iPedia Free Information Center

Information about Development Economics

Development economics is a branch of economics which deals with economic aspects of the development process in low-income countries. Its focus is on methods of promoting economic growth but also of realizing individual potential for the mass of the population, for example, through health and education and workplace conditions, whether through public or private channels.[1] Thus, development economics involves the creation of theories and methods that aid in the determination of types of policies and practices and can be implemented at either the domestic or international level.[2] This may involve restructuring market incentives or using mathematical methods like inter-temporal optimization for project analysis, or it may involve a mixture of quantitative and qualitative methods.[3] Unlike in many other fields of economics, approaches in development economics may incorporate social and political factors to devise particular plans.[4]

Theories of Development Economics

Linear-stages-of-growth model

The earliest theory of development economics, the linear-stages-of-growth model was first formulated in the 1950s by W. W. Rostow in The Stages of Growth. This theory focuses on the accelerated accumulation of capital, through the utilization of both domestic and international savings as a means of spurring investment, as the primary means of promoting economic growth and, thus, development.<ref name="Economic Development" /> The linear-stages-of-growth model posits that there are a series of five consecutive stages of development which all countries must go through during the process of development. These stages are “the traditional society, the pre-conditions for take-off, the take-off, the drive to maturity, and the age of high mass-consumption”[5] This theory gave further rise to the Harrod-Domar Model which serves to explain through mathematics the basic assumption that improved capital investment leads to greater economic growth.<ref name="Economic Development" />

This theory has been criticized for not recognizing that, while necessary, capital accumulation is not a sufficient condition for development. That is to say that this early and simplistic theory failed to account for political, social and institutional obstacles to development. Furthermore, this theory was developed in the early years of the Cold War and was largely derived from the successes of the Marshall Plan. This has led to the major criticism that the theory assumes that the conditions found in developing countries are the same as those found in post-WWII Europe.<ref name="Economic Development" />

Structural-change theory

Structural-change theory deals with policies focused on changing the economic structures of developing countries from being primarily comprised of subsistence agricultural practices to being a “more modern, more urbanized, and more industrially diverse manufacturing and service economy.” There are two major forms of structural-change theory; W. Lewis’ two-sector surplus model, which views agrarian societies as consisting of large amounts of surplus labor which can be utilized to spur the development of an urbanized industrial sector, and Hollis Chenery’s patterns of development approach, which is the empirical analysis of the “sequential process through which the economic, industrial and institutional structure of an underdeveloped economy is transformed over time to permit new industries to replace traditional agriculture as the engine of economic growth.” <ref name="Economic Development" />

Structural-change approaches to development economics have faced criticism for their emphasis on urban development at the expense of rural development which can lead to a substantial rise in inequality between internal regions of a country. The two-sector surplus model, which was developed in the 1950s, has been further criticized for its underlying assumption that predominantly agrarian societies suffer from a surplus of labor. Actual empirical studies have shown that such labor surpluses are only seasonal and drawing such labor to urban areas can result in a collapse of the agricultural sector. The patterns of development approach has been criticized for lacking a theoretical framework.<ref name="Economic Development" />

International dependence theory

International dependence theories gained prominence in the 1970s as a reaction to the failure of earlier theories to lead to widespread successes in international development. Unlike earlier theories, international dependence theories have their origins in developing countries and view obstacles to development as being primarily external in nature, rather than internal. These theories view developing countries as being economically and politically dependent on more powerful, developed countries which have an interest in maintaining their dominant position. There are three different, major formulations of international dependence theory; neocolonial dependence theory, the false-paradigm model and the dualistic-dependence model. The first formulation of international dependence theory, neocolonial dependence theory has its origins in Marxism and views the failure of many developing nations to undergo successful development as being the result of the historical development of the international capitalist system.<ref name="Economic Development" />

Neoclassical theory

First gaining prominency with the rise of several conservative governments in the West during the 1980s, neoclassical theories represents a radical shift away from International Dependence Theories. Neoclassical theories argue that governments should not intervene in the economy; in other words, these theories are claiming that an unobstructed free market is the best means of inducing rapid and successful development. Competitive free markets unrestrained by excessive government regulation are seen as being able to naturally ensure that the allocation of resources occurs with the greatest efficiency possible and the economic growth is raised and stabilized.<ref name="Economic Development" />

