Definition: In economics, the cost commanded by a factor that is unique or inelastic in supply.
Example: The portion of rental income attributable to the land is often considered economic rent, since the land will exist no matter what the rental rate. In this context, economic rent carries a connotation of being "unearned" by its owner.
Today is bright and hopeful because, for once, the nations developing are growing faster than the nations already developed.
Will the developing world, then, ever 'catch up' with the developed world?
My personal intuition (Read: I am too lazy to actually hunt for numbers that would prove/disprove anything) would be No.
My reasoning (independent of data again, of course! :P..) is like this.
On a straight highway, there are two cars, N and S (Standing for North and South = Developed and Developing). N has had a head start and is 10 km ahead of S.
Speed of N= 100 kmph, which the driver increases by 3% after every hour.
Speed of S=10 kmph, which the driver increases by 9% after every hour.
Distance Now between N and S = 10 km
After 1 hour,
N is 110 km down the road.
S is 10 km down the road
Distance between N and S = 100 km
After 2 hours,
N is 110+103 = 213 km down the road
S is 10+10.9=20.9 km down the road
Distance between N and S = 192.1 km
After 3 hours,
N is 213+106.09=319.09 km down the road
S is 20.9+ 11.881 = 32.781 km down the road
Distance between N and S = 286. 309 km
As you can see, it is going to take a looooooong time for S to catch up with N.... :P
What makes this even more interesting is, N is actually asking S to agree to use new and expensive "eco" fuel, that will limit speed increases to less than 7%.
3 comments:
Oops, I just realized I didn't say this:
The 'Rent' analogy could be something like this - N is basically 'coasting' on its initial 100 kmph attained speed. Even at low % growth, it will keep outpacing S.
Now that I think of it, I am not sure this is the best analogy after all. It is actually even worse for S, if we allow for investment.
For instance, for every 10 units that developed countries invest in the growth of developing countries, even if the returns are split 50/50, developing countries are stuck in a Rent Trap.
I am a cheerful fellow, ain't I? :P
Hey ... regarding the investment thing (50/ 50 split), I think it is being presumed that it is all a kind of zero sum game.
I think (!!!!) that rich nations will benefit, but quite a amount of benefit will also be there for the non-rich nations. SO they may be better off than what they were few years ago, yet the distance between rich and non-rich countries will be there!
Yeah, it defintely is not a zero sum game...
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