ECONOMIC DEVELOPMENT
of scarce resources and its allocation, economics is merged, with
WEEK 01: Prelim Lecture Notes 01
Living our way of life
Each of us live our life each day in different ways, circumtances, and
conditions. Some live with affluence, some with poverty, some with
just enough to make both ends meet. Differences are noticeable in
our physical attributes, ownership and properties, society status,
consumption pattern, education, health, employment, and a lot
more. All of these things speak of our standard of living. Going around
places, you will see people living in beautiful and confortable homes,
with so much expensive foods on the table, dressed more than
enough to be called decent, working in high rise building with all
amenities that goes with it, eating in flashy and expensive restaurant,
driving expensive cars, children and youth going to expensive school
and universities, then also you wil encounter people living in
makeshift and shanty dwellings located in a crowded places, with no
foods on the table, dressed just to cover their stomachs, dressed as
to cover their physical feature, working in uncomfortable working
areas, eating just anywhere to fill their stomachs, childen and youth
playing in the streets because no school to go to, children and youth
trying to earn a living, running after public utility vehicles to take a
ride back home or to work, somehow you will also encounter people
in less expensive houses, with less expensive and enough food on the
table to be shared by the whole household members, eating in less
expensive restaurants, driving less expensives car usually acquired for
family use, dressed enough to show decency, children going to less
expensive private and public schools and universities. The contrast of
how we live our lives is revealing and these contrasts are not just
within our community, our town, our province, our country but,
entire world, almost all parts of the world from south to north, from
east to west. What makes it so? Is it not living is a shared experience
one way or another and as such will affect each others well-being?
A closer and detailed examination will help us to recognize that a large
part of world population are living in absolute poverty, a situation of
being unable to meet the minimum levels of income, food, clothing,
health care, shelter, and other essentials, others are living in a
subsistence level, a situation in being able to meet mainly personal
consumption, basic necessities of life like food, clothing and shelter,
and small sector of world population live a reasonably good life. But
then, what makes it so? Is it not living is a shared experience one way
or another as such will affect each others well-being?
With such conditions of the well-being of world population, we are all
responsible to effect changes, to reverse what looks like irreversible
conditions of the present world population well-being, a widening gap
between affluence and poverty. We need development, a process of
improving the quality of human lives and capabilities by raising
people’s levels of living, self-esteem, and freedom.
Economics and Studies on Development
Economics - emphasizes profit maximization and marginal based
production and consumption, rational decision-making, market
mechanism and efficiency, utility measurements, and determination
of equilibrium. It has a self-interest, individualistic, and materialistic
orientation. It is about the use of scarce resources, efficiency in
production, and allocations to satisfy human needs and wants.
Political Economy is a merging of politics with economics, it includes
social and institutional processes in the use of scarce resources and
its allocation. It is an economic activity with political context that
includes role of power in economic decision making.
Development Economics is wider in scope, beside the efficiency use
social, political, and institutional processes or system to achieve fast,
wider, and higher improvements in the levels of living of the people.
Its concern is the utilization or use of economics, social, and political
requirements necessary to effect structural and institutional
transformation or changes to efficiently bring economic progress to
widest segments of the population as much as possible. It recognizes
the role of government and coordinated economic decision-making
and activities as essential components to transform the economy. It
draws relevant concepts and theories from other branches of
economics and combine them with models and wider
multidisciplinary approaches derived from historical and
contemporary development studies.
Prelim Lecture Notes 02
What is Development
Before Development, in economic sense, is a state of achieving
sustained growth rates of per capita income that enable a country to
increase its output at a rate faster than the population rate of growth.
The overall economic well-being of a population which is the amount
of real goods and service available to the average people for
investment and consumption are measured through the levels and
rate of growth of real per capita Gross National Income (monetary
growth of per capita GNI less inflation rate). Development strategies
are geared towards a planned alteration of the structure of
production and employment which saw a decline in agriculture and
the rise in manufacturing and services and emphasis is toward output
measured by Gross Domestic Product (total amount of the final