It is important to note that there are several different approaches within the realm of neoclassical theory, each with subtle, but important, differences in their views regarding the extent to which the market should be left unregulated. These different takes on neoclassical theory are the free market approach, public-choice theory, and the market-friendly approach. Of the three, both the free-market approach and public-choice theory contend that the market should be totally free, meaning that any intervention by the government is necessarily bad. Public-choice theory is arguably the more radical of the two with its view, closely associated with libertarianism, that governments themselves are rarely good and therefore should be as minimal as possible.<ref name="Economic Development" />

The market-friendly approach, unlike the other two, is a more recent development and is often associated with the World Bank. This approach still advocates free markets but recognizes that there are many imperfections in the markets of many developing nations and thus argues that some government intervention is an effective means of fixing such imperfections<ref name="Economic Development" />

Topics of Research

Development economics also includes topics such as Third World debt, and the functions of such organisations as the International Monetary Fund and World Bank. Many economists in this field are interested in ways of promoting stable and sustainable growth in poor countries and areas, by promoting self reliance and education in some of the lowest income countries in the world. Where economic issues merge with social and political ones, it is referred to as development studies.

Criticisms

Per capita Gross Domestic Product (GDP per head) is used by many developmental economists as an approximation of general national well-being. However, these measures are criticized as not measuring economic growth well enough, especially in countries where there is much economic activity that is not part of measured financial transactions (such as housekeeping and self-homebuilding), or where funding is not available for accurate measurements to be made publicly available for other economists to use in their studies (including private and institutional fraud, in some countries). Even though per-capita GDP as measured can make economic well-being appear smaller than it really is in some developing countries, the discrepancy could be still bigger in a developed country where people may perform outside of financial transactions an even higher-value service than housekeeping or homebuilding as gifts or in their own households, such as counseling, lifestyle coaching, a more valuable home décor service, and time management. Even free choice can be considered to add value to lifestyles without necessarily increasing the financial transaction amounts. More recent theories of Human Development have begun to see beyond purely financial measures of development, for example with measures such as medical care available, education, equality, and political freedom. One measure used is the Genuine Progress Indicator, which relates strongly to theories of distributive justice. Actual knowledge about what creates growth is largely unproven; however recent advances in econometrics and more accurate measurements in many countries is creating new knowledge by compensating for the effects of variables to determine probable causes out of merely correlational statistics.

Recent developments

The most prominent contemporary development economist is perhaps the Nobel laureate Amartya Sen. Recent theories revolve around questions about what variables or inputs correlate or affect economic growth the most: elementary, secondary, or higher education, government policy stability, low tariffs, fair court systems, available infrastructure, availability of medical care, prenatal care and clean water, ease of entry and exit into trade, and equality of income distribution (for example, as indicated by the Gini coefficient), and how to advise governments about macroeconomic policies, which include all policies that affect the economy. Education enables countries to adapt the latest technology and creates an environment for new innovations. The cause of limited growth and divergence in economic growth lies in the high rate of acceleration of technological change by a small number of developed countries. These countries’ acceleration of technology was due to increased incentive structures for mass education which in turn created a framework for the population to create and adapt new innovations and methods. Furthermore, the content of their education was composed of secular schooling that resulted in higher productivity levels and modern economic growth.

Notes

1. ^ Bell, Clive (1987). "development economics," , v. 1, pp. 818, 825.
2. ^ Arndt, H.W. Economic Development: A Semantic History. “Economic Development and Cultural Change.” Vol. 29, No. 3. (Apr., 1981), pp. 457-466. Chicago: The Chicago University Press.
3. ^ Bell, Clive (1987). "development economics," , v. 1, p. 825.
4. ^ Todaro, Michael and Stephen Smith. Economic Development. 9th ed. Addison-Wesley series in economics, 2006
5. ^ Rostow, W.W. The Five Stages of Growth. Development and Underdevelopment: The Political Economy of Global Inequality. 3rd ed. pp. 123-131. Eds. Seligson, Mitchell and John Passe-Smith. Boulder, CO: Lynne Rienner Publishers, 2003.

