M1: Introduction to Economic - In economics terms, development

Development is the capacity of a nation to

generate and sustain an annual
Scottish Economist increase in its GNP of 5% or
Adam Smith - the first person to tie more.
together all of the ideas of what we now - Traditional economic measures:
call economics and introduce the GDP: is the market value of all
concept of the market. final goods and services produced
within a country in a given period of time
Famous Classical Economists (18th
century)
1. Adam Smith - Father of modern GNP: the market value of all final
economics goods and services produces by
- Scottish economist permanent residents of a country in a
- “Wealth of the nations” - given period of time
productivity, exchange, 3
components of price why
some jobs pay better? - Common alternative index is the
2. Jean-Baptise Say rate of growth of income per
- French economist, capita or per capita GNP
businessman - Per capita GNP is the per-head
- Trade business/free trade value of final goods and services
- Sales law produced by permanent residents
3. David Ricardo of a country in a given period of
- Comparative advantage time. It is converted to USD
- Politica;l economist using the current exchange rate.
- country should focus on - PP Measure; the number of units
the line of expertise of a country’s currency required
4. Thomas Robert Malthus to purchase the same of basket
- Population of goods and services in the local
- More on demography market that a US $1 would buy in
- Geometric theory of the USA. Under PPP, exchange
population rates should adjust to equalize
5. John Stuart Mill the price of a common basket of
- utilitarianism, goods and services across
happiness/pleasure countries. Penn World Table
- Theory of mortality ranks countries using the PPP
method.
Definition of economic development
(1950s)
Definition of economic development such as respect, dignity, in
(1970s) integrity, and self-determination
- Decreasing of GNP in the 1970s 3. Freedom - a situation in which a
and increasing emphasis on society has its disposal a variety
“redistribution from growth” of alternatives from which to
- Increasing emphasis on non- satisfy its wants and individuals
economic social indicators and joy real choices according to
- Economic development consists their preferences
of the reduction or elimination of
poverty, inequality and The central role of Women
unemployment within the context - Development scholars general
of a growing economy view women as playing the
central role in the development
Definition of economic development drama
(1990s) - women have primary
- World bank in its 1991 WDR responsibility for child rearing,
asserted that the “challenge of and the resources that they are
development is to improve the able to bring to this task will
quality of life” determine whether the cycle of
- the improved QOL involves transmission of poverty from
higher incomes, better education, generation to generation will be
higher standards and nutrition, broken
less poverty, a cleaner - women also transmit values to
environment, more equality of the next generation
opportunities, greater individual
freedom, and a richer cultural life. Three objectives of development
1. To increase the availability and
Three Core Values of Development widen the distribution of basic
1. Sustenance - the basic goods life-sustaining goods such as
and services, such as food, food, shelter, health and
clothing, and shelter, that are protection
necessary to sustain an average 2. To raise level of living, including,
human being at the bare in addition to higher incomes, the
minimum level of living provision of more jobs, better
2. Self-esteem - the feeling of education, and greater attention
worthiness that a society enjoys to material well-being but also to
when is social, political, and generate greater individual and
economic systems and national self-esteem
institutions remote human values 3. To expand the range of economic
and social choices available to
 individuals and nations by freeing “DevelopmentIs a multi-dimensional
them from servitude and process involving changes in social
dependence not only in relation structures, popular attitudes, and
to other people and nation-states national institutions, as well as the
but also to the forces of acceleration of economic growth, the
ignorance and human misery reduction of inequality, and the
eradication of poverty.”
The millennium development goals
1. To eradicate extreme poverty and Classifying countries
hunger 1. Most developed countries
2. Achieve universal primary (MDCs)
education - the richest of the
3. Reduce child mortality industrialized and
4. Improve maternal health democratic nations of the
5. Combat HIV/AIDS, malaria, and world
other diseases 2. Less developed countries (LDCs)
6. ensure environmental - countries with little
sustainability industrial development,
7. Develop a global partnership for little wealth, and high
development population growth
3. Least developed countries
Economic Factors (LLDCs)
- Capital - Very low per capita
- Technology income, low literacy rates,
- Labor and very little in the way of
- Natural resources manufacturing industries
- Established markets (labour,
financial, goods) Defining the developing world
- The UN’s System
Non-economic factors (institutional, - World bank's system
social, values) - Classification by levels of
- attitudes toward life and work GNI per capita
- Public and private structures - The UNDP’s Human
- Cultural traditional Development Index
- Systems of land tenure, property - Classification by levels of
rights human development
- Integrity of governance agencies - The OECD’s system

Todaro and Smith said: Country classification according to world

bank
 1. Low-income economies - 1,035 - Historical role of international
or less migration
2. Middle-income economies - - Busy R&D capabilities
1,036 - 4,045 - Stability and flexibility of political
3. High-income economies - 12,536 social institutions
or more - Effectiveness of domestic
economic institutions
Common characteristics of developing
nations Developed vs Developing
- Levels of living
- per capita national income DEVELOPED DEVELOPING
- relative growth rates of
national and per capital 1. Educational 1. Schooling not
income system: school available to all
- distribution of national required citizens of the
country
income
- extent of poverty 2. Widely 2. Poor
- Health available healthcare; not
- Education healthcare enough doctors
- The human development
3. Many 3. Left by
index manufacturing subsistence from
- Low levels of productivity and service farming in rural
- High rate of population growth industries. areas. Few
and dependency burden Farmers use businesses
- substantial dependence on technology
agriculture production and
4. Participate in 4. Few items to
primary exports international trade trade
- Prevalence of imperfect markets
- Dependence and vulnerability 5. People mostly 5. People live
live in cities mostly in rural
areas
How developing countries today differ
from developed countries in their earlier 6. People have 6. Modern
stages access to communications
- Physical and human resource telephone and are are not found
endowment part of global outside of city
- Per capita incomes and levels of network
gdp to the rest of the world
- Climate First world countries
- Population size, distribution and - Refers to so called developed,
growth capitalist, industrial countries,
roughly, a bloc of countries
 aligned with the US after the with unstable governments and
WWII, with more or less common having high rates of population
political and economic interests: growth, illiteracy, and disease
north america, western europe, - most third world nations also
japan, and australia have very large foreign debt

Second world countries What is growth?

