Concepts of Economic Development
Traditionally economists have made little if any distinction between
economic growth and economic development
using the terms almost synonymously.
As a concept, Economic development can be seen
as a complex multi-dimensional concept involving improvements in
human well-being, however defined Critics point out that GDP is
a narrow measure of economic welfare that does not take account
of important non-economic aspects eg more leisure time, access to
health & education, environment, freedom or social justice.
Economic growth is a necessary but insufficient
condition for economic development.
Professor Dudley Seers argues development is about outcomes ie development
occurs with the reduction and elimination of poverty, inequality
and unemployment within a growing economy.
Professor Michael Todaro sees three objectives of development:
Producing more life sustaining necessities such as food shelter
& health care and broadening their distribution Raising standards
of living and individual self esteem
Expanding economic and social choice and reducing fear.
The UN has developed a widely accepted set of indices to
measure development against a mix of composite indicators:
UN's Human Development Index (HDI) measures a country's average
achievements in three basic dimensions of human development: life
expectancy, educational attainment and adjusted real income ($PPP
per person).
UN's Human Poverty Index (HPI) measure deprivation using % of people
expected to die before age 40, % of illiterate adults, % of people
without access to health services and safe water and the % of underweight
children under five.
Development economics emerged as a branch of economics
because economists after World War II become concerned about the
low standard of living in so many countries of Latin America, Africa,
and Asia. There are, however, important reservations in making development
economics as branch of economics as opposed to the ultimate
objective of the study of economics. The first approaches to development
economics assumed that the economies of the less developed
countries (LDCs) were so different from the developed countries
that basic economics could not explain the behavior of LDC economies.
Such approaches produced some interesting and even elegant economic
models, but these models failed to explain the patterns of no growth,
slow growth, or growth and retrogression found in the LDCs.
Slowly the field swung back towards more acceptance that opportunity
cost, supply and demand, and so on apply to the LDCs also. This
cleared the ground for better approaches. Traditional economics,
however, still couldn't reconcile the weak and failed growth patterns.
What was required to explain poor growth were macro and institutional
factors beyond micro concepts of the firm, individual preferences,
and endowments? Institutional analysis has been able to explain
the poor growth patterns much better than the market failure theories
did. However, there is no generally accepted institutional theory
of economic development that a large share of development
economists agree upon. There is not even agreement on how
important institutional factors are.
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