Notes for economic development

Module 1

Development economics is a field of study that focuses on how economies in poorer, less developed
countries can improve. It's broader than regular economics because it considers:

More than just money: It doesn't just look at supply and demand, but also at social, political, and
cultural factors.

Real-world problems of poor countries: It deals with the specific challenges faced by nations with low
incomes, like poverty, inequality, and lack of access to basic resources.

Different cultures: It acknowledges that countries have unique cultural backgrounds that influence their
economic development.

Complicated issues: It tackles complex problems that require solutions beyond simple economic
theories.

Why Study Development Economics?

It helps us figure out how to reduce poverty and improve living standards in poorer countries.

It examines how economies grow and change, and what obstacles they face.

It looks at issues like inequality, education, healthcare, and how they impact a country's progress.

It helps us to create policies to improve people’s lives.

The Important Role of Values:

Development isn't just about money. It's also about things like fairness, access to education, and
everyone having a chance to live a fulfilling life.

What we think is "good" or "desirable" (like everyone having enough food or going to school) influences
how we try to help countries develop.

Development Economics is not just about numbers, but also about what is considered ethical and just.

So, when we study development economics, we're not just looking at charts and graphs. We're also
thinking about what kind of world we want to create.

Imagine you're trying to figure out how a pie gets divided. Traditional economics just looks at
the pie itself: who wants it, how much they're willing to pay, and how to bake more.

Political economy, on the other hand, asks:

 Who's holding the knife? It looks at the people with power (like politicians or rich
business owners) and how they decide who gets a slice.
Notes for economic development

 What are the rules of the game? It examines the systems (like laws and institutions)
that affect how the pie is divided.
 Who gets the biggest pieces, and why? It investigates how these powerful people use
their influence to get what they want, whether it's just for themselves or for everyone.

Essentially, political economy studies how politics and economics are tangled together, focusing
on how power affects who gets what. It's not just about money; it's about who has the say in how
money and resources are used.

Development economics into simpler terms:

Imagine you're trying to help a whole town become better off, not just one person or business.
Development economics is like that, but on a much bigger scale, for entire countries. It's about
figuring out how to make things better for everyone, especially in poorer countries.

 "Even greater scope": This means development economics looks at more than just
money and businesses. It considers everything that affects a country's well-being.
 "Efficient allocation of existing scarce (or idle) productive resources and with their
sustained growth overtime": This is about using what a country already has (like land,
workers, and factories) in the best way possible, and making sure that the economy keeps
growing over time. It's not just about getting richer now, but staying rich in the future.
 "It must also deal with the economic, social, political, and institutional mechanisms,
both public and private": This means development economics looks at all the different
parts of a country that affect its economy:
o Economic: Things like businesses, jobs, and trade.
o Social: Things like education, healthcare, and equality.
o Political: Things like government policies and stability.
o Institutional: Things like laws, banks, and other organizations.
o Public and private: both government and bussinesses.
 "It must be concerned with the economic, cultural, and political requirements for
effecting rapid structural and institutional transformations of entire societies": This
means that sometimes, big changes are needed to make a country better. This might
involve changing how the economy works, how people live, or how the government is
run.
 "In a manner that will most efficiently bring the fruits of economic progress to the
broadest segments of their populations": The ultimate goal is to make sure that
everyone benefits from economic growth, not just a few rich people. It's about spreading
the wealth and improving the lives of as many people as possible.

In short, development economics is about making entire countries better off by using their
resources wisely, fixing problems in their systems, and making sure everyone shares in the
benefits.
Notes for economic development

Economics and development topics into simple terms:

1. Economics, Institutions, and Development from a Global Perspective:

 Basically: This looks at how countries grow their economies, but it also considers the
rules of the game (institutions) like laws, governments, and social norms.
 Think of it like: Building a house. You need money (economics), but you also need
building codes (institutions) and a good location (global perspective) to make it work. It's
about how all these things fit together for countries around the world.

