Ecn103 Chapter 1 Encoded

CHAPTER 1: INTRODUCING ECONOMIC DEVELOPMENT: A GLOBAL
PERSPECTIIVE
1.1 How the other half live
Absolute Poverty
– a situation of being unable to meet the minimum levels of income, food, clothing,
health and shelter and other essentials.
• Over 40% of the world’s population lives on less $2 a day.
Subsistence Economy
– an economy in which production in mainly for personal consumption and the
standards of living yields little more than necessities of life – food, shelter, and
clothing.
Ex. Remote rural area in the eastern part of Africa. There is little money income. There
are few possible roads, few schools and no hospitals, electric wires or water supplies.
Development – the focus of improving the quality of all human lives and capabilities by
raising people’s levels of living. Self-esteem and freedom.
Developing Countries less economically developed. developed country are the advanced economies.
• countries of Asia, Africa, the Middle East, Latin America, Eastern Europe and the
former Soviet Union, that are presently characterized by low levels of living and
other development deficits.
• Used in the development literature as a synonym for less developed countries.
low access to safe drinking water, hygiene, sanitation, health services. also called as low income countries
and middle income countries.
1.2 Economics and Development Studies
The Nature of Development Economics
centered around the passing down of customs and beliefs

Traditional Economics economic questions are answered by tradition and elders.
little to no individual freedom
- is primarily concerned with the efficient, least-cost allocation of serve productive
resources and with the optimal growth of these resources over time so as to
produce on over-expanding large of goods and services.
tradition and family history (if youre born in a famiy of farmer so that will be your future
no innovation
less stress more time
elders have lot of power over their subpeople
- perfect markets, automatic price adjustments, decisions made on the basis of
marginal, private-profit and utility conclusions; and equilibrium outcomes in all
product and resource markets.
Political Economy
• Goes beyond traditional economics to study among other things, the social and
constitutional processes through which certain groups of economic and political
elites influence the allocation of source production resources now and in the future,
either for their own benefit exclusively or for that of other larger population as well.
• Is therefore concerned with the relationship between politics and economics with
a special emphasis on the role of power in economic decision making.
Development Economics
• Has a greater scope.
• In addition to being concerned with the efficient allocation of existing productive
resources and with their sustain growth over time, it must also with the economic,
social, political, and institutional mechanisms, both public and private necessary
to bring rapid and large-scale improvements in the levels of living for the people
Africa, Asia, Latin America, etc.
More Developed Countries (MDCS)
• The now economically advanced capitalist countries of western Europe, North
America, Australia, New Zealand, and Japan.
“The ultimate purpose of development economies is to helps us understand developing
economies in order to help improve the maternal lives of the majority of the global
population.”
= Economics as Social Systems: The need to so beyond simple economics.
Social System – the independent relationship between economic and non-economic
factors.
Noneconomic factors – include:
• Attitudes toward life, work, and authority
• Public and private bureaucratic, legal, and administrative structures
• Patterns of leadership and religion
• Cultural traditions
• Systems of land treasure
• The authority and integrity of government agencies
• The degree of popular participation in development decisions and activities
• The flexibility or rigidity of economic and social classes
*Clearly these factors vary widely from one region of the world to another.
*Values, attitudes, both domestic and international plays = crucial
1.3 What do we mean by Development?
Traditional Economic Measures

• Income per Capita
- Total gross national income divided by total population
- GNI / Population
• Gross Domestic Product (GDP)
- Traditionally, development meant achieving sustained rates of growth of
income per capita to enable a notion to expand its output at a rate faster
than the growth rate of its population.
- Levels and rates of growth of GNI per capita are then used to measure the
overall economic well being of a population
▪ How much of real goods and services s available to the average
citizen for consumption and investment.
The new Economic View of Development
- The experiences of the 1950’s and 1960s, when many developing nations
did reach their economic growth rates targets but levels of living of the
masses of people remained unchanged, signaled that something was very
wrong with the narrow definition of development.
- In 1970s economic development came to be redefined in terms of reduction
or elimination of poverty, inequality, and unemployment within the context
of a growing economy. development includes the health and education
Amartya Sen’s Capability Approach
emphasizes - 1998 Nobel Concreate in Economics
functionings
and - Capability to function is what matters for status as a poor or normal person
capabilities, - “Economic growth cannot be sensibly treated as an end in itself.
something to Development has to be more concerned with enhancing the lives we live
do with the and the freedoms that we enjoy”
happinessand
quality that we - What matter for well-being us nit just the characteristics and commodities
derived from consumed, but what use the consumer and does make of commodities.
consuming
those goods Functioning - What a person does (or can do) with the commodities that they
and services. have.
- Thus holding at income cannot suffice as a measure of well-being.

Capabilities – the freedom that a person has in terms of the choice of functioning.
Real income is essential, but to convert the characteristics of commodities
into functioning in most important cases, surely requires health and education as
well as income.
= For Sen, human well-being means being well in the basic means of being healthy, well-
nourished, well-clothed, literate and long lived and more broadly, being able to take part
in the life of the community, being morale and having freedom of choice om what one can
become and can do.
Development and Happiness
- In recent years, empirical studies have shown that the average level of
happiness or satisfaction increases with a country’s average income.
- Studies show that financial security is only one factor affecting happiness,
According to Richard Layard, surveys show that there are seven (7) factors
affecting average national happiness:
gross national happiness is a better measurement of the
• Family Relationships development progress rather than gross national income.
• Financial Situation
• Work
• Community and friends
• Health personal freedom
• Personal values
In particular, aside from not being poor, evidence says people are happier when they are
not unemployed not divorced or separated and have high trust of others in society, as
well as enjoy high government quality with democratic freedoms and have religious faith.
• The government of Bhutan attempts to make “gross national happiness” rather
than “gross national income” its measure of development progress.
Three (3) Core Values of Development
• Substance – the ability to meet basic needs
• Self-esteem – to be a person
• Freedom from Servitude – to be able to choose
The Central role of Women
- To make biggest impact on development, society must empower and invest
on its women
The three (3) Objectives of Development
• To increase the availability and wisdom and the distribution of basic life-sustaining
goods such as food, shelter, health, and protection.
• To raise levels of living including, in addition to higher incomes, the provisions of
more jobs, better education and greater attention to cultural human
• To expand the range of economic and social choices
Eight (8) Millennium Development Goals
- Sept 2000, 189 member countries of the UN committed to make substantial
progress toward the eradication of poverty and achieving other human
development goals.
• Eradicate extreme poverty
• Achieve universal primary education
• Promote gender equality and empower women
• Reduce child mortality
• Improve maternal health
• Combat HIV/AIDS, Malaria, and other diseases
• Ensure environmental sustainability
• Develop global partnership for development

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CHAPTER 1: INTRODUCING ECONOMIC DEVELOPMENT: A GLOBAL

1.1 How the other half live

The Nature of Development Economics

centered around the passing down of customs and beliefs

1.3 What do we mean by Development?

Traditional Economic Measures

- Thus holding at income cannot suffice as a measure of well-being.

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