Lecture+2 (1) - What's Different About Economic...

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Click to edit Master subtitle style 5/10/10 What’s Different About Economic Development?
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5/10/10 What’s Different About Development Economics? Why don’t labor economists study developing country labor markets, trade economists study developing country labor markets, etc.? Notice that there is no “American Economics” distinct from “European Economics” No single answer, or even consensus. But here are some possibilities….
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5/10/10 What’s Different About Development Economics? 1) Historical happenstance Once upon a time, it was thought that economic development was primarily about building up a country’s stock of capital (machines, tools, buildings, etc.) Development Economics was then the study of how to mobilize resources for investment Heavy socialist tone to this line of
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5/10/10 What’s Different About Development Economics? 2) Most people don’t care much about poor countries. Without a separate Development Economics, labor economists wouldn’t pay attention to (say) Nigerian labor markets.
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5/10/10 What’s Different About Development Economics? 3) Development Economics takes government failure more seriously. Government failure : The failure of a government to choose the most efficient policies. Economists often think governments fail in rich countries, e.g., trade tariffs. But entire theories of underdevelopment have been built around government
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5/10/10 What’s Different About Development Economics? 3) Development Economics takes government failure more seriously. E.g., what if Robert Mugabe is trying to maximize the size of his bank account, not the size of Zimbabwe’s economy? In fact, think of him as a gang leader who wants to steal the maximum possible amount from his “turf” If a business owner makes an
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5/10/10 What’s Different About Development Economics? 3) Development Economics takes government failure more seriously. When deciding how much to steal, Mugabe must balance The short term gain from stealing more today The long term cost of reduced investment and a smaller “pie” to steal from in the future Unless Mugabe takes a very long view,
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5/10/10 What’s Different About Development Economics? 3) Development Economics takes government failure more seriously. In fact, things might be even worse.
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Lecture+2 (1) - What's Different About Economic...

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