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Unformatted text preview: -String, clear property rights require enforcing contracts, fostering political stability-Prices are an incentive. Why create something in demand if you cannot reap the rewards?-No foreign investment without string property rights What can the government do to enhance productivity? 1. Encourage saving and investment. Q: Will saving more increase productivity and our standard of living? A: Due to diminishing returns, more saving and more investment in capital goods increases economic growth only for a while. To demonstrate the idea of diminishing returns; as we add more and more capital to the productive process, holding constant all other determinants of output , then output increases at a diminished rate relative to increasing only one input. 2. Investment from abroad. Foreign direct/portfolio 3. Education 4. Property rights and political stability 5. Free trade Inward/outward-oriented policies 6. Research and development Issues around population growth/ natural resources...
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- Fall '08