Notes from Development
Economics
The economics of the developing countries are usually filled
with the usual litany of woes. Despite of the progress they
have made in the last several years, there are fundamental
economic inadequacies in terms of several indicators:
Levels of physical capital per person is small
Nutrition levels are low
Education is below the accepted standards
Inadequate sanitation, safe water and housing
High population growth rates and infant mortality
There are several more reasons other than the given factors
that talks of underdevelopment but the question that most
people are trying to find explanations is why underdeveloped
countries underdeveloped?
Several causes may not be the reason as these could be
symptoms that can be addressed such as:
- it is unclear whether low fertility rates are intrinsically
a feature of economic welfare or development
- large holdings of physical capital may well have an
instrumental value to play in the development process.
“Big questions” of economic development.
• Why are some countries poor while others are rich?
• What explains the success stories of economic
development, and how can we learn from the failures?
• How do we make sense of the enormous inequalities that
we see, both within and across questions?
Developing world
• group of countries classified by the World Bank as having “low” and
“middle” income
Development Economics
• studies the economics of the developing world, has made excellent
use of economic theory, econometric methods, sociology,
anthropology, political science, biology and demography and has
burgeoned into one of the liveliest areas of research in all the social
sciences
• seeks to understand the economic aspects of the development process
in low-income countries. This implies that there must be something
different about studying economics in low income countries
Development economics involves many different things:
• It’s income growth
• It’s welfare economics, including the study of poverty and
inequality.
• It’s agricultural economics.
• It’s economic demography, the study of population growth
• It’s labor economics: education, health, conditions in the
workplace.
• It’s the study of markets for goods, services, inputs, outputs,
credit, and insurance, without which whole economies can grind
to a standstill.
• It’s public economics, including the provision of public goods
from roads and communications to utilities and waste treatment
• It’s about natural resources and the environment: energy, water,
deforestation, pollution, climate change, sustainability.
Evolution of Development Economics
• The origins of modern development economics are not
found in low-income countries, but rather in relatively
developed countries devastated by war
• Marshall Plan – rebuilding of war-torn Europe and Japan
• Focused on income growth, often blurring the lines
between growth and development
• Walter Rostow’s treatise on the stages of economic growth:
the traditional society, the preconditions for takeoff, the
takeoff, the drive to maturity, and the age of high mass
consumption.
Evolution of Development Economics
• The anatomy of growth/how the growth process works
• Linkages/multiplier effect on economic growth
• Rethinking growth: inequality and poverty
• Experimental revolution/people’s economic behavior
• Four themes of classical development economics, namely
(1) industrialization, (2) rapid capital accumulation, (3)
mobilization of underemployed manpower, and (4)
planning and an economically active state
Economic Development
• different meanings in different contexts
• difficult to achieve development goals without growth
• determining who reaps the benefits of economic growth,
but also to understanding growth itself
• development projects in high-income countries often are
motivated by some of the same goals that inspire
development projects in poor countries, particularly the
creation of new jobs, incomes, and tax revenues
• equity and efficiency are not only complementary; they are
inseparable
