Answer to Question #261686 in Economics for Sahba

Question

Name the three hypotheses of countries' failure as hypotheses that cannot fully explain why some countries are progressing and others are lagging behind. And explain

Answer 1

The explanation for the fact that some countries are richer than others is the "theory of ignorance," which claims that inequality in the world exists because the inhabitants of poor countries or their rulers do not know how to make their country rich. This theory is close to most economists who share the famous definition given in 1935 by the English economist Lionel Robbins:

"Economics is the science that studies human behavior as the relationship between ends and limited means, which also have alternative applications."

Having given such a definition, it remains to take only a small logical step in order to conclude: the purpose of economics is to find the optimal use of limited resources to meet the needs of society. Indeed, the most important theoretical result in economics, the so-called First Welfare Theorem, defines the conditions under which the “market” allocation of resources is optimal for social welfare (as economists understand it). A "market economy" in this context is an ideal situation where people and companies are free to produce, buy and sell goods and services. When something goes wrong, we talk about "market failure" or "market failure". Such disruptions represent another explanation for global inequality, because the more such disruptions remain without consequences (that is, no attempt is made to eliminate their causes) in a country, the poorer such countries live.