Economic Development (saylor.org)

This course introduces major theories of economic development and to place them in a historical context. In his contributory introduction “Economic Growth, Economic Development and Human Development” in The Development Economics Reader (2008), edited by Giorgio Secondi and published by Routledge, Secondi defines economic development as the “branch of economics that studies relatively poor countries.” In the same book, Mahbub ul Haq, writing under the title “The Human Development Paradigm,” suggests that the “basic purpose of development is to enlarge people’s choices,” which is in line with the views expressed by the Nobel laureate Amartya Sen. Whether development is simply studying poor countries or expanding people’s choices in poor countries, one of the essential requirements is that there must be a means for making the choices available. This means that economic development must include growth, but growth can take place without economic development. Without economic growth, the choices cannot be expanded. At the same time, however, economic growth can take place and people’s choices can still be limited. Therefore, economic development requires economic growth, but the inverse is not required. Indeed, Pearce defines economic development as “the process of improving the standards of living and well-being of the population of developing countries by raising per capita income” (1992). In essence, theories of economic development attempt to explain the process that less developed countries (LDCs) go through to become developed countries (DCs). Further, because economic development is more than economic growth and involves changes in all aspects of the society, both social and political, the discipline tends to be interdisciplinary, drawing from other social sciences such as sociology and geography.

In this course, in addition to discussing the theories of development, we will also try to explain how the theories are applied and how successful they have been in explaining the development patterns of various countries. The oft cited example of Ghana and Malaysia might be instructive at this point. Both countries gained independence from the British in 1957 (Ghana a few months earlier in March and Malaysia in August). At the time, both countries were roughly at the same level of development. If you fast forward to the 2000s, Malaysia’s per capita GDP is five times that of Ghana’s per capita GDP; it is $16,200 in Malaysia and $3,100 in Ghana. The literacy rate in Malaysia is 88.7% and 67.3% in Ghana. Malaysia has 11 times more physicians per 1,000 people than Ghana, and life expectancy is 74.04 in Malaysia but 61.45 in Ghana. There are many questions which the development economist wants the answers to, but mainly this boils down to: What accounts for the vast differences in the many measures of human development indices? We study economic development to learn from the Malaysians so that we can offer useful advice to the Ghanaians.

The units in this course are stacked as building blocks; each successive unit depends on a thorough understanding of the previous unit. The course begins with some of the stylized facts of the countries classified as developing countries. You will find that they are not all alike. Some countries, such as the oil rich ones, may have a very high per capita GDP. You will learn the definitions of major terms and concepts. The sections that follow the introductory unit outline the major theories of economic development, tracing their development throughout history as the dialogue on development economics has progressed. Finally, the course will present a number of development successes and failures and will prompt you to draw your own conclusions on the validity of certain theories based on case studies.

Upon successful completion of this course, you will be able to:

define economic development and its components;

describe major theories of economic development;

explain and apply some basic economic models related to economic development and economic growth, including the Solow Growth model and its extensions;

identify and discuss economic development theories in the social and political context in which they were created; and

critically examine economic development theories in light of a history of poor performance in development programs.