Class Notes - ECON 371 6/5/06 I. Introduction Thinking...

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ECON 371 6/5/06 I. Introduction – Thinking About Development A) Meaning of Economic Development Widespread interest in figuring out successes and disappointments 3 essential Questions 1) What are the sources of growth and change in a developing economy? 2) What accounts for variation in cross-national economic development and performance? 3) What policies are most important in promoting economic development? Almost half of the population lives on $2 a day and 1/5 of the population lives on $1 Even if per-capita income increases, there shouldn’t be an increase of the population above the poverty line. Economic Development (ED) = increase in living standards Development is the process that encompasses economic growth plus structural changes (as structure of production changes from primary to secondary) -1950-70’s, economic development concentrated on maximization of growth and GDP and per-capita income -Official exchange rates were incorrect as well -Purchasing Power Parity’s were then used to translate/compare currencies United Nations Development Program (UNDP) Started to use the Human Development Index (HDI) which includes Qualitative choices: 1) GDP per-capita 2) Life expectancy from birth 3) Adult Literacy 4) School Enrollment In 1997, Sudan ranked17 places lower by HDI than by GDP approach UAE 50 places lower India 12 places higher “ Sri Lanka “ 45 places higher “ B) Development Economists (Two Types) 1) Kenneth Arrow (Stanford) – “Guardians of Rationality” -Economics resources are scarce and markets can’t be ignored. 2) Theodore Schultz (Chicago) – “Trustees for the Poor” -Most people are poor, and to understand the poor will help understand economy 2 Questions: i) Why are poor countries still poor? ii) What can be done to remove persistent poverty? -Theoretically -Empirical -Normative – What ought to be done.
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C) Ideas for Development Ideally development and problem solving -New concepts and policy objectives After WWII, economic development meant economics of discontent. Economic Development can’t come from emotional desire or resentment. -It can’t be legislated or voted on. As new institutions arose, economic development needed policy advice. Change in one of these three things can cause changes in the others: 1) Growth comes as GDP increases 2) Increase in GDP per-capita 3) Decrease Poverty Development Economics is not like natural or physical size, the idea that the latest idea is the best idea is not always true. Some old ideas might still apply today and be better suited today depending on the situation and different factors that apply.
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II. Heritage of Classical Growth Economics Adam Smith, Thomas Malthos, David Ricardo, John Stewart (J.S.) Mills, Karl Marx -All of these people concerned with Economic Growth or the “Progressive State” J.S. Mills trade has indirect advantages: tendency of trade to improve process of
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This note was uploaded on 06/11/2008 for the course ECON 371 taught by Professor Vanderford during the Summer '08 term at University of Arizona- Tucson.

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Class Notes - ECON 371 6/5/06 I. Introduction Thinking...

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