Economic development: introduction

ECO 442 Spring 2012

Three economics courses

ECO 440Comparative economics The transition economies; institutional economics ECO 442Development economics Africa Asia, Latin America; poverty ECO 443International economics Trade, fair trade, exchange rate determination
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syllabus

ECO 442three questions How can I be rich? Why are people poor? What is my responsibility?

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How the Other Half Live

When one is poor, she has no say in public, she feels inferior. She has no food, so there is famine in her house; no clothing, and no progress in her family.
A poor woman from Uganda

For a poor person everything is terribleillness, humiliation, shame. We are cripples; we are afraid of everything; we depend on everyone. No one needs us. We are like garbage that everyone wants to get rid of.
A blind woman from Tiraspol, Moldova

Life in the area is so precarious that the youth and every able person have to migrate to the towns or join the army at the war front in order to escape the hazards of hunger escalating over here.
Participant in a discussion group in rural Ethiopia

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Christian worldview
The Important Role of Values in Development Economics Myers, walking; working Hicks Sherman Yamamori
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Todaro & Smith

Todaro and Smith believe that development economics should foster a students ability to understand real problems faced by developing countries. Unlike other texts, Economic Development , Ninth Edition, introduces economic models within the context of countries and issues, so that students learn to analyze and engage in ongoing policy debates. Website: http://wps.aw.com/aw_todarosmit_econdevelp_ 9/

Intoduction
I. PRINCIPLES AND CONCEPTS. 1. Economics, Institutions, and Development: A Global Perspective. 2. Comparative Development: Differences and Commonalities among Developing Countries.

 A major theme of Todaro & Smith: development economics must encompass the study of institutional & social, as well as economic, mechanisms for modernizing an economy while eliminating absolute poverty

World Bank Classification p. 39

http://data.worldbank.org/news/2010-GNI-income-classifications

For analytical purposes the World Bank classifies economies as low income, middle income, or high income. As of 1 July 2011 low-income economies are those that had average incomes of $1,005 or less in 2010; lower-middle-income economies had average incomes of $1,006 to $3,975; upper-middle-income economies had average incomes of $3,976 to $12,275; and high-income had average incomes of $12,276 or more. Low- and middle-income economies are commonly referred to as developing economies. However this does not imply that economies in the same income group have reached similar stages of development or that high-income economies have reached a preferred or final stage of development.

Major set of problems

Poverty Inequality Population growth Rural stagnation

Diverse countries but common problems

widespread poverty Large income & asset inequalities Rapid population growth Low levels of literacy & health High urban unemployment & underemployment

Figure 1.1 World Income Distribution

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Chapter 1 (and later chapters). 1. eclectic pp. 10, 103 2. neoclassical economics pp. 8, 9, 25 3. subsistence pp. 6, 26, 47, 54, 59,108,109 4. deprivation pp. 6, 19, 20, 56 5. eradicate, eradication pp. 23,24, 25,29 6. alleviate pp. 22, 47 7. sustainability, sustainable pp. 23, 30, 31 8. growth without development pp. 20,27, 31, 61, 84, 86 Chapter 2 (and later chapters). 1. structures pp. 37.41,47,49,70 2. institutions pp. 42, 78, 79, 81, 83 3. endowments pp. 41,43,45,48 4. indigenous pp. 31,44, 46 5. imperfect markets pp. 50,69,70 6. diminishing marginal utility of income pp. 59,60 7. diminishing marginal productivity pp. 64 8. traps p. 71,83,146,153,165,166,168,173 9. convergence 79,80,83,122

Importance of vocabulary

ECO 442Development Economics

Vocabulary for Exercise Ifor class on January 15, 2009

Learning vocabulary is an important but often neglected task. Being a proficient reader requires building a

Macro vs micro
What Works in Development? the most basic yet vexing issues in development: what do we really know about what works- and what doesnt in fighting global poverty?
http://www.brookings.edu/events/2010/01 21_development.aspx

Randomized testing
Banerjee & Duflo (2011) pioneered the use of randomized control trials in development economics defies certain presumptions: that microfinance is a cureall, that schooling equals learning

The meaning of development Chapters 1 & 2

A fundamental question: what kind of development is most desirable? Pages ix, 89, 456

Economies as Social Systems: The Need to go Beyond Simple Economics

Social Systems
Interdependent relationships between economic and non-economic factors

Failure of development policy

Importance of Institutional and structural variables

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The capabilities approach to wellbeing Traditional Economic Measures

GNI income per capita

New View of Development

Sens Capabilities Approach pp. 17-20
Functionings as an achievement Capabilities as freedoms enjoyed in terms of functionings Development and happiness Well being in terms of being well and having freedoms of choice

Three Core Values of Development

pp. 20-22
sustenance, self-esteem, freedom

Case Study: Brazil a Belgium inside an India growth without development

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Brazil
Social indicators: lower than expected Poverty: growth, but no change in the poverty rate since the 1970s Inequality: worst in the world

Class next Tuesday

Denis Goulet Amartya Sen voices of the poor pp. 7, 230, 363

Denis Goulet
A value-focused approach to local investigations & action The ethics of power The power of ethicsto counter the power of wealth Policy ethics procedural commitment to respect values already in place constitutes a solid guarantee against falling in the twin traps of elitism & manipulation Change-oriented, close to practice