Chapter 1

Basic concepts and

theoretical framework
for development policy
analysis
 Qs to be addressed
 How was Development Economics
emerge and evolve? What are the
purpose and scope of the subject and
how this subject is distinct from other
major branches of economics?
 What are the differences between
development and economic growth? How
can economic growth and development
be measured?
 How should a developing country be
analyzed so that their development
strategies can be worked out?
 Topics to be covered

1. Introduction to development
economics
2. Economic growth
3. Development
4. Theoretical framework for economic
development
List of readings - for Part 1, 2 & 3

 Todaro, M.P & Smith, S.C, Economic

Development, 11th Edition, Pearson Education
Ltd., Essex, (2006), pp.7-33;
 Meier G. M (1995), Leading Issues in
Development, 6th Edition, Oxford University
Press, Oxford, p.86;
 Gratak, S., Introduction to Development
Economics, 4th Edition, Routledge, London,
(2003), pp. 23-26;
 Colman, D. & Nixson F., Economics of change
in less developed countries, Harvester
Wheatsheaf, (Cambridge), (1994), pp. 2-20;
 List of readings - for Part 1, 2 &3

 Perkins, D.H, Radelet S. & Lindauer, D.L.,

Economics of Development, 6th Edition, W.W
Norton & Co., New York, (2006) , pp. 12-13, 31-40;
 Ingham, B., The meaning of development:
interaction between "new" and "old" ideas, World
Development, Vol21, No.11, pp.1803-1821;
 Cypher, J.M, Dietz, J.L, The Process of Economic
Development, 3nd Edition, Routledge, London &
New York, (2005), pp. 18-25;
 Vu Thi Ngoc Phung, Giáo trình Kinh tế phát triển,
Labour – Social Publishing House, Hanoi, (2005),
pp.26-48; (optional)
 List of readings - for Part 4

 Todaro, M.P & Smith, S.C, Economic

Development, 11th Edition, Pearson
Education Ltd., Essex, (2006), pp.13-14;
 Hayami Y & Agodo Y., Development
Economics: from the poverty to the
wealth of nations (3rd Edition), Oxford
University Press, Oxford, 2005, pp. 9-16;
 Part 1. Introduction to
development economics
1.1 The importance of values in social
science
1.2 The evolution of development
economics
1.3 Nature of development economics
1.4 Development Economics in
comparison with political economics
and neoclassical economics
1.1 The importance of values in social
sciences

Social sciences are based on a

number of normative values. Values
are things that are considered good
and desirable.
The values will define/shape the
objectives of the subject in question.
 Values in development
economics
Development economics relies on a number
of ethical and normative values about what
are good and desirable for developing
countries.
The values are:
Generally: “realization of human potential”
Particularly: economic and social equality,
elimination of poverty, universal education, rising
levels of living, gender equality, national
independence, grassroots democracy…
 1.2 The evolution of
development economics
 A. Smith is sometimes claimed to be the first development
economist and his book “Wealth of Nations” was the first
study on economic development
 However, most of other authors discussing the subject hold
that development economics emerged as late as late 1940s
and early 1950s
 The subject arose in the time of political independence of the
emerging countries of Asia, Africa, Latin America and
Caribbean. Development economics is a
counterpart/response to the independence of those nations
 The conference on the “Teaching of Development
Economics: Its position in the Present State of Knowledge”
in Manchester in 1964 was the landmark in both the
evolution of both the subject and its teaching. According to
the researchers/ participants, the subject was shaped
because orthodox economic is inadequate for the study of
the group of new emergent countries
1.3 Nature and scope and focus
of development economics (1/3)
M.P.Todaro (USA): Development economics
is the economics of contemporary poor,
underdeveloped nations. Besides being
concerned with efficient allocation of
existing scare (or idle) productive
resources with their sustained growth over
time, development economics also deals
with the economic, social, political and
institutional mechanisms necessary to bring
about rapid and large-scale improvements
in levels of living for the peoples of Africa,
Asia, Latin America and the former socialist
transition economies.
 Nature and scope and focus of
development economics (2/3)
Y. Hayami (Japan): The major task of
development economics is to explore the
possibility of escaping from poverty. The
ultimate goal of development economics is to
obtain an answer to the question How can low-
income countries today can be set on the track
of sustained economic development for the
intermediate goal of reducing poverty and the
long-run goal of catching up to the wealth of
developed economies
 Nature and scope and focus of
development economics (3/3)
D. Hunt (England): The focus of
development economics is twofold:
firstly, the causes of the relative poverty
of underdeveloped countries and
secondly, the potential way forward for
these economies, the specification of the
route to economic progress in these pre
industrial regions.
1.4 Development Economics in comparison
with political economy and neoclassical
economics

Base on pp. 7-8 in Todaro’s, please

discuss this point! (easy!!!)
Another Q: Why should we have
development economics to focus on
developing countries? (Or why can’t
we apply theories of traditional
economics to developing countries?)
 Stop here for checking

