Development Economics
BA-4706
BBA 5
Lecture # 1
Dr. Muhammad Aqil
Marks Distribution
Total Total Marks Total Marks
Marks Head
Frequency Exempted /Frequency /Head
Quiz 4 1 5 15
Final Paper 1 0 40 40
Mid Term Paper 1 0 20 20
Presentation 1 0 10 10
Case Study 4 1 5 15
Total Marks 100
Basic Concepts
Branches of Economics
Micro Economics
Macro Economics
Managerial Economics
Business Economics
Political Economy
Labor Economics
Public Finance
Monetary Economics
Development Economics
Basic Concepts
GDP
GNP
NNP = GNP – Depreciation
National Income = NY= NNP
NY = C+I+G+Xn
Per Capita Income = NY/ Population
Real Per Capita = Nominal PCI – Inflation effect
Savings
Investment
Consumption
New Concepts
Unemployment
Underemployment
Poverty
Economic Growth
Economic Development
Human Development Index
Theories of Development
Division of World
Rich Countries
Poor Countries
Developed, Developing and Under Developed Countries
What is the difference?
Why is this difference?
How can the difference be removed?
The Answer is Socialism?
The answer is Capitalism?
The answer is mixed economy?
The answer is still awaited?
What is the difference
The richest 1% own 45% of world wealth
836 million people living in extreme poverty i.e. less
than $1 (UN)
1/5th of the world population below $1.25
22,000 children die each day due to poverty
805 million people worldwide do not have enough
food to eat.
More than 750 million people lack adequate access
to clean drinking water.
80% of the world population lives on less than $10 a day.
Why to Study Economic Development
What is Growth and Development?
Why Development is necessary?
What mistakes were made by Past economists to
attain economic development?
Are non-economic factors significant to economic
development?
What if there is no economic development?
What are the determinants of Eco Development?
How can economic development be achieved
today?
What is Economic Development
https://
www.youtube.com/watch?v=ovSJQ4GZeHE
Why Development is necessary?
For Producers
Maximization of Profit
For Consumers
Maximization of Satisfaction
Standard of Living
For Government
Eradication of Poverty
Decrease in Crime Rate and Violence
Better Defense
Infrastructure
Health
Education
High Per Capita Income
Numerical
In 2016, A Country produced the total goods for Rs 60
billion and services worth Rs. 40 billion. The total
expenditures by consumers amounted to Rs. 39 b. The
producers made capital expenditures of Rs. 23 b and
government spent 25% of NI. Import for the year was
Rs. 9 b and export Rs.11 billion.
Calculate:
National Income
Real National Income if Inflation Rate is 15% P.A.
Y=C+I+G+Xn
Traditional View of Economic
Development 1950s
Eco Development = Eco Growth
Eco Growth = Rise in GDP / GNP (5% or more)
Rise in GDP / GNP = Rise in Income
Problems
Industrialization at the cost of Agriculture
Issues of Concentration of Wealth
Poverty
Unemployment
Limitations of Traditional Measures
In 1970s, the definition was criticized on the
following grounds
It did not address poverty of the masses
It did not take into account income disparity
It did not focus on unemployment reduction
The Growth Rate Dilemma might be
misleading
The countries with rapid growth also failed
View of Economic Development in
1970s
Slogan was “Redistribution from Growth”
Economic Variables
Elimination of Poverty
Reduction in Unemployment
Reduction in Income Inequality
Non-Economic Variables
Summary of Traditional View of
Development
Focus is on National Income
Poverty means the person who is deprived of
certain level of income
Development means increasing the level of
income By
Increasing GDP
Reducing Income Inequality
Reducing Unemployment
Problems with Traditional View
Amerta Sen and Dr. Mehboobul Haq
Income is important thing but not everything
Income without health is not development
Income without education is not
development
Income without social freedom is not
significant
The Centre of Development is NOT INCOME
BUT HUMAN
Sen’s “Capabilities” Approach: 1985
GDP standard is not the only good measure
of welfare or development
Happiness standard (measured by Gross
Happiness Index ) is also subjective to
measure
Basic Needs Approach is also difficult to
identify as to what basic needs of people are
and what are not
Sen’s “Capabilities” Approach: 1985
Capability Approach has two dimensions
Do People have capability to live their own life that
make them happy?
Do People have functioning (Freedom) to live their own
life that make them happy?
For example a book is irrelevant to an illiterate person
or A TV set is meaningless to a blind as they do not have
capability to use them
A wife in a joint family system may not enjoy many
facilities due to lack of freedom
A sick person can not enjoy regular food
Explanation
So, if we measure the well-being of people by
means of availability goods and services, that
may be misleading
Therefore to conditions are necessary to get
benefit from goods i.e. Capability and
Functioning
Hence: Freedom of Choice or control of one’e
own life is a central aspect of wellbeing
Capability approach
Broad evaluative framework
Focus on what individuals are able to be and do
Functioning = actual activity or state of being
eg being healthy
Functioning vector = combination of functioning at
any one time
eg caring for elderly parent AND being healthy
Capability set = set of alternative functioning vectors
available to an individual
eg (caring for elderly parent AND being healthy) OR
(receiving care services AND being healthy AND being in
paid work)
Definition of Development in 1990s
1. The challenge of Development is to improve
the quality of life (World Bank Report 1991)
2. The improved QOL involves higher incomes,
better education, higher standards of health
and nutrition, less poverty, a cleaner
environment, more equality of opportunities,
greater individual freedom, and a richer
cultural life.
Economic factors
capital
Labor
Natural resources
technology
established markets (labour, financial, goods)
Non-economic factors (institutional, social,
values)
attitudes toward life and work
public and private structures
cultural traditions
systems of land tenure, property rights
integrity of government agencies
27
Final Definition
1. Development must be conceived of as a
multidimensional process involving major
changes in social structures, popular attitudes
and national institutions as well as the
acceleration of economic growth, the reduction
of inequality, and the eradication of poverty
(Todaro and Smith)
2. Development is both a physical reality and a
state of mind for attaining a better life.
Economic Development and SDGs
In 2015, 195 nations agreed with the United Nation
that they can change the world for the better.
This will be accomplished by bringing together
their respective governments, businesses, media,
institutions of higher education, and local NGOs to
improve the lives of the people in their country by
the year 2030.
Economic Development and SDGs
Eliminate Poverty
Erase Hunger
Establish Good Health and Well-Being
Provide Quality Education
Enforce Gender Equality
Improve Clean Water and Sanitation
Grow Affordable and Clean Energy
Create Decent Work and Economic Growth
Economic Development and SDGs
Increase Industry, Innovation, and Infrastructure
Reduce Inequality
Mobilize Sustainable Cities and Communities
Influence Responsible Consumption and Production
Organize Climate Action
Develop Life Below Water
Advance Life On Land
Guarantee Peace, Justice, and Strong Institutions
Build Partnerships for the Goals