References

  • Clive Bell (1987). "development economics," , v. 1, pp. 818-26.
  • Hollis B. Chenery and T. N. Srinivasan, eds. (1988, 1989). Handbook of Development Economics, Vol. I & II, Amsterdam: North-Holland,
  • K.S. Jomo (2005), Pioneers of Development Economics: Great Economists on Development, Zed Books - the contributions of economists such as Marshall and Keynes, not normally considered development economists
  • Gerald M. Meier (2005), Biography of a Subject: An Evolution of Development Economics, Oxford University Press
  • Gerald M. Meier, Dudley Seers[editors] (1984), Pioneers in Development, World Bank (http://www-wds.worldbank.org/servlet/WDS_IBank_Servlet?pcont=details&eid=000178830_98101901520025)
  • Dwight H. Perkins, Steven Radelet, Donald R. Snodgrass, Malcolm Gillis and Michael Roemer (2001), Economics of Development, 5th edition, New York: W. W. Norton.
  • Jeffrey D. Sachs (2005), The End of Poverty: Economic Possibilities for Our Time, Penguin Books
  • Ben Fine and Jomo K.S. (eds, 2005), The New Development Economics: Post Washington Consensus Neoliberal Thinking, Zed Books
  • Peter Griffiths (2003), The Economist's Tale: A Consultant Encounters Hunger and the World Bank, Zed Books
  • George Mavrotas and Anthony Shorrocks (eds, 2007), Advancing Development: Core Themes in Global Development, Palgrave Macmillan
  • World Institute for Development Economics Research Publications/Discussion Papers
  • The Center for Global Development
  • Easterly, William (2002), Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics, The MIT Press

See also

External links

Economics is the social science that studies the production, distribution, and consumption of goods and services. The term economics comes from the Greek for oikos (house) and nomos (custom or law), hence "rules of the house(hold).
..... Click the link for more information.
developing country has a relatively low standard of living, an undeveloped industrial base, and a moderate to low Human Development Index (HDI) score. In developing countries, there is low per capita income, widespread poverty, and low capital formation.
..... Click the link for more information.
Economic growth is the increase in value of the goods and services produced by an economy. It is conventionally measured as the percent rate of increase in real gross domestic product, or GDP. Growth is usually calculated in real terms, i.e.
..... Click the link for more information.
In mathematics, the term optimization, or mathematical programming, refers to the study of problems in which one seeks to minimize or maximize a real function by systematically choosing the values of real or integer variables from within an allowed set.
..... Click the link for more information.
The Harrod-Domar model is used in development economics to explain an economy's growth rate in terms of the level of saving and productivity of capital. It suggests that there is no natural reason for an economy to have balanced growth.
..... Click the link for more information.
The Cold War was the period of conflict, tension and competition between the United States and the Soviet Union and their respective allies from the mid-1940s until the early 1990s.
..... Click the link for more information.
Marshall Plan (from its enactment, officially the European Recovery Program [ERP]) was the primary plan of the United States for rebuilding and creating a stronger foundation for the allied countries of Europe, and repelling communism after World War II.
..... Click the link for more information.
This article or section is in need of attention from an expert on the subject.
Please help recruit one or [ improve this article] yourself. See the talk page for details.
..... Click the link for more information.
Marxism is both the theory and the political practice (that is, the praxis) derived from the work of Karl Marx and Friedrich Engels. Any political practice or theory that is based on an interpretation of the works of Marx and Engels may be called Marxism; this includes
..... Click the link for more information.
WEST can refer to:
  • Western European Summer Time
  • WEST (AM), an AM radio station located in Easton, Pennsylvania
''This article refers to the cardinal direction; for other uses see West (disambiguation).

