Week 1 Development

Week 1 Development - Week 1- Introduction Economics and...

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Week 1- Introduction Economics and Development Studies The Nature of Development Economics Traditional Economics is concerned with the efficient, least-cost allocation of scare resources and with the optimal growth of these resources over time so as to produce an expanding range of goods and services. Traditional neoclassical economics 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 economic ‘rationality’ and purely materialistic, individualistic, self interested orientation toward economic decision making. Political economy goes beyond traditional economics to study the social and institutional processes through which certain groups of economic and political elites influence the allocation of scarce resources now and in the future, either for their own benefit or for that of the larger population. It is therefore concerned with the relationship between politics and economics, with an emphasis on the role of power in economic decision making. Development economics has an even greater scope. In addition to being concerned with the efficient allocation of scarce (or idle) resources and with their sustained growth over time, it must also deal with the economic, social, political and institutional mechanics, necessary to bring about rapid and large scale improvements in levels of living for the peoples of Africa, Asia, Latin America etc. Unlike More Developed Countries (MDC’s), in the less developed countries most commodity and resource markets are highly imperfect, consumers and producers have limited information, major structural changes are taking place in both the society and the economy, the potential for multiple equilibria rather than a single equi is more common, and disequilibrium situations often prevail (S doesn’t equal D). Development Economics must be concerned with the economic, cultural and political requirements for effecting rapid structural and institutional transformations of entire societies in a manner that will most efficiently bring the fruits of economic progress to the broadest segments of their populations. It must focus on the mechanisms that keep families, regions, and entire nations in poverty traps, in which past poverty causes future poverty, and on the most effective strategies for breaking out of these traps. Thus, a larger government role and some degree of coordinated economic decision making toward transforming the economy are usually viewed as essential components of development economics. Yet this must be achieved despite the fact that both governments and markets function less well in the developing world. Economies as Social Systems: The need to go beyond simple economics
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Week 1 Development - Week 1- Introduction Economics and...

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