2. Comparative Development: A Look at Differences and Commonalities among

Developing:

 Basically: This compares how different poorer countries are trying to get richer. It looks
at what they have in common and what makes them different.
 Think of it like: Comparing different gardens. Some might grow tomatoes, others
flowers, but they all need sunlight and water. This is about finding the shared needs and
unique challenges of developing countries.

3. Examining Classic Theories of Economic Development:

 Basically: This studies the old ideas about how countries become wealthy. These are the
foundational theories that economists have used for a long time.
 Think of it like: Looking at the first blueprints for building a car. These theories are the
starting points for understanding development, even if we've made improvements since
then.

4. A Look at Contemporary Models of Development and Underdeveloped:

 Basically: This studies the newer, more modern ideas about why some countries are rich
and others are poor. It looks at factors like technology, globalization, and social issues.
 Think of it like: Looking at the latest car designs, with all the new features and
technologies. This is about understanding development in today's world, with all its
complexities.

 Poverty, Inequality, and Development:

o This looks at why some people are poor, why there's a gap between the rich and
poor, and how to make the country's economy grow in a way that benefits
everyone.
 Population Growth and Economic Development:
o This examines how a growing population affects the economy. Does it help or
hurt? What are the results of a large population?
 Urbanization and Rural-Urban Migration:
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o This explores why people move from the countryside to cities, what problems this
creates, and what policies can help manage this movement.
 Human Capital: Education and Health:
o This emphasizes that a country's workforce is its "human capital." It looks at how
investing in education and healthcare can make people more productive and
improve the economy.
 Agricultural Transformation and Rural Development:
o This focuses on improving farming and rural areas to boost food production,
create jobs, and reduce poverty in the countryside.
 Environment and Development:
o This is about how to grow the economy without damaging the environment. How
can we balance economic progress with protecting natural resources?
 Development Policymaking and the Roles of Market, State, and Civil Society:
o This is about how decisions are made to improve the country. It looks at the roles
of:
 Market: businesses and consumers.
 State: the government.
 Civil Society: non-profit organizations and community groups.
o And how these three can work together.

 Trade Theory and Development Experience:

o This looks at the basic ideas behind international trade (like why countries buy
and sell goods to each other) and how these ideas have played out in real-world
development.
 The Trade Policy Debate:
o This examines different strategies countries use to manage trade:
 Export promotion: Encouraging businesses to sell their goods abroad.
 Import substitution: Trying to produce goods domestically instead of
buying them from other countries.
 Economic integration: Joining with other countries to form trade
agreements (like the EU).
 Balance of Payments, Debt, and Stabilization:
o This covers a country's financial transactions with the rest of the world (balance
of payments), the debt developing countries often owe, and how countries try to
keep their economies stable (avoiding things like high inflation).
 Foreign Finance, Investment, and Aid:
o This explores the good and bad sides of foreign investment (when companies
from other countries build factories, etc.), loans, and aid that developing countries
receive.
 Financial Reform and Fiscal Policy:
o This part looks at changes to a country's financial system (like banks and stock
markets) and how governments manage their spending and taxes (fiscal policy).
 Critical Issues for the 21st Century:
o This section addresses big, modern challenges:
 Globalization: The increasing interconnectedness of countries.
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 Technology transfer: How developing countries get access to new

technologies.
 The environment: The impact of economic activity on the planet.
 International economic reform: Changes to the global economic system
to make it fairer.

In short, it's about understanding how countries' economies work together, the challenges
developing countries face, and the big economic issues of our time

Imagine you're trying to build a strong, healthy community. That's what development economics
is trying to do for countries. Now, just like building a good community needs more than just
bricks and roads, building a strong economy need more than just money and factories.

Here's how values play a big role:

 Economics isn't just numbers:

o Economics is about people and how they live together. So, it's not just about
math; it's also about what people think is important.
o Many economic ideas assume everyone acts the same way, like always wanting
more money. But in real life, especially in developing countries, people have
different priorities.
 Values shape what we want:
o When we talk about "development," we're not just talking about making a country
richer. We're also talking about making it a better place to live.
o What "better" means depends on our values. Do we value fairness, equality,
protecting the environment, or preserving traditions? These values guide what we
think is important for a country to achieve.
o For example, if we value equality, we'll focus on making sure everyone has access
to education and healthcare. If we value the environment, we'll focus on
sustainable development.
 Values guide our choices:
o When governments and organizations make decisions about how to help a country
develop, they're making choices based on their values.
o If they value short-term economic growth, they might focus on building factories.
If they value long-term well-being, they might focus on investing in education
and healthcare.