output of goods and services produced within the economy, within
the territorial area of the country usually measured annually).
The experiences in 1950’s, 60’s, 70’s of different developing countries
led to view economic development in different perspective. The
growth targets achieved by developing countries with no changes in
the level of living of the population shows that there is something
wrong on how economic development is defined. Economic
development then is redefined in terms of the reduction or
elimination of poverty, inequality, and unemployment within the
context of a growing economy. The phenomenon of development or
economic development is no longer a mere question of economics or
quantitative measures of incomes, employment, and inequality.
Development must be conceived of as a multidimensional process
that involves major changes in social structures, attitudes, and
national institutions coupled with acceleration of economic growth,
reduction of inequality, and eradication of poverty. Development in
essence must represent the whole gamut of change by which the
whole social system moves away from unsatisfactory condition of life
toward the better one.
Economies and Social Systems
Economic system should be analyzed within the context of entire
social system of a country or even in global context. Social system
means interdependent relationships of economic and non-economic
factors and about the structure of the organizations and institutions
of a society that includes their values, attitudes, power arrangements
or structure, and traditions.
Values means principles, standards, or qualities that a society
considers worthwhile.
Attitudes means the frame of mind or feelings taken by an individual,
group, or society toward material gain, wealth sharing, work, and
others.
Institutions means rules of conduct or generally accepted ways or
norms of doing things, it can be construed as constraints to human
interactions.
Role of Values in Development Economics
Since economics is a social science, we must recognize the ethical and
normative premises about what is or what ought to be? Objectives
like poverty elimination, universal education, social and income
equality, rule of law and due process, self-reliance, democracy,
property rights and others are derived from value judgement about
what is and what ought to be. The validity of economic analysis and
positive economic prescriptions should be evaluated from underlying
value premises. The value premises agreed upon by those responsible
for national decision-making in which the economic development
goals and corresponding public policies are derived from can be
pursued based on theoretical and quantitative analysis.
Prelim Lecture Notes 03
⎯ 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.
Amartya Sen’s capability approach
Sen argues that poverty cannot be measure or utility as
conventionally understood; what matters for well-being is not just the
characteristic of goods and services but what use consumer can and
does make of commodities. As in Sen’s functioning, which is what a
person does with the commodities of given characteristics that they
come to possess or control. Sen noted that functioning depends on 1.
Social conventions in force in the society in which the person live, 2.
The position of the person in the family and in the society, 3. The
presence or absence of festivities such as marriages, seasonal
festivities, 4. Physical distance from the homes of friends and
relatives. Sen defines Capabilities as “the freedom that a person has
in terms of the choice of functioning, given his personal features and
his command over commodities.” Sen’s perspective helps explain why
there are now emphasis on health and education, social inclusion and
empowerment in development issues. For Sen, human “well-being”
means being well as in basic sense of being healthy, well nourished…
and others.
Development and Happiness: Happiness is part of human well-being,
and greater happiness may in itself expanse an individual’s capability
to function. Empirical findings show that average level of happiness
or satisfaction increases with country’s average income.

Three Core Values of Development

The core values represent common goals sought by all individuals and
societies and may be also use as a conceptual basis and guidelines for
understanding the meaning of development.

1. Sustenance: The ability to meet basic needs. Sustenance means

the basic goods and services, food clothing and shelter, that are
necessary to sustain an average human being at the bare
minimum level of living.

2. Self-esteem: To be a person. Self-esteem means the feeling of

worthiness that a society enjoys when social, political, and
economic system promote human values such as respect,
dignity, integrity, and self-determination.

3. Freedom from Servitude: To be able to choose. Freedom means

a situation in which society has at its disposal variety of
alternatives from which to satisfy its wants and individuals enjoy
real choices according to their preferences.

Three Objectives of Development

⎯ To increase the availability and widen the distribution of basic

life-sustaining goods such food, clothing, shelter, health and
protection.
⎯ To raise levels of living that includes higher income, provision of
more jobs, better education, and greater attention to cultural
and human values which enhance material wellbeing and
generate greater individual and national self-esteem.