by

answer

their general capital income is 79

places

higher than the hgive in other words uh

they're not necessarily translating the

high income ahead

into

durable sustainable improvements and

development across the population

kuwait kuwait kapon uae etc good

examples there

to include south africa is another good

example of course in part because of the

the deep inequalities

my third point again i'm building three

points for here saying that gdp capital

is important

third justification to focus on high gdp

is that it can raise the level of

private savings and investment which is

important for future

economic growth now we need to justify

this i need to analyze it

and to do so i'm going to bring in the

howa dermal model of growth

the howard derma model emphasizes the

role of savings to help fund investment

in many lower and middle income

countries gross national savings

insufficient to fund investment so if

policies are successful in lifting gdp

per capita

then an increase in savings leads to an

expansion that's investment

which helps to grow a country's capital

stock and then i'm building the virtual

circle idea the extra investment helps

hopefully to increase real gdp which

supports further increases in incomes

and consumption i'm not putting

necessarily any data in but i mentioned

in two countries here in indonesia both

have

a high level of saving investment as per

capital incomes

lies

but of course i need to evaluate

one problem with this argument that's by

the way that's a neat evaluative phrase

one problem with this argument is

that in many countries financial

institutions bank stock exchanges etc

are not efficient

at allocating capital to productive uses

and many of the gains from rising

incomes actually don't flow to

investment they referred to elites who

may send their money out of a country

capital flight rather than retain it for

domestic investment

so an increase in per capita incomes

does not necessarily

drive investment going forward

investment in productive users

now what i've done so far in this essay

is i've built three points which say

that per capita income

is important for living standards

hopefully using some good analysis there

but i've also evaluated and said

actually though there are three

negative the three downsides of this of

those arguments

my fourth point actually is just to

twist it slightly and say actually no

government should not

focus solely on genome biblical capital

because

this is something that many students

will be familiar with it is an

inaccurate indicator

of changes in

the standard of living

and then again this provides you an

opportunity to build quite a flowing

paragraph which might put together two

or three points

relevant to the inaccuracy or the

or the the um the way which gdp is not

necessarily a an appropriate kind of

living standard

firstly the capital gdp understates real

living standards it tends to underset it

due to the shadow economy the value of

unpaid work by volunteers people caring

for their families in fact

were we to include when some countries

now do these these imputed estimates

from the value of home care for example

gdp capital will be much higher

higher per capita incomes however might

also have come from longer working hours

which

negatively affects quality of life so

gdp capital perhaps overstates

living standards gdp ahead also

increases when we spend money

defensively protecting against crime

insurance for example cleaning up the

effects of pollution and waste actually

adds to gdp doesn't add to our welfare

and there are also big difficulties in

accurately measuring the true value of

welfare that we derive from consuming

products for example for free on the

internet youtube videos

facebook connections snapchats stories

etc many economists now see gdp

as deeply flawed so i'm trying to build

a point here for saying

hang on a minute we can't rely

solely on gdp

because actually gdp as an indicator

itself is uh is inherently flawed

however we don't have to evaluate that

point

we can and many economists do

make adjustments to gdp to take into

account these

criticisms for example and it depends on

which other indicators you've looked at

in your lessons

but the genuine progress indicator gpi

are just for environmental costs and

benefits and surveys of all sorts of

people people's measured happiness and

well-being

hdi data for most countries is now

adjusted to take into account gender and

income inequality

instead of looking at

years of life expectancy for example we

might focus on years of healthy life

expectancy instead of just looking at

years of expected and mean years of

schooling we might look at quality of

education outcomes in terms of

basic literacy of functional literacy

for example so there are ways in which

we can take we can recognize the flaws

in gdp

but also perhaps move the debate on a

little bit

think about adjustments to improvements

to amendments to the national income

data that's not it's not impossible for

the lots of economists working in this

area

so in this essay we have focused on four

essentially four key arguments for each

we've contextualized the analysis but

then we've also tried to evaluate

the point so we've already had four

evaluation points

straight away and now we come to the

final recent comments

it's important in the

in the essay to come to a final reason

comment

some examples want you to look at costs

and benefits of something or short and

long-term perspectives it obviously

depends on what the question is

the example i teach looking for a

student to make a final comment which

hopefully says something

relatively fresh

rather than just goes over the same

ground again

but take advice from your teachers about

the best approach for your particular

example

here's my answer here's my final reason

comment it's a chunky paragraph but let

me take you through it and hopefully it

might be useful

overall i would argue that that's quite

a nice phrase to use to start your final

paragraph

overall i would argue that and then

you're going to justify your arguments

changes in gdp are an inadequate measure

of human well-being some economists

argue that we should now concentrate on

median real disposable incomes instead

of moving from gdp per capita

average measure let's move to median

incomes rather than income per capita

this allows us for example to consider

the hecks of taxation and inequality

the legatum institute is to prosperity

in this and the kingdom of bhutan as

many people know has for the last 40

years or more published an annual gross

national happiness index

gdp is an important indicator not just

because it reflects the positivity of an

economy we should not ignore it when

assessing the standard of living but and

here's my kind of

key point material welfare

it's not the same as economic and social

well-being from health to education

and

the sustainable stock of national

capital that we leave to our future

generations well-being is a

multi-dimensional

idea that's a crucial point in my essay

that gdp alone

cannot measure

and then you come like again think about

the way in which you can bring an essay

to an

end come back to your main point so i

would favor focusing on progress in the

middle of the income distribution

and therefore i would replace gdp per

capita

with median household income as my main

measure that is sending quite a strong

message to the examiner i've settled on

a particular indicator as my if you like

my

guiding light for household living

standards

it may or may not be possible to get all

that data on medium housing but that's

what i want to use as my main measure so

i've come to quite a firm conclusion

okay

so that is my approach to this

particular question there's lots of

different approaches you can take but

hopefully it gives you a little feel and

a flavor for how we can use the pecan

pie

approach to answer these questions

there are lots of these essay plans now

on youtube we're going to be adding lots

more before the exams so keep checking

out our youtube channel subscribe and

hang around hopefully will be another

question along soon which will help you

in your

your progress towards the exams

cheers now take care see