In short, values are like the compass that guides development economics. They help us decide
what we want to achieve and how we want to get there. It's important to be aware of these
values, because they greatly impact the direction of economic development.

 Inflation: When prices go up, people can't buy as much, which hurts businesses.
 Taxes: Taxes like income tax and sales tax (VAT) affect how much money people have to
spend.
 Interest Rates: How much it costs to borrow money can impact businesses. For example, high
interest rates on car loans can make people less likely to buy cars.
Notes for economic development

 Government Policies: The rules and plans the government makes can encourage or
discourage businesses.

This slide lists more things that affect a country's economy:

 Currency Strength: How strong a country's money is compared to other countries

matters, even for businesses that don't buy or sell things internationally.
 Government Intervention: The government makes rules to protect people and the
environment, which can impact businesses.
 Overall Economic Health: If the country's economy is doing well and people feel
confident, it helps the economy grow.
 Social and Cultural Values: What people believe and value can influence how they feel
about progress and change, which affects the economy.
 Foreign Direct Investment: When companies from other countries invest in a country, it
can help the economy.

When we say "development," it means making things better for people. It's not just about money,
but about improving how people live and feel. Think of it as making life better in a lot of
different ways.

 Economic development is when a country's economy gets better.

 It involves both:
o Quantitative changes: The economy grows (more money, more production).
o Qualitative changes: People's lives improve (better living conditions, better
health).
 It's about making people's lives better and the economy healthier.
 Things like better education (literacy rates) and how long people live (life expectancy)
are important signs of economic development.
 Modernization (new technology) and industrialization (more factories) help a country's
economy develop.

Old-School Thinking About Economic Development:

 Focus on Money: In the past, people mostly thought a country was "developing" if it was
making more money each year.
 Growing the Country's Wealth: They looked at how much the country was producing
overall (Gross National Income or GNI). If it was growing by a certain percentage (like
5-7%), that was considered good.
 People Getting Richer Too: They also looked at how much money each person in the
country was making (income per capita). This helped see if the country was getting richer
faster than its population was growing.

Basically, it was all about measuring how much the country's economy was growing in
terms of money and production.
Notes for economic development

 Solving big problems: It's about tackling things like poverty (people not having enough),
inequality (some people having way more than others), and unemployment (people not
having jobs).
 More than just money: It's not just about the economy growing bigger. It's also about
changing how society works.
 Many parts working together: It involves big changes in:
o How society is organized (social structures).
o How people think and feel (popular attitudes).
o How the government works (national institutions).
 The goal is to:
o Make the economy grow faster.
o Make things more equal for everyone.
o Get rid of poverty.

Basically, economic development is about making a country a fairer, better place to live for
its entire people, by improving both the economy and society as a whole.

Three Core Values of Development (What people need to feel good about life):

1. Sustenance (Staying Alive): Having the basics, like enough food, a safe place to live,
healthcare, and protection from harm.
2. Self-Esteem (Feeling Good About Yourself): Feeling respected and valued as a person,
not just being treated like a number.
3. Freedom (Making Your Own Choices): Being able to make your own decisions and
not being controlled by others.

Three Objectives of Development (What a country should try to achieve):

1. More Stuff for Everyone: Making sure there's enough of the things people need to live,
like food and goods.
2. Better Lives: Improving people's overall quality of life, like having better education,
healthcare, and housing.
3. More Choices: Giving people more options in their lives, both economically (like jobs)
and socially (like freedoms).

Basically, development is about making sure everyone has their basic needs met, feels good
about themselves, and has the freedom to make choices, while also improving the country's
overall economy and people's lives.