Class I 2012 Economic Development

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Economic development:

introductionECO 442

Spring 2012


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Copyright 2009 PearsonAddison-Wesley. All rights

reserved.

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Three economics courses

ECO 440Comparative economicsThe transition economies; institutional

economics

ECO 442Development economics

Africa Asia, Latin America; poverty

ECO 443

International economicsTrade, fair trade, exchange rate determination


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syllabus


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reserved.

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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 arecripples; we are afraid of everything; we depend on everyone. No one needsus. 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 tomigrate 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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reserved.

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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 developmenteconomics should foster a students ability tounderstand real problems faced by developingcountries. Unlike other texts, Economic

Development, Ninth Edition, introduceseconomic models within the context of countriesand issues, so that students learn to analyze andengage in ongoing policy debates.

Website: http://wps.aw.com/aw_todarosmit_econdevelp_

9/
http://wps.aw.com/aw_todarosmit_econdevelp_9/http://wps.aw.com/aw_todarosmit_econdevelp_9/http://wps.aw.com/aw_todarosmit_econdevelp_9/http://wps.aw.com/aw_todarosmit_econdevelp_9/


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Intoduction

I. PRINCIPLES AND CONCEPTS.

1. Economics, Institutions, and Development:

A Global Perspective.

2. Comparative Development: Differences and

Commonalities among Developing Countries.


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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


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World Bank Classification p. 39http://data.worldbank.org/news/2010-GNI-income-classifications

For analytical purposes the World Bank classifieseconomies as low income, middle income, or high income.As of 1 July 2011 low-income economies are those thathad 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 doesnot imply that economies in the same income group havereached similar stages of development or that high-incomeeconomies have reached a preferred or final stage ofdevelopment.
http://data.worldbank.org/news/2010-GNI-income-classificationshttp://data.worldbank.org/news/2010-GNI-income-classificationshttp://data.worldbank.org/news/2010-GNI-income-classificationshttp://data.worldbank.org/news/2010-GNI-income-classificationshttp://data.worldbank.org/news/2010-GNI-income-classificationshttp://data.worldbank.org/news/2010-GNI-income-classificationshttp://data.worldbank.org/news/2010-GNI-income-classificationshttp://data.worldbank.org/news/2010-GNI-income-classifications


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Major set of problems

Poverty

Inequality

Population growth

Rural stagnation

Diverse countries but common problems widespread poverty

Large income & asset inequalities

Rapid population growthLow levels of literacy & health

High urban unemployment & underemployment


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Copyright 2009 Pearson

Addison-Wesley. All rights

reserved.

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Figure 1.1 World Income Distribution


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Importance of

vocabulary

Chapter 1 (and later chapters).

1. eclectic pp. 10, 1032. neoclassical economics pp. 8, 9, 253. subsistence pp. 6, 26, 47, 54, 59,108,1094. deprivation pp. 6, 19, 20, 565. eradicate, eradication pp. 23,24, 25,296. alleviate pp. 22, 477. sustainability, sustainable pp. 23, 30, 318. growth without development pp. 20,27, 31, 61, 84, 86

Chapter 2 (and later chapters).

1. structures pp. 37.41,47,49,702. institutions pp. 42, 78, 79, 81, 833. endowments pp. 41,43,45,484. indigenous pp. 31,44, 465. imperfect markets pp. 50,69,706. diminishing marginal utility of income pp. 59,607. diminishing marginal productivity pp. 648. traps p. 71,83,146,153,165,166,168,1739. convergence 79,80,83,122


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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
http://www.brookings.edu/events/2010/0121_development.aspxhttp://www.brookings.edu/events/2010/0121_development.aspxhttp://www.brookings.edu/events/2010/0121_development.aspxhttp://www.brookings.edu/events/2010/0121_development.aspx


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Randomized testing

Banerjee & Duflo (2011)

pioneered the use of

randomized control trials in

development economics

defies certain presumptions:

that microfinance is a cure-

all, that schooling equalslearning
http://www.amazon.com/gp/reader/1586487981/ref=sib_dp_pthttp://www.amazon.com/gp/reader/1586487981/ref=sib_dp_pthttp://www.amazon.com/gp/reader/1586487981/ref=sib_dp_pt


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The meaning of development

Chapters 1 & 2

A fundamental question: what kind of

development is most desirable?

Pages ix, 89, 456


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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 well-

being

Traditional Economic Measures GNI

income per capita

New View of Development SensCapabilities 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 Developmentpp. 20-22 sustenance, self-esteem, freedom


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reserved.

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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


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Class next Tuesday

Denis Goulet

Amartya Sen

voices of the poor pp. 7, 230, 363


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Denis Goulet

A value-focused approach to local investigations

& action

The ethics of power

The power of ethicsto counter the power ofwealth

Policy ethicsprocedural commitment to respect

values already in place constitutes a solid

guarantee against falling in the twin traps ofelitism & manipulation

Change-oriented, close to practice

Documents

Class I 2012 Economic Development