- Refers to the former - Economic growth is the increase
communist-socialist, industrial of a nation's real output (GDP)
states, (formerly the eastern bloc, - Results from
the territory and the sphere of - Greater quantities of
influence of the union of soviet natural resources, human
socialist republic): today: russia. resources and capital
eastern europe and some of the - Improvements in the
turk states, as well as china quality of resources
- Technological and
Thrid world countries advances that boost
- These, are all the countries to productivity
they often used to roughly
describe the developing countries What is development
of africa, asia, and latin america - Economic development is the
process by which a nation
What makes a nation third world? enhances it's standard of living
- Despite ever-evolving definitions, over time
the concepts of the third world - The economic standard of living
serves to identify countries that is often defined as GDP per
suffer from high infant mortality, capita
low economic development, high
levels of poverty, low utilization of Economic development vs economic
natural resources and heavy growth
dependence on the industrialized - Economic growth is a narrower
nations concept than economic
- this are the developing and development. It is an increase in
technologically last advanced a country’s real level of national
nations of asia, africa, oceania, output which can be caused by
and latin america an increase in the quality of
- third world nations tend to have resources, increase in the
economies dependent on the quantity of resources and
developed countries and are improvements in technology or in
generally characterized as poor another way and increase in the
 value of goods and services natural resources which might
produced by every sector of the lead to pollution, congestion and
economy. disease. Development however is
- economic growth can be concerned with sustainability
measured by an increase in the which means meeting the needs
country’s GDP of the present without
- Economic development is a compromising the future needs.
normative concept. It applies in These environmental effects are
the context of people's sense of becoming more of a problem for
mortality. The definition of governments now that the
economic development given by pressure has increased on them
Michael Todaro is an increase in due to global warming
living standards, improvement in - Economic growth is a necessary
self-esteem needs and freedom but not sufficient condition of
from oppression as well as a economic development
greater choice. The most
accurate method of measuring
development is the human Basis Economic Economic
development index which takes development growth
into account the literacy rates and
life expectancy which affect Economic Economic
productivity and could lead to development growth
implies refers to an
economic growth. It also leads to
changes in increase in
the creation of more opportunities income, the real
in the sectors of education, savings and output of
healthcare, employment and the investment goods and
environment. It implies an along with service in
increase in the per capita income progressive the country
of every citizen changes in
socio
- Economic growth does not take
economic
into account the size of informal structure of
economy. The informal economy country
is also known as the black
economy which is unrecorded Factors Development Growth
relates to the relates to a
economic activity. Development
growth of gradually
elevates people from low human increased in
standard of living into capital one of the
employment with suitable shelter. indexes, a components
Economic growth does not take decrease in of GDP:
into account the depletion of inequality consumptio
 figures, and n, countries
structural government, because
changes that spending, growth is a
improve the investing, necessary
general net exports condition for
population’s developmen
quality of life t

Measurem Qualitative. Quantitative.

ent HDI ( human increase in CONCLUSIONS
development real GDP, - Development economics is a
index), shown by distinct yet very important
Gender-relat PPP extension of both traditional
ed index economics and political economy.
(GRI), human
while necessarily also concerned
poverty index
(HPI), infant with efficient resource allocation
mortality, and the steady growth of
literacy rate, aggregate output over time,
etc development economics focuses
primarily on the economic, social,
concept Normative Narrower
concept concept social and institutional
than mechanisms needed to bring
economic about rapid and large-scale
developmen improvements in standards of
t living for the masses of poor
people in developing nations
effect Bring Brings
qualitative quantitative - as a social science, economics
and changes in is concerned with people and
quantitative the how best to provide them with the
changes in economy material means to help them
the economy realize their full human potential.
Relevance Economic Economic but what constitute the good life
development growth is a is a perennial question, and
is more more hence economics necessarily
relevant to relevant involves values and value
measure metric for judgments. are very concerned
progress and progress in with promoting development
quality of life developed
represents an implicit value
in developing countries.
nations but it is judgement about good
widely used (development) and evil
in all (underdevelopment)
- The central economic problems and the values, roles, and
of all societies include traditional attitudes of political and
questions such as what, where, economic elites
how, how much, can for whom
goods and services should be
produced. but you should also
include the fundamental question
at the national level about who
actually makes or influences
economic decisions and for
whose principal benefit these
decisions are made. Finally, at
the international level, it is
necessary to consider the
question of which nations and
which powerful groups within
nations exert the most influence
with regard to the control,
transmission, and technology,
information, and finance.
moreover, for whom do they
exercise this power?
- Any realistic analysis of
development problems
necessitates the supplementation
of strictly economic variables
such as incomes, prices, and
savings rates with equally
relevant non-economic
institutional factors, including
nature of tenure agreements; the
influence of social and class
stratification; the structure of
credit, education, and health
systems; the organization and
motivation of government
bureaucracies; the machinery of
public administrations; the nature
of popular attitude toward work,
leisure, and self-improvement;