Ec121 Slides set 1_Devt and Devt Eco

9/13/2016

Topics
Development and
Development Economics
Ec121 Slides Set 1
For the class of Dr.C.Bautista (Ec121)

1. Introduction (including article of C. Habito)

2. Development = growth +
3. HDI as sample development indicator:
Philippines (F. Aldaba slides)
4. Less developed/ developing countries
5. Development Economics, in constrast with
neoclassical economics and political economy
6. Economies and social systems
7. Role of values, attitudes and institutions
8. Social capital

Development = Growth +

Example: The World based on HDI

What is HDI?
Human development index (HDI) is an index
measuring national socioeconomic
development based on combining measures
of education, health and adjusted real income
per capita.
United Nations Development Programme
(UNDP) presents the data in its Human
Development Report (initiated in 1990)

HDI Range: 0 1:

Dark green= 0.9 up .

Yellow= 0.6 to 0.7.

Red= 0.35 down

Ec121 Slides set 1_Devt and Devt Eco

HDI

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HDI = 0.392 (2000) to 0.483 (2014)

HDI= 1 highest human devt; 0 = lowest

Basis: Devt Goals
Decent standard of
living

Measures
Real per capita GDP (adjusted for PPP
to reflect the cost of living)

Long and healthy life Life expectancy at birth

Knowledge

Average schooling attained by adults

and expected years of schooling for
for school-age children

Case example: Uganda

Life expectancy = 58.5 years. Ave Expected Schooling = 9.8 years

Undercover Angel: Meet the

businesspeople making a difference

Improved HDI over the years after postconflict peace and development effort
Still one of the poorest in the world
1970s-mid 80s: Human rights abuses and
military dictatorship
Conflicts: Terrorism and counter-terrorism
1990s onwards: Improved services sector
Boston businessman Ernie immerses himself in a community in Uganda.
National Geographic feature August 2016.

Philippines
The Philippines: Human Development Index
Ranking. Human Development Network
presentation of Dr. Fernando Aldaba
(downloadable) in January 2016

Development = Growth +
The

+ is very important.

Need to look at other aspects of development.

The HDI is one example.
Other examples: Inequality, gender, happiness,
environment, access to ICT,
Economic growth is necessary.
Need to sustain growth to reduce poverty.

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What is development?
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.

It is a process of improving the quality of all

human lives and capabilities by raising peoples
levels of living, self-esteem and freedom.
Todaro & Smith (2015, 7)

From a poor woman from Uganda

Voices of the Poor in Todaro & Smith (2015, 8)

Developing countries/
Less Developed Countries (LDCs)
Countries of Asia,
Africa,
Middle East,
Latin America,
eastern Europe and
former Soviet Union
that are presently characterized by low levels of
living and other development deficits.

Traditional economics has been there for a

very long time.
But the systematic study of LDCs began only
some years after WW II.
International Bank for Reconstruction and
Development (1944) original World Bank
1978: first World Development Report
produced by the WB

Todaro & Smith (2015, 9)

Compare
Traditional economics
Political economy
Development economics

Traditional Economics
It is concerned primarily with the efficient,
least-cost allocation of scarce productive
resources and with the optimal growth of
these resources over time so as to produce as
ever-expanding range of good and services.

Todaro & Smith (2015, 9)

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Traditional Neoclassical Economics

Political Economy

In particular, traditional neoclassical economics

which deals with an advanced capitalist world of
perfect markets; consumer sovereignty;
automatic price adjustments; decisions made on
the basis of marginal, private-profit, and utility
calculations; and equilibrium outcomes in all
product and resource markets. It assumes
rationality and a purely materialistic,
individualistic, self-interested orientation towards
economic decision-making.

It merges economic analysis with politics. It

studies the social and institutional processes
through which certain groups of economic and
political elites influence the allocation of
scarce productive resources now and in the
future, for their own benefit or for the larger
population.
It also covers the role of power in economic
decision making.

Todaro & Smith (2015, 9)

Todaro & Smith (2015, 9)

Development Economics

Economies and Social Systems

It is the study of how economies are transformed

from stagnation to growth and from low-income
to high-income status, and overcome problems of
absolute poverty.
It has a broader scope.
It deals with economic, social, cultural, political
and institutional mechanisms to bring about
rapid and large-scale improvement in the lives of
people in LDCs.

Social system organizational and

institutional structure of a society, including
its values, attitudes, power structure, and
traditions.
Local social system, national, global
There are interdependent relationships
between economic and non-economic factors
(legal, religion, kinship, degree of
participation, bureaucracy, cultural tradition)

Todaro & Smith (2015, 10)

Role of Values
Crucial roles that values, attitudes and
institutions play in the overall development
process

Economics as a social science.

Concerned with human beings and social
systems.
Recognize that people have own values.
Devt economics: Strong normative aspect
Subjective value judgment of what is good and
desirable
Vis--vis basic, universal human values

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Values
These are principles, standards or qualities
considered worthwhile or desirable.

Institutions
These are the norms, rules of conduct, and
generally accepted ways of doing things.
Rules of the game
Humanly devised constraints that shape
human interactions, formal and informal

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Attitude
It is the state of mind or feelings regarding
issues.

Social Capital
Social capital = productive value of
1) a set of social institutions and norms
(including group trust),
2) expected cooperative behavior, and
3) a shared history that raises expectations in
future cooperative behavior.
Todaro & Smith (2015, 682)