All right. Now let's discuss the role that the government can play in promoting economic growth. So we want to see things that the government can do to help the economy grow, right? The government can play a role in this. Some of the most important things they can do is to increase human capital. So the first one here, Public Education. This is an investment in Human Capital by the government offering free public schools. Well, that's going to make their population smarter, right? More educated, technically savvy to be more productive at their jobs, right? So smart and experienced workers are more productive, so we'll have economic growth. Pretty straightforward public education is a key to economic growth. And the government can also in another way they can invest in public health and nutrition. So this is kind of like an investment in human capital, but a little different. Remember, when we talk about human capital, it's like investing in education and training of the citizens, right? Well, how about the health of the citizens, right? Healthy citizens are going to be more productive than sick citizens, right? If you're sick and you can't go to work, well, you're not being productive. So by investing in health and having a healthy population, well, that's going to increase productivity as well. So it's kind of like an alternative investment. Now, when we talk about human capital, I do want you to really focus that definition on education. That should be the keyword that triggers in your mind, Having educated citizens when you think about human capital. But health, it's kind of like an alternative investment there. So those are 2 things already that the government can do to help promote economic growth, right? We're trying to see how can the government help the citizens be more productive.
So the next one here is property rights. So property rights by establishing property rights, they're going to help entrepreneurs and investors make investments. When we talk about property rights, this is the ability to exercise authority over your property. So you own something, well who says that you own it? You live in a house, but is it your house? Who says it's your house? Well, the government has property rights that say this is your house. Now, what if property rights weren't clearly defined, right? What if it wasn't so simple to show the deed and say, Hey, this is my house. Well, then it would be a lot riskier, right? Entrepreneurs and investors would not risk their funds if their property could be seized and this is actually very relevant in developing countries. There's a lot of developing countries where property rights can be undermined by government corruption. So a lot of times with this 3rd bullet point especially if a country is at war or maybe the citizens are unhappy and there's a big revolution going on. Well, if you have a factory in that country who knows what could happen, right? If there's a new government that gets put in place, they could seize your assets, right? Who knows what could happen? So if property rights are not clearly defined and you can't really control your property, well that would not help entrepreneurs make investments, right? And that's the key to economic growth here is that we want to be able to make these investments to allow the economy to grow. So by establishing these property rights, well that's going to allow entrepreneurs to feel better about making these investments, right? So establishing property rights, that's another thing the government does, right? The government is the one who protects your property and in any case, you have the deeds, right? You're able to show that this is your property and you can take them to court if someone tried to deny you, right? So establishing property rights is a key to economic growth.
The next one here is savings and investment. So we've mentioned these terms before, savings and investment. Now, let's go ahead and define them first and let's see how that relates to productivity growth. Remember, our goal here is how can the government help growth. So when we talk about savings, this is something that the households do. Households have savings and this is when current consumption is less than current output, right? So there's less they don't consume everything today. They save some for the future. Well, how does that help our how does that help productivity growth? Well, we're going to see how savings and investment are highly interrelated. So when households save, that allows firms to borrow money and invest, right? And remember, when we talk about investments, so this is something that firms do here, when we talk about investment, we're not talking about like buying stock or buying bitcoins or something. We're talking about economic investment. When we talk about economic investment, this is something that increases future output. So, current resources being devoted to increasing future output. What does that mean? That's like building a factory, right? If we build a factory today, we're taking current resources to build this factory so that in the future, we can use the factory to be more productive and create more output in the future. Okay? So that's something that the firms do. They invest to create future output. So the savings and investments go hand in hand. The households save so so that the firms can borrow those savings and invest them, okay? So the government can help incentivize saving and they can help incentivize investment. They can incentivize savings with things you've probably heard of. Their tax incentives by giving households reasons to save like 401ks or other retirement vehicles that there are to help you save on taxes by saving your money, you don't get taxed on it right away and you're able to save on the taxes and that incentivizes people to save some of their money because they'll have money, put away for retirement and they won't have to pay taxes on it. Now, firm, how can the government help firms invest? How can they incentivize firms to invest in the future instead of saying, hey, let's just make money now. Let's instead, they want to incentivize them to grow in the future as well to make these investments. So they can give subsidies for research and development. So remember, research and development, well we're gonna be making more technology here, right? We're improving our technology. Improving technology which will increase the value of investment in the future, right? By subsidizing research and development well, that's going to help technology grow which is an important part of economic growth and the government also plays a role in infrastructure by building roads and power lines and that's an important part of economic growth, right? Think about the highway system here in the US, right? When the government built the highway system, it made it a lot easier for business to do logistics, right? To be able to send and receive things across the country by different materials, right? So infrastructure plays a key role in investment as well. So by saving and incentivizing investment, the government can promote economic growth as well. The last one we have here is free trade. So free trade, this is integrating into the worldwide marketplace. We've got this word globalization that gets thrown around a lot. Well, that's just being part of the global marketplace. Becoming more open to foreign trade and investment. Okay, by being part of the global marketplace, you can sustain economic growth. And this is especially true for let's say low income countries. Maybe in a low income country, a developing country, they don't have the savings to be able to invest and create new factories. Well, by allowing foreign investments and we call them here foreign direct investments. So, this is purchasing or building factories, facilities in foreign countries. So, by investing in other countries, well these low income countries can increase their production and increase this would be economic growth here, right? By allowing, the foreign investment, right? So maybe a factory they couldn't build themselves, if they allow if they have free trade and they allow foreign investment, well they can the foreigners can build the factory and help that country grow, right? So that's about it. These are things that governments can do to help promote economic growth. So remember by the main ones here to think about is investing in here in human capital through education and health, establishing property rights is key. That's a key to economic growth, savings and investment, and finally, free trade. Cool? Alright. Let's go ahead and move on to the next topic.