..... Click the link for more information.
Libertarianism

Schools of thought
Agorism
Anarcho-capitalism
Geolibertarianism
Green libertarianism
Right-libertarianism
Left-libertarianism
Minarchism
Neolibertarianism
Paleolibertarianism
Progressive libertarianism


..... Click the link for more information.
Libertarianism

Schools of thought
Agorism
Anarcho-capitalism
Geolibertarianism
Green libertarianism
Right-libertarianism
Left-libertarianism
Minarchism
Neolibertarianism
Paleolibertarianism
Progressive libertarianism


..... Click the link for more information.
The World Bank (the Bank) is a part of the World Bank Group (WBG), is a bank that makes loans to developing countries for development programs with the stated goal of reducing poverty.
..... Click the link for more information.
original research or unverifiable claims.
* It is missing citations and/or footnotes. Please help improve this article by adding inline citations.
* It needs to be expanded.

Please help [ improve the article] or discuss these issues on the talk page.
..... Click the link for more information.

International Monetary Fund

IMF member states
Headquarters Washington, D.C., USA

Managing Director Dominique Strauss-Kahn
Central Bank of

Base borrowing rate 5.50%

Website www.
..... Click the link for more information.
The World Bank (the Bank) is a part of the World Bank Group (WBG), is a bank that makes loans to developing countries for development programs with the stated goal of reducing poverty.
..... Click the link for more information.
Development studies is a multidisciplinary branch of social science which addresses issues of concern to developing countries. It has historically placed a particular focus on issues related to social and economic development, and its relevance may therefore extend to communities
..... Click the link for more information.
The Genuine Progress Indicator (GPI) is a concept in green economics and welfare economics that has been suggested as a replacement metric for gross domestic product (GDP) as a metric of economic growth.
..... Click the link for more information.
Distributive justice concerns what is just or right with respect to the allocation of goods in a society. Thus, a community whose individual members are rendered their due would be considered a society guided by the principles of distributive justice.
..... Click the link for more information.
Econometrics is concerned with the tasks of developing and applying quantitative or statistical methods to the study and elucidation of economic principles.[1] Econometrics combines economic theory with statistics to analyze and test economic relationships.
..... Click the link for more information.
Winners of the Nobel Prize are scientists, writers and peacemakers who have been awarded in their field of endeavour, and who are known collectively as either Nobel laureates or Nobel Prize winners.
..... Click the link for more information.
Amartya Sen

Born November 3 1933 (1933--) (age 74)
Santiniketan, India
Residence U.S.
..... Click the link for more information.
Gini coefficient is a measure of statistical dispersion most prominently used as a measure of inequality of income distribution or inequality of wealth distribution. It is defined as a ratio with values between 0 and 1: the numerator is the area between the Lorenz curve of the
..... Click the link for more information.
Thirukodikaval Nilakanta "T. N." Srinivasan (b. 1933) is the Samuel C. Park, Jr. Professor of Economics at Yale University. He was formerly chairman of the department of economics at Yale University.
..... Click the link for more information.
Development studies is a multidisciplinary branch of social science which addresses issues of concern to developing countries. It has historically placed a particular focus on issues related to social and economic development, and its relevance may therefore extend to communities
..... Click the link for more information.
Alvin Toffler (born October 3, 1928) is an American writer and futurist, known for his works discussing the digital revolution, communications revolution, corporate revolution and technological singularity.
..... Click the link for more information.
Social change (or Social development) is a general term which refers to:
  • change in the nature, the social institutions, the social behaviour or the social relations of a society, community of people, or other social structures.

..... Click the link for more information.
Sustainable development is a socio-ecological process characterized by the fulfilment of human needs while maintaining the quality of the natural environment indefinitely. The linkage between environment and development was globally recognized in 1980, when the International Union
..... Click the link for more information.
Economic development is the development of economic wealth of countries or regions for the well-being of their inhabitants. From a policy perspective, economic development can be defined as efforts that seek to improve the economic well-being and quality of life for a community by
..... Click the link for more information.
The concept of right-financing was coined by English Political Economist Dr. Peter Middlebrook to highlight the importance of adopting the appropriate policy, institutional and financial support mechanisms to maximize sustainable returns on both public and private investments over
..... Click the link for more information.


This article is copied from an article on Wikipedia.org - the free encyclopedia created and edited by online user community. The text was not checked or edited by anyone on our staff. Although the vast majority of the wikipedia encyclopedia articles provide accurate and timely information please do not assume the accuracy of any particular article. This article is distributed under the terms of GNU Free Documentation License.
Herod_Archelaus


page counter