ECONOMIC

DEVELOPMENT
Introducing Economic Development: A Global Perspective
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Objectives
1. Economics and Development Studies
2. What do we mean by development?
3. The future of the Millennium
development Goals
4. Why study Development Economics?
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What is Economics?
What is Economics?
Economics is the social science that studies
how individuals, businesses, and societies
allocate scarce resources to satisfy unlimited
wants and needs. It examines the production,
distribution, and consumption of goods and
services, as well as the factors that influence
economic behavior, such as supply and demand,
pricing, incentives, and the role of government.
Economics also explores concepts like
economic growth, unemployment, inflation,
market structures, and the overall functioning of
national and global economies.
What is Development?
The process of improving the
quality of all human lives and
capabilities by raising people’s
levels of living, self-esteem, and
freedom.
What is Economic
Development?
The study of how economies are
transformed from stagnation to
growth and from low income to
high-income status, and
overcome problems of
absolute poverty.
How the Other Half Live?
FAMILY WORK EDUCATION FOOD SHELTER HAPPINESS
RICH
POOR
“They too can view the sea, but somehow it seems neither
scenic nor relaxing”
How the Other Half Live?
Now imagine that you are in a remote rural area in the
eastern part of Africa, where many small clusters of tiny
huts dot a dry and barren land. Each cluster contains a
group of extended families, all participating in and sharing
the work. There is little money income here because most
food, clothing, shelter, and worldly goods are made and
consumed by the people themselves—theirs is a
subsistence economy.
How the Other Half Live?
Subsistence economy

An economy in which production is mainly for

personal consumption and the standard of living
yields little more than basic necessities of life—food,
shelter, and clothing.
How the Other Half Live?
“As people throughout the world awake each morning to face a new day,
they do so under very different circumstances. Some live in comfortable
homes with many rooms. They have more than enough to eat, are well
clothed and healthy, and have a reasonable degree of financial security.
Others—and these constitute a majority of the earth’s more than 7 billion
people—are much less fortunate. They may have inadequate food and
shelter, especially if they are among the poorest third. Their health is often
poor, they may not know how to read or write, they may be unemployed, and
their prospects for a better life are uncertain at best. About two-fifths of the
world’s population lives on less than $2 per day, part of a condition of
absolute poverty.”
How the Other Half Live?

Absolute Poverty
A situation of being unable to meet
the minimum levels of income, food, clothing,
health care, shelter, and other essentials.
 How the Other Half Live?
A new road is being built that will pass near this village. No
doubt it will bring with it the means for prolonging life
through improved medical care. But it will also bring more
information about the world outside, along with the
gadgets of modern civilization. The possibilities of a “better”
life will be promoted, and the opportunities for such a life
will become feasible. Aspirations will be raised, but so will
frustrations as people understand the depth of some of
their deprivations more clearly. In short, the development
process has been set in motion.
How the Other Half Live?
Development
The process of improving the quality of all
human lives and capabilities by raising
people’s levels of living, self-esteem, and
freedom.
“Parasite” is a satirically
comedic thriller about poverty,
about the contrast between
the rich and the poor, about
the injustice of inequality, that
avoids the conventions and
habits of realistic social
dramas..
-The New Yorker
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Nature of Development Economics

