Jaké reformy a proč (141) For Foreign Applicants

26. červen 2014 | 07.52 |

About Focus of the ConferenceHuman Capital andInvestment in Education

for Foreign Interested Applicants

(third part)

Pro české kolegy:

Pracovní sekce letošní "rozjezdové" konference Lidský kapitál a investice do vzdělání bude orientována převážně na domácí publikum. Jejím cílem je vytvořit (zejména odborně "prokomunikovat") solidní základ pro další jednání, viz:

http://radimvalencik.pise.cz/1419-je-cas-zacit-hledat-cestu-ze-soucasne-situace.html

(zde jsou všechny potřebné informace).

Teprve v příštím roce budeme klást důraz na reprezentativní mezinárodní účast.

Ačkoli tedy s výraznou mezinárodní účastí při "rozjezdu" nepočítáme, zaznamenal jsem zájem i ze zahraničí. Proto využiji předprázdninový týden a na pokračování zveřejňuji v angličtině a následně pak i v ruštině dva odborné materiály, které dávají poměrně jasnou představu o obsahovém zaměření jak letošní, tak (po příslušných korekcích, které vzejdou z jednání letošní konference) i příští konference v roce 2015.

Pokud kdokoli zprostředkuje informaci a text případnému zahraničnímu zájemci, budu mu velmi vděčný.


3. Sector of productive services and a new type of economic growth

The most common cause of current problems is the fact that the present steady development has not been reoriented towards a society of productive services, i.e. a society where the economic core is represented by productive services related to acquiring, maintaining and applying the human capital.  The economic growth can be exponentially dynamic as well as sustainable, or precisely speaking it has to be exponentially dynamic to be sustainable. The foundation of this type of growth stands for productive services. A crucial condition for the transition to the economy of productive services is the motivation of entities that are involved in the area of productive services related to acquiring, maintaining and applying the human capital; the creation of the feedback between the effects of productive services and the funding of these subjects can substantially contribute to higher dynamics of the economic growth, positive changes of its nature and to enhanced quality of people. In order to implement the new economy, i.e. the economy of productive services, it is necessary to have a complex of interconnected reforms in the sectors of social investment and social insurance (especially education, health care and pension schemes).

The timely theoretical preparation of the reforms in the area of the social investments/social insurance systems as well as the subsequent implementation of such reforms are crucial for further crisis-free/conflict-free development of the society, which assumes significantly higher role of productive services as the center of gravity of such economic growth that may be increasingly dynamic as well as sustainable.

The inability to come up with a realistic idea about the possibility of exponentially dynamic sustainable growth is epistemological cause of evoking and spreading visions about catastrophic or enforced dealing with problems associated with the existence of insuperable obstacles of the growth (through consumption regulation, population number limits etc.). These visions subsequently enhance the intensity of position investment that results in economic segregation and weakening of the institutional system of the society by activities of structures that protect one another when breaching generally accepted principles. It subsequently leads to bending reforms in the areas of social investment and social insurance, exploiting their objective indispensability to activities harming the society. For this reason, we are going to focus on creating a vision about the possibility of exponentially dynamic and sustainable economic growth based on the role of the sector of productive services.

The economy based on productive services allows economic growth that can be (in a simplified way) described as exponentially dynamic as well as sustainable. In other words – a transition to the economy based on productive services allows dynamic growth. There is no need for consumption regulation or struggle for sources; it involves the change in consumption manner. It is about satisfying needs associated with developing, maintaining and applying human skills, i.e. satisfying needs that subsequently affect the economic growth as the most significant productive force.

The following set of figures will try to specify the vision about the possibility of such growth and to present it in the context of the industrial revolution that allowed the exponentially dynamic growth in a similar way as the current transition to the economy based on productive services.

It is not easy to imagine how the growth could be exponentially dynamic (in terms of the average of the same proportional gains in a long-time time horizon to a gradually increasing base) and sustainable at the same time. The Fugure 2 compares the alternative of continuing exponentially dynamic growth (a dashed line graph) with the alternative of degressive growth limited by sources and consumption restriction (a dotted line graph).

Figure 2: The Alternatives of the Growth

(Own creation - Valenčík)

Note: During discussions at various expert forums we were presented with major opinion indicating that sooner or later it will not be possible to continue growth that would demonstrate exponential dynamic. We are going to reveal that such growth is possible and the shift of this dynamics already occurred in the past.

On the one hand it implies that no steady growth can be both exponentially dynamic and sustainable. On the other hand, however, it implies that the economic growth that is not steady and the nature of which changes can be both exponentially dynamic and sustainable.

Let´s focus on the example of industrial revolution. First, we are going to use a very simple scheme and afterwards a more detailed scheme based on the analysis of real data.

The Figure 3 presents a situation where the economy is based on the old sector (agriculture in the respective case) and a new sector is included in the initial phase (e.g. a new industry represented by craft). If the growth is of steady nature, then most production is ensured by the old sector (e.g. agriculture). Accordingly, production of the new sector production is increased as well. Enhancement of the old sector production, however, often runs into natural obstacles that restrict the growth (in that case a limited soil reserve with restricted productivity of the soil).

