DEVELOPMENT ECONOMICS

Questions:
Why does affluence coexist with dire poverty not only across different continents, but also within the same country or even the same city? Can traditional, low productivity, subsistence societies be transformed into modern, high productivity, high income nations? To what extent are the development aspirations of poor nations helped or hindered by the economic activities of rich nations? By what process and under what conditions do rural subsistence farmers of traditional societies evolve into successful commercial farmers? How poverty can be reduced and living conditions of poor people can be improved?

Traditional Economics
(classical and neoclassical) is concerned primarily with the efficient, least-cost allocation of scarIce productive resources and with the optimal growth of these resources over time so as to produce an ever-expanding range of goods and services. Neoclassical economics deals with an advanced capitalist world of perfect markets, consumer sovereignty, automatic price adjustment, decisions made on the basis of marginal, private profit and utility calculation and equilibrium outcomes in all product and resource markets. It assumes economic rationality and a purely materialistic and individualistic self-interested orientation toward economic decision making.

DEVELOPMENT ECONOMICS

 Development economics, in addition to being concerned with the efficient allocation of resources and their sustained growth over time, must also deal with economic, social, political and institutional mechanisms, both public and private, necessary to bring rapid and large scale improvements in the living standard of poverty stricken masses of Africa, Asia and Latin America. . In these less developed countries commodity and resource markets are highly imperfect, consumers and producers have limited information, major structural changes are taking place, disequilibrium situation often prevail (prices often do not equate demand and supply). In many cases economic calculations are dominated by political and social priorities such as building a new nation, resolving ethnic conflict or preserving cultural and religious traditions. The ultimate purpose of development economics is to help us better understand developing countries in order to improve living conditions of the people of these countries. Theories of economic development and their compatibility Economic development experiences of developed countries Status of women and development process Population growth and economic development Poverty alleviation Health and development Unemployment and migration Education and development Agricultural and rural development Environment and sustainable development International trade and development Industrialization and development International debt problem and economic development Foreign investment Foreign aid and development Role of public and private sector for development Globalization

Values and Development Economics:

 Economics, being a branch of social sciences, deals with human and the fulfillment of their desires. The activities of human are usually rooted in social context. Therefore, social science of economics can claim neither scientific laws nor universal truths. In economics there can only be tendencies, and even these are subject to great variations in different countries and cultures and at different times. Many so called general economic models are in fact based on a set of assumptions about human behavior and economic relationship that may have little or no connection with the realities of developing economies. Value premises (like what is or is not) are central features of economic discipline in general and of development economics in particular.

Economics as social system:

Economics as social system means the interdependent relationship between so called economic and non-economic factors. At national level latter include attitudes toward life, work and authority, bureaucratic, legal and administrative structures, pattern of kinship and religion, cultural traditions, system of land tenure, authority and integrity of government agencies, popular participation in developmental decision making and flexibility or rigidity of economic and social classes. All these factors vary from region to region. At international level we must also consider the organization and rules of conduct of the global economy how they were formulated, who control them and who benefits most from them. These factors are as well quite important keeping in view the spread of market economy and rapid globalization of trade, finance, and technology and labor migration World Bank Report asserted: The challenge of development is to improve the quality of life. Especially in the worlds poor countries, a better quality of life generally calls for higher incomes- but it involves much more. It encompasses as ends in themselves better education, higher standards of health and nutrition, less poverty, a cleaner environment, more equality of opportunity, greater individual freedom, and a richer cultural life.

 Development must therefore be conceived of as a multidimensional process involving major changes in social structures, popular attitudes, and national institutions, as well as the acceleration of economic growth, the reduction of inequality, and the eradication of poverty.

Capabilities Approach (Amartya Sen)

According to Aristotle income and wealth are not ends in themselves but instruments for other purposes. Amartya Sen argues that the capability to function is what really matters for status as a poor or nonpoor person. Economic growth can not be sensibly treated as an end in itself. Development has to more concerned with improving lives we lead and the freedom we enjoy. . What matters for wellbeing is not just the characteristics of commodities consumed, as in the utility approach, but what use the consumer can and does make of commodities. For example a book is of little value to an illiterate person (except perhaps as cooking fuel or as a status symbol) or a person with parasitic diseases will be less able to extract nourishment from a given quantity of food than will someone without parasites. For the concept of well-being we need to think beyond the availability of commodities and consider their use, their functioning. According to Sen the functioning of a person is an achievement; what the person succeeds in doing with the commodities and characteristics at his/her command. For example, bicycling has to be distinguished from possessing a bike. Sen identify 5 sources of disparity between real income Personal heterogeneities (disability, illness, age, gender), Environmental diversities (Heating/clothing in cold, infections in tropics and pollution) Variation in social climate (crime/violence) Social capital and Differences in relational perspectives (conventions/customs).