1. Traditional Economics
2. Political Economy
3. Development Economics
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1. Traditional Economics
Traditional economics is concerned
primarily with the efficient, least-cost
allocation of scarce productive resources
and with the optimal growth of these
resources over time so as to produce an
ever-expanding range of goods and services.
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1. Traditional Economics
Traditional neoclassical economics deals with an:
• advanced capitalist world of perfect markets;
• consumer sovereignty;
• automatic price adjustments;
• decisions made on the basis of marginal,
• private-profit, and utility calculations; and equilibrium
outcomes in all product and resource markets.
It assumes economic “rationality” and a purely materialistic,
individualistic,
self-interested orientation toward economic decision making.
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2. Political Economy
Political economy goes beyond traditional
economics to study, among other things, the social
and institutional processes through which certain
groups of economic and political elites influence
the allocation of scarce productive resources now
and in the future, either for their own benefit
exclusively or for that of the larger population as
well.
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3. Development Economics
Development economics has an even greater scope. In addition
to being concerned with the efficient allocation of existing
scarce (or idle) productive resources and with their sustained
growth over time, it must also deal with the economic, social,
political, and institutional mechanisms, both public and private,
necessary to bring about rapid (at least by historical standards)
and large-scale improvements in levels of living for the peoples
of Africa, Asia, Latin America, and the formerly socialist
transition economies.
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What do we mean by development?
(1) Traditional View - achieving sustained rates of
growth of income per capita to enable a nation to expand
its output at a rate faster than the growth rate of its
population. Levels and rates of growth of “real” per
capita gross national income (GNI) (monetary growth of
GNI per capita minus the rate of inflation) are then used
to measure the overall economic well-being of a
population—how much of real goods and services is
available to the average citizen for consumption and
investment.
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What do we mean by development?
(2) New Economic View- Development must therefore
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.
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What do we mean by development?
Development, in its essence, must represent the whole
gamut of change by which an entire social system, tuned
to the diverse basic needs and evolving aspirations of
individuals and social groups within that system, moves
away from a condition of life widely perceived as
unsatisfactory toward a situation or condition of life
regarded as materially and spiritually better.
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What do we mean by development?
Amartya Sen’s “Capability” Approach
The view that income and wealth are not ends in themselves but
instruments for other purposes goes back at least as far as
Aristotle. Amartya Sen, the 1998 Nobel laureate in economics,
argues that the “capability to function” is what really matters for
status as a poor or nonpoor person. As Sen puts it, “the
expansion of commodity productions...are valued, ultimately,
not for their own sake, but as means to human welfare and
freedom.”
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What do we mean by development?
Amartya Sen’s “Capability” Approach

For example, a book is of little value to an illiterate person

(except perhaps as cooking fuel or as a status symbol). Or as
Sen noted, a person with a parasitic disease will be less able
to extract nourishment from a given quantity of food than
someone without parasites.
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What do we mean by development?
Amartya Sen’s “Capability” Approach

For example, a book is of little value to an illiterate person

(except perhaps as cooking fuel or as a status symbol). Or as
Sen noted, a person with a parasitic disease will be less able
to extract nourishment from a given quantity of food than
someone without parasites.
2
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Not surprisingly, studies show that financial security is only one factor
affecting happiness. Richard Layard identifies seven factors that surveys
show affect
average national happiness:
1. family relationships,
2. financial situation,
3. work,
4. community and friends,
5. health,
6. personal freedom,
7. and personal values.
In particular, aside from not being poor, the evidence says people are
happier when they are not unemployed, not divorced or separated, and
have high trust of others in society, as well as enjoy high government
quality with democratic freedoms and have religious faith.
3 Core Values of Development
1.Sustenance: The Ability to
Meet Basic Needs
2.Self Esteem: To be a
Person
3.Freedom from servitude:
To Be able to Choose
Sustenance
The basic goods and services, such
as food, clothing, and shelter, that are
necessary to sustain an average
human being at the bare minimum
level of living.
Self-esteem
feeling of worthiness that a society
enjoys when its social, political, and
economic systems and institutions
promote human values such as
respect, dignity, integrity, and self
determination.
Freedom
A situation in which a society has at
its disposal a variety of alternatives
from which to satisfy its wants and
individuals enjoy real choices
according to their preferences.
Objectives of Development
1. To increase the availability and
widen the distribution of basic life-
sustaining goods such as food,
shelter, health, and protection.
Objectives of Development
2. To raise levels of living, including, in
addition to higher incomes, the provision
of more jobs, better education, and greater
attention to cultural and human values, all
of which will serve not only to enhance
material wellbeing but also to generate
greater individual and national self-
esteem.
Objectives of Development
3. To expand the range of economic and
social choices available to individuals and
nations by freeing them from servitude
and dependence, not only in relation to
other people and nation-states, but also to
the forces of ignorance and human
misery.
Millennium Development
Goals (MDGs)
In September 2000, the 189 member
countries of the United Nations at that
time adopted eight Millennium
Development Goals (MDGs), committing
themselves to making substantial
progress toward the eradication of
poverty and achieving other human
development goals by 2015.
Sustainable
development goals
(SDGs) have set the
2030 agenda to
transform our world
by tackling multiple
challenges
humankind is facing
to ensure well-being,
economic prosperity,
and environmental
protection.
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Why study Development

Economics?
“To help us understand developing economies in
order to help improve the material lives of the
majority of the global population..”