The difference in living quality of the people is conditioned to their level of income which, in turn, depends on their level of training in the functions they perform in order to obtain that income; that is to say that the price-value of the work performed by a person is a function of the level of study achieved by that person or the depth of the training received on his job. Thus, we see that there is a direct correlation between the level of study or training of a person and the remuneration he receives for the execution of the job he has been trained for: the lower the training, the lower the income. Conversely, with higher training comes higher income.
The living status of a person is usually classified as low (poor), middle and upper (rich) class according to his income level; but following the reasoning of the previous paragraph we can see that in most of the cases a “poor” person has not finished high school education; therefore earns less than a minimum wage and therefore lives in a residence of very low quality. A middle class person is one who has finished secondary education and has some professional certification; therefore earns several minimum wages and lives in a good quality habitat. A high-class person has higher education and thus earns a lot more than people without training and those of the middle class; therefore he lives in a very high quality environment.
This leads us to the conclusion that it is not appropriate to speak of poor people, or poor countries, or that being poor is a consequence and not a cause. In the case of individuals being poor is a result of their level of training, and in the case of the countries it is a consequence of what they invest per habitant per year in education or training. Instead we should be talking about trained or disabled people as well as trained or disabled countries. This issue is essential to understand the development of the countries because when we speak of poor countries or poor people it sounds as if it is a circumstance alien to people or countries, when the fact is that in most cases it is a consequence of decisions made by those people or countries.
The Gross Domestic Product (GDP) of a country is the sum of the goods and services that country generates; which at the same time is a function of the production capacity of goods and services that the population of the territory has. This production is quantified with a value which is the product of the units produced at the market price, a price that is in turn depending on the relationship between the amounts demanded and the quantities offered. If the offered ones exceed the demanded one, the price has a decreasing tendency. The opposite occurs when the demanded quantities exceed those offered: the price increases. This mechanism is the one that establishes the economic cycles.
PIB= ∑ of i=1 till i=N of Pi x Xi
Pi = The unit price of the goods and services offered and demanded
Xi = The quantities of goods and services offered and demanded
The value of Pi is a function of two factors, namely:
- The level of sophistication or complexity that the production of the goods and services in question has. This level or degree of
sophistication is in turn based on the study or training of the population dedicated to produce and all this is a consequence of the resources or investment that is allocated to education or the amount of money per capita and per year that is assigned to education. This is usually represented as a percentage of GDP which in most cases is inappropriate since the correlation between gross domestic product and what is in vested in education does not correspond to the percentage of GDP but with the amount that is invested per habitant per year in education. - The value of Xi (quantities produced) is also a function of the level of education of the population: at a higher level of education, greater efficiency in productive processes.
In summary, since the GDP is a function of the value of production by the quantities produced and both, value and quantity, are functions of the level of instruction of the population, we may conclude that the economic development of the country is a consequence of an adequate investment in education.
Anthony De Freitas
ECONOMIST