Read thoroughly the 27 critical Qs in

development economics in Todaro’s
(pp.9-11)
 More discussions on
development economics
1. What is the objective of development
economics? Do you think the objective has
been changing since the birth of the
subject? How about the theories and
models in development economics?
2. What is the importance of values in social
science? Explain why.
3. What are the values of natural sciences?
 2. Economic growth

2.1 Definition
2.2 Measurements
 2.1 Economic growth:
Definition
Economic growth refers to a rise in
national or per capita income and
product. If the production (output) of
goods and services in a country rises,
by whatever means, one can speck of
that rise as economic growth.
 2.2 Economic growth:
Measurements
 GO (Gross Output)
 GDP
 GNP/GNI
 NNP (Net National Product)
 NI (National Income)
 GDP or GNI per capita
(For further details, consult WB website and
Mankiw’s Macroeconomics, Fourth Edition,
pp.205-210)
 Problems associated with GDP
calculation and comparison
1. Prices: current or constant prices (nominal or
real GDP)
2. Statistical methods can matter (asking for
income data is more difficult than asking for
expenditure data (both for GDP estimation) 
discrepancy
3. Exchange rate conversion problems
 Please discuss these points and make sure
you understand these if not, ask your
lecturer!
 Brain storming:

What is left out when

GDP is estimated or
calculated?
 Suggested answer
1. unpaid work does not enter GDP
2. non-traded or non-marketed output is not
termed in GDP
3. non-registered or informal sector output
is not estimated
4. negative impact or “bads” (as opposed to
goods) that an economy produce is not
taken into account
5. satisfaction that leisure time brings
about
 3. Development

3.1 Perceptions
3.2 Measurements
3.1 Different views of development

This part will summarize various

views of development discussed by
different authors or institutions,
from both an individual perspective
or nation’s perspective.
 3.1.1 From an individual perspective
(added beyond the readings)

1. Sen’s approach: three core values of

development
2. Dudley Seers: realization of the
potential of human personality
3. More reference: Maslow’s pyramid of
needs
 Sen’s approach

1. Sustenance: the ability to meet

basic needs
2. Self-esteem: to be a person
(human)
3. Freedom of choice
 three objectives of development
Dudley Seers: realization of the
potential of human personality
1. Meeting one’s basic needs: having enough income
to cover these costs. Incomes are a means
2. Being employed: without jobs, personality can
not develop (no social contact or no social
recognition): a job in this sense is a means (to
satisfy basic needs) and an end in itself
3. Equality: Equality is both and end and a means as
it affects income distribution and poverty and
distort the personalities of both those with high
incomes and those who are poor
Maslow’s hierarchy of needs (1/2)
Maslow’s hierarchy of needs (2/2)
 Q to be discussed

Compared the 2 definitions and the

Maslow’s hierarchy of needs!
 3.1.2 From a nation’s perspective

1. M.P Todaro
2. M. Gillis & D. Perkins (the only definition not
appearing in the reading, for your reference, it is extracted
from “economics of development” by the author)
3. D. Colman & F. Nixon
4. B. Ingham
5. World Bank/UN 8 MDGs and now SDGs
 M.P Todaro (1/2)
a. Traditional view: (1) economic
growth + (2) structural change
(agriculture’s share of output and
employment decreases and that of
manufacturing and service industries
increases + “trickle down”
mechanism will ensure social benefits
of growth and solve the problems of
poverty, inequality, unemployment...
 M.P Todaro (2/2)
 Experience of 1950s and 1960s proved the
“trickle down” mechanism had not worked
 new view
 New view: (1) economic growth, (2)
structural change, (3) direct intervention in
the problems of poverty, inequality, and
unemployment. Priorities even given to 3rd
components
 M. Gillis & D. Perkins
Development comprises of three component:
(1) a rise in per capita income,
(2) fundamental changes in the structure of the
economy (change (a) in shares of 3 sectors, (b)
in share of population living in cities as compared
to those in countryside, (c) in population growth
rate (increase then decrease, and age structure),
(d) in consumption patterns: less spending on
necessities, more on durable items and leisure-
time products),
(3) the people in the country in question must be
major participant in the development process and
as well as in the enjoyment of the benefits
 Colman & F. Nixon (1/2)

Development is a process of
improvement measured with respect
to some set of criteria or value; when
comparing two countries development
measure the state of the two nations
with respect to that set of value
 development is a normative concept
 Colman & F. Nixon (2/2)
Set of criteria are:
1. Rationality
2. Development and development planning
3. Rise of productivity
4. Rise of levels of living
5. Social and economic equality
6. Improved institutions and attitudes
7. National consolidation
8. national independence
9. Democracy at the grass root
10. Social discipline
 B. Ingham
Development means:
1. Economic growth
2. Structural change
3. Modernization (westernization)
4. Political change (at national (democratization,
political freedom, equitable distribution, expanded
choice) and international levels: (Major institutions,
Bretton Woods institutions take into account the
interests of developing countries)
5. Decentralization and Participation (of grassroots)
6. Redistribution and ensurance of basic needs
7. Human development
8. Sustainable development (environment
preservation+)
 The World bank