Figure 3: The Economy Based on the Old Economic Sector

(Own creation - Valenčík)

The economic revolution consists in expanding the new sector (e.g. craft turning into industry), it becomes the most dynamic, the core of the new type growth moves there, which subsequently allows enhancing the productivity of the old sector as well (in agriculture in the respective case). Restrictions that used to affect the old sector are overcome through innovations produced in the new sector. See Figure 4:

Figure 4: The Economy Based on the New Economic Sector

(Own creation - Valenčík)

However, the aforementioned scheme can be used for describing smaller changes in the economy related to spreading innovation waves. Let´s focus on the economy that is based on industrial revolution, however, it has not included electronics yet:

- Old sector = nearly the whole industrial economy.

- New sector = initial phase of logistic elements of the mechanical type (from the Prague astronomical clock, Watt regulator to analog computers controlling gunfire of ship guns).

Technological development (from the invention of relay, electron valve, transistor, integrated circuit to the microchip) allows massive (then hardly to imagine) expansion of logistic elements in economy, the launch of microelectronic logistics offering new possibilities for economic growth:

- Input savings (space, time, energy).

- Achieving technological parameters that were unthinkable before (precision, operating technology without direct human involvement, not only during space exploration).

- Generating new human needs that can be fulfilled by logistics based on microelectronics.

This way we could also describe innovation waves related to biotechnologies, laser technology etc.

The abovementioned scheme is most significant for demonstrating a crucial change affecting us nowadays: transition to economy based on productive services, i.e. services related to acquiring, maintaining and applying human capital. Here, the basic condition does not have to be technological but system-based:

- Development of relevant products of financial markets that would allow feedback between economic effects of productive services and funding these services.

- Breaking through barriers working against natural orientation of the society towards a higher level of equal opportunities.

The following Figure 5 depicts the development of labour productivity from the beginning of our era:

Figure 5: The Development of Labour Productivity from the Beginning of Our Era

(Own creation - Mihola)

We can see that G(HDP/L), (i.e. rate of growth per labour unit), starts to increase markedly  in the initial phase of the industrial revolution and keeps growing to this day. However, its growth is decreasing and shall stabilize at the average interannual rate of 1.4 %:

Figure 6: The Rate of Growth per Labour Unit

(Own creation - Mihola)

The transition to economy based on productive services can launch a similar process. Not only does the economic growth have an exponential nature from a long-term perspective, but it is actually faster. At a certain period the exponential dynamics of this growth started to accelerate and stabilized (so far) on exponential growth that corresponds to the average interannual rate of 1.4 % of rate of growth per labour unit (i.e. absolute growth is higher as a result of  labour reserve gain). This increase in the rate of growth, well-described in graph 7 presenting the increase of average long-term gains, occurs during the industrial revolution. Throughout the industrial revolution, the respective dynamics is slightly increasing. Rather than to expect the rate of growth to decrease, we are more likely to experience similar increase as the one during the industrial revolution when the change of the economic growth character causes increase in its interannual dynamics from the present 1.4 % to a higher number as indicated by the following Figure 7:

Figure 7: The transition to Economy Based on Productive Services

(Own creation - Valenčík)

Another analysis presents intensive factors of growth entering the economy during the industrial revolution. First, there was room for capital accumulation (which was not the intensive factor of growth yet), only then did the capital accumulation provide room for applying innovations related to technical progress.

Figure 8: The Intensive factors of Growth Entering the Economy during the Industrial Revolution

(Own creation - Mihola)

Intensive factors stand for all positive changes as against the expansion of production solely based on expanding the production scope. The basic circle provides innovations of all kinds supported by patents and inventions i.e. by the development of science and knowledge in the broadest sense of the word. The intensive factors also include numerous improvements such as better work organization, more efficient management, effective motivation and marketing etc.

The growth in influence of intensive factors depends on the level of human capital. The key elements are utilization and development of those primary human skills possessed by all individuals. This complex of skills and faculties is always individual and original for every individual, however, it is possible to find a job that can be the most suitable for this person. Therein lies the biggest present reserve of society development.

The dynamic parameter of intensity is determined by the relationship and the dynamic parameter of extensity is determined by the expression, where G(SIF) is the rate of growth of the total input factor and G(SPF) is the rate of growth of the total productivity factors.

The dynamic parameter of intensity expresses the portion of intensive factors influence, whereas the dynamic parameter of extensity expresses the portion of extensive factors influence. If both factors exert influence upon the growth, their sum equals 1 (or 100 %).

Productive services of their own nature (suitable selection of profession, acceleration of professional preparation, acquirement of higher-level innovation skills, extension of the period of their acquirement and application, enhancement of the effectiveness of their application) lead to the enhancement of intensive factors influence. Technically speaking, they are the growth factor that enhances intensification, which makes it quite a distinct intensive factor.

The development of intensity and extensity of the world development from the beginning of our era is shown in the upper graph. It clearly demonstrates that a significant arrival of intensive factors corresponds to the period of industrial revolution. By that time, the development had been quite moderate, so the significance of dynamic parameters was markedly smaller with this tiny product growth. This development came close to a purely extensive development.

Figure 9: The Input of Human Skills

(Own creation - Mihola, Valenčík)

The input of human skills that "are recast" within a technical progress is the factor of intensive growth and we can express it and even imagine. Productive services intensify the process of overall utilization of human faculties (through their effective acquirement, better maintenance and application) and affect the intensification of the intensive factor. Future breakdown of the portion of extensive, intensive and super intensive growth factors may take the form presented in the Figure 9.

(To be continued in the next part)

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