ecodev midterms

• Economics


  A branch of Social Science that deals with the allocation of resources, production, distribution, and consumption of goods and services
• Branches of Economics

  • Microeconomics
  • Macroeconomics
• Economic Resources/Inputs/Factors of Production

  • Land
  • Labor
  • Capital
  • Entrepreneurship
• Land


  The natural resources
• Labor


  The manpower resources, physical and mental abilities (Human capital)
• Capital


  Goods produced that are used as resources/man-made
• Entrepreneurship


  The act of organizing the other three resources
• Key Concepts in Economics

  • Opportunity cost
  • Marginal benefit
  • Marginal cost
  • Efficiency
  • Incentive
  • Exchange
  • Market
  • Theory
• Development Economics


  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
• Absolute Poverty


  Unable to meet the minimum levels of income, food, clothing, health care, shelter and other essentials
• Development Economics is concerned with economic, cultural, and political requirements for effecting rapid structural and institutional transformations of entire societies
• The aim of Development Economics is to help people understand developing economies to help improve the material lives of the majority of the global population
• Scope of Development Economics

  • Poverty
  • Inequality
  • Population Growth
  • Rural-Urban Migration
  • Agricultural Development
  • International Trading
  • Stabilization Policies
  • Financial System
  • Fiscal Policy
• The importance of Development Economics is to help developing countries attain development: economic and social equality, elimination of poverty, universal education, rising levels of living, national independence
• Traditional definition of Development

  Making sure a country's income per person grows consistently, allowing the nation to increase its output more rapidly than its population is growing
• New Meaning of Development


  Improving the quality of all human lives and capabilities by raising people's levels of living, self-esteem, and freedom
• The magnitude of absolute poverty results from a combination of low per capita incomes and highly unequal income distributions
• Per person needs $370 a year to meet the cost of minimum adequate caloric intakes and other necessities. Lower than that are poor and lower than $275 are extremely poor
• Poverty Equilibrium


  Poverty itself maintains the forces that lead to its perpetuation. A condition of life so characterized by malnutrition, illiteracy, and disease as to be beneath any reasonable definition of human decency. The income level from employment is so low that basic human needs can't be met
• Structure of Third World Economies

  • The size of the country (geographic area, population, and income)
  • Its historical and colonial background
  • Its endowments of physical and human resources
  • The relative importance of its public and private sectors
  • The nature of its industrial structure
  • Its degree of dependence on external economic and political forces
  • The distribution of power and the institutional and political structure within the nation
• Characteristics of the Developing World

  • Lower levels of living and productivity
  • Lower levels of human capital
  • Higher levels of inequality and absolute poverty
  • Higher population growth rates
  • Greater social fractionalization (ETHNIC, CULTURAL, RELIGIOUS ASPECT)
• Indicators of Development


  • Income (Gross Domestic Product/Gross National Product/Gross National Income, PPP –PURCHASING POWER PARITY)
  • Health
  • Education
• Human Development Index


  Socioeconomic development is based on income per capita, education and health
• Linear Stages Theory


  Development involves stages of growth. Countries go through steps from underdevelopment to development. "Takeoff into self-sustaining growth" is a crucial phase - Requires sufficient funds for necessary growth
• Harrod-Growth Model (AK model)


  Relationship: Economic growth (g) linked to national net savings rate (s) and inversely related to national capital-output ratio (c)
• To achieve growth, countries must prioritize saving and investing
• Structural Change Model


  Describes economic transformation in developing countries. Shift from traditional subsistence agriculture to modern industrialized economy. Utilizes modern econometrics, neoclassical price tools, and resource allocation theory
• Patterns of Development


  Focuses on transitioning from the traditional to industrial sector. Drivers: Capital, labor, and interrelated economic changes. Economic structure changes include: Transformation of production, Changes in consumer demand, International trade shifts, Resource use adjustments, Socioeconomic factors like urbanization and population growth
• International-Dependence Revolution


  This model sees the developing nations as being threatened by external environment such as: Political, economic rigidities, institutional Dependence, dominance of the rich countries
• Three Major Streams of Thought in International-Dependence Revolution

  • Neocolonial Dependence Model
  • False Paradigm Model
  • Dualistic-Development Thesis
• Neocolonial Dependence Model


  Argues that developing countries remain underdeveloped due to the historical evolution of an unequal international capitalist system, creating rich-country-poor country disparities. Center - In dependence theory, the economically developed world (elite groups). Periphery - In dependence theory, the developing countries. Comprador group - In dependence theory, local elites who act as fronts for foreign investors. They are the elite groups of periphery and the extensions of center (landlords, entrepreneurs, military, and public officials)
• False Paradigm Model


  Underdevelopment stems from faulty advice by experts from developed nations. What works for developed countries may not apply to developing ones. Differences in resources, culture, governance, and institutions exist in developing nations. Models should be grounded in the historical context of developing countries
• Dualistic-Development Thesis


  The dualistic nature of the world that we live in is the existence of the rich and the poor: rich and poor nations, rich and poor people. Conditions can coexist in a space, some considered "superior" and others "inferior"
• Two weaknesses of Dependence Theories: They don't explain how developing countries start and maintain development. Developing nations face challenges in industrialization efforts
• Neoclassical Counterrevolution


  Developed nations: Favors supply-side policies and privatization. Developing countries: Pushes for freer markets, dismantling public ownership, and reducing government regulation
• Central Argument of the Neoclassical Counterrevolution


  Underdevelopment happens when resources are not allocated properly because of wrong pricing policies and excessive government intervention in developing nations
• Reasons for Underdevelopment


  • Underdevelopment caused by strong government control, corruption, inefficiency, and lack of economic incentives in developing nations
  • Promoting free markets and laissez-faire economics
  • Permissive governments allowing the "magic of the marketplace" and the "invisible hand" of market prices to guide resource allocation and stimulate economic development
• Balanced approach


  Involves both government and market efforts for economic improvement
• Neoclassical counterrevolution


  • Favors supply-side policies and privatization in developed nations
  • Pushes for freer markets, dismantling public ownership, and reducing government regulation in developing countries
• Reasons for underdevelopment

  • Strong government control
  • Corruption
  • Inefficiency
  • Lack of economic incentives in developing nations