WB + UN indirectly state their current

view of development by stipulating 8
Millennium Development Goals, and
now 17 Sustainable Development
Goals
(You have to read more about these on the
WB or UN websites)
Introduction to MDGs (up to 2015)
(updated/revised list of targets and indicators are on UN, WB, OECD websites)

The Millennium Development Goals (MDGs) are eight goals to be achieved by

2015 that respond to the world's main development challenges. The MDGs
are drawn from the actions and targets contained in the Millennium
Declaration that was adopted by 189 nations-and signed by 147 heads of
state and governments during the UN Millennium Summit in September
2000. The eight MDGs break down into 21 quantifiable targets that are
measured by 60 indicators.
Goal 1: Eradicate extreme poverty and hunger
Goal 2: Achieve universal primary education
Goal 3: Promote gender equality and empower women
Goal 4: Reduce child mortality
Goal 5: Improve maternal health
Goal 6: Combat HIV/AIDS, malaria and other diseases
Goal 7: Ensure environmental sustainability
Goal 8: Develop a Global Partnership for Development
(Notes: be careful of the number of targets, in Todaro’s there are 16, in Perkins
18 and in http://www.undp.org/mdg/basics.shtml it was said that there are
21. Anyway, there are 8 MDGs and they are all the same in all sources of
reference)
When to achieve MDGs?
What are the MDGs?
 Hierarchy of MDGs

8 Goals- 20 Targets measured by 60

Indicators
Notes: Indicators are useful tools to
indicate whether a target(s) has/have
been attained or not
Indicators must be S.M.A.R.T
 Introduction to SDGs
(from 25 Sep., 2015)
(updated/revised list of targets and indicators are on UN, WB, OECD websites)
 Q to be discussed

Can you find a popular public slogan in

Vietnam which has similar meaning to
development discussed so far!
 To conclude …..

Development is a normative
concept/term which are defined
basing on a number of value premises
Development means improvements,
better life with respect to the
specifically defined values/standards
The distinctions in different views lie in
the differences in the value premises
3.2 Measuring Development

Criteria to assess development are as

numerous as views of development
(Find them yourselves, consult also
Prof. Vu Thi Ngoc Phung’s)
 Basic indicators to measure
development
1. Measurements for economic growth
2. Indicators for structural change
3. Indicators for social and human development
i. Measurements for basic human needs such as:
income (calorie intake), educational attainment,
life expectancy (separate or composite in HDI)
(employment and worker’s time use, population
growth)
ii. Measurement for poverty and inequality: HCI,
HCR, PG, Lorenz Curve, Gini coefficient,
iii. Measurements for gender equality: GDI and GEM
 Homework

Work in group, find out about the

concepts of sustainable development
and send me the ppt file!
 Sustainable development
WCED (World Commission on En. and Dev.), 1987:
Sustainable development is development that
meets the needs of the present without
compromising the ability of the future generations
to meet their own needs
Pearce et al, 1989: sustainable development involve
providing bequest to the next generation of an
amount and quality of wealth (both natural and
man-made) which is at least equal to that
inherited by the current generation
In Vietnam, sustainable development means
sustainability and harmony of three pillars:
economic growth, social improvement and
environment preservation
 4. Theoretical Framework for
economic development

4.1 The need to go beyond simple

economics
4.2 A model of dialectic social
development
 4.1 The need to go beyond
simple economics
How M.P Todaro explain the need to go
beyond simple economics when
analyzing developing countries today
in order to find ways for their
development?
 Suggested answer
1. The world now become more integrated
more interdependent no countries can
develop in isolation both national and
international levels must be considered
2. Failures in development process arose
from the dismissal of non-economic
variables (often viewed as non-
quantifiable) important role of these
non-economic variables: values, attitudes,
institutions
4.2 A model of dialectic social development

Institutions-
Culture: Cultural-
Rules Institutional
Value
System subsystem

Resources- Technology-
Production Economic
Production Subsystem
Factors Function
 4.2 A model of dialectic social development:
discussions

Points to remember:
- What the four concepts mean, give
examples
- How are they interconnected or impact on
one another
Discuss in group and find examples to
illustrate this model!
A model of dialectic social development: an example

Institutions-Rules:
Culture: promulgation of
Value System appropriate laws and
Eg: regulation to facilitate
pte. capital accumulation
appreciation of
and pte. production
private organization, pte.
enterpreurship Investment in R&D
and investment

Resources-
Technology-Production
Production
Function:
Factors: more
production factors More invention, more
can be technologies application
exploited/put in
production