1 Traditional Economics and Neoclassical Economics
It is concerned with the efficient distribution of resources, least-cost allocation of scarce resources to reach the optimal growth of goods and services.
2 Economic of Development
Economics of development must deal with the economic, social, political, institutional mechanisms, both public and private, which are necessary to bring about rapid and large scale improvements in the levels of living for the peoples of Africa, Asia, Latin America, and the formerly socialist transition economies.
3 What do we mean by development?
- Development has traditionally meant the capacity of a national economy to generate and sustain an annual increase in its Gross National Income (GNI) at rate of 5% to 7% or more.
- An alternative economic index of the development has been the use of rates of growth of income per capita to take into account the ability of a nation to expand its output at a faster rate than the growth rate of its population.
- GNI per capita = (GNI / Population)
- Real GNI per capita = (monetary GNI per capita – inflation rate)
- Using levels and rates of growth of real per capita GNI.
- Levels and rates of real per capita GNI are normally used to measure the overall economic well-being of a population---how much of a real goods and services is available to the average citizen for consumption and investment.
- Economic development in the past has been typically seen in terms of the planned alteration of the structure of production and employment so that agricultures share of both declines and that of manufacturing and services increases.
- Development until recently nearly always seen as an economic phenomenon in which rapid gains in the overall and per capita GNI growth would either:
I. Trickle down to the masses in the form of jobs and other economic opportunities
II. Or, create the necessary conditions for the wider distribution of the economic and social benefits of growth.
- Problems of poverty, discrimination, unemployment, and income distribution were of secondary importance to getting the growth job done.
4 Sen’s Capabilities approach
- Income and wealth are not ends in themselves but instruments for other purposes.
- The capability to function is what really matters for status as a poor or non poor person.
- Economic growth can not be sensibly treated as an end in itself.
- Development has to be concerned with enhancing the lives we lead and the freedoms we enjoy.
- What matters is not things a person has, but what a person is or what he can do.
- Freedom of choice or control of one’s own life is itself a central aspect of most understandings of well-being.
5 Sen defined five sources of disparities between measured real income and actual advantage:
I. Personal Heterogeneity
II. Environment Diversities, (heating, clothing requirement in the cold)
III. Variations in social climate such as the prevalence of crime and violence and social capital
IV. Differences in relational perspectives
V. Distribution within the family
6 Three core values of development
I. Sustenance: The Ability to Meet Basic Needs
All people have certain basic needs without which life would be impossible, these life-sustaining basic human needs include food, shelter, health, and protection.
When any of these needs is absent or in critically short supply, a condition of absolute underdevelopment exists.
II. Self-esteem: to be a person
A sense of worth and self-respect, of not being used as a tool by others for their own ends.
III. Freedom from servitude: to be able to choose
Freedom involves an expanded range of choices for societies and their members together with a minimization of external constraint in the pursuit of some social goal we call development
It is concerned with the efficient distribution of resources, least-cost allocation of scarce resources to reach the optimal growth of goods and services.
2 Economic of Development
Economics of development must deal with the economic, social, political, institutional mechanisms, both public and private, which are necessary to bring about rapid and large scale improvements in the levels of living for the peoples of Africa, Asia, Latin America, and the formerly socialist transition economies.
3 What do we mean by development?
- Development has traditionally meant the capacity of a national economy to generate and sustain an annual increase in its Gross National Income (GNI) at rate of 5% to 7% or more.
- An alternative economic index of the development has been the use of rates of growth of income per capita to take into account the ability of a nation to expand its output at a faster rate than the growth rate of its population.
- GNI per capita = (GNI / Population)
- Real GNI per capita = (monetary GNI per capita – inflation rate)
- Using levels and rates of growth of real per capita GNI.
- Levels and rates of real per capita GNI are normally used to measure the overall economic well-being of a population---how much of a real goods and services is available to the average citizen for consumption and investment.
- Economic development in the past has been typically seen in terms of the planned alteration of the structure of production and employment so that agricultures share of both declines and that of manufacturing and services increases.
- Development until recently nearly always seen as an economic phenomenon in which rapid gains in the overall and per capita GNI growth would either:
I. Trickle down to the masses in the form of jobs and other economic opportunities
II. Or, create the necessary conditions for the wider distribution of the economic and social benefits of growth.
- Problems of poverty, discrimination, unemployment, and income distribution were of secondary importance to getting the growth job done.
4 Sen’s Capabilities approach
- Income and wealth are not ends in themselves but instruments for other purposes.
- The capability to function is what really matters for status as a poor or non poor person.
- Economic growth can not be sensibly treated as an end in itself.
- Development has to be concerned with enhancing the lives we lead and the freedoms we enjoy.
- What matters is not things a person has, but what a person is or what he can do.
- Freedom of choice or control of one’s own life is itself a central aspect of most understandings of well-being.
5 Sen defined five sources of disparities between measured real income and actual advantage:
I. Personal Heterogeneity
II. Environment Diversities, (heating, clothing requirement in the cold)
III. Variations in social climate such as the prevalence of crime and violence and social capital
IV. Differences in relational perspectives
V. Distribution within the family
6 Three core values of development
I. Sustenance: The Ability to Meet Basic Needs
All people have certain basic needs without which life would be impossible, these life-sustaining basic human needs include food, shelter, health, and protection.
When any of these needs is absent or in critically short supply, a condition of absolute underdevelopment exists.
II. Self-esteem: to be a person
A sense of worth and self-respect, of not being used as a tool by others for their own ends.
III. Freedom from servitude: to be able to choose
Freedom involves an expanded range of choices for societies and their members together with a minimization of external constraint in the pursuit of some social goal we call development
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