Economic Development Challenges and Insights

Introduction to Economic Development

• This lecture series introduces economic development from a global perspective.
• The course material is compiled from various copyrighted and open-source materials.
• Students are committing to not sharing the course material on any website, chat group or any social media site or distributing it in any form.

The Nature of Development Economics

• Traditional economics focuses on efficient resource allocation and optimal growth.
• It deals with capitalist markets, consumer sovereignty, and equilibrium outcomes.
• Political economy goes beyond traditional economics to study the social and institutional processes influencing resource allocation.
• It emphasizes the relationship between politics and economics and the role of power,

Development Economics

• Development economics encompasses a broader scope than traditional economics.
• It considers issues such as the efficient allocation of productive resources, sustained growth, and mechanisms for improved living standards in various regions (e.g., Africa, Asia, South-Central America).

Development

• Development is about improving the quality of human lives, self-esteem, and freedom.
• Development economics studies how economies transition from stagnation to growth and from low-income to high-income status, and overcomes extreme poverty.
• This includes basic needs provision, reduced inequality, and economic prosperity,

The Study of Economic Development

• It raises fundamental questions about the disparities in living conditions across countries.
• These include discrepancies in health, nutrition, education, freedom of choice, women's autonomy, environmental quality, market access, and security.
• It delves into factors affecting output per worker, employment types, and population growth.
• It investigates why some countries see significant progress while others struggle.

Introducing Economic Development: A Global Perspective

• Substantial progress in growth and poverty reduction has occurred in developing countries in recent decades.
• Income poverty rates have been halved.
• International economic relationships have become less one-sided, but remain complex.
• There are significant challenges for sustainable development, including violent conflict, environmental issues, and governance challenges.

The Experience of Poverty—Voices of the Poor

• Poverty manifests as a lack of basic necessities such as food and clothing, and feelings of inferiority, humiliation and shame.
• It often limits access to public resources like clean water.
• Difficulties related to health, and lack of secure, formal employment can be critical factors.
• Poverty is multidimensional, extending beyond the simple lack of income.

Development: Traditional Economic Concepts

• Gross domestic product (GDP) is the total output of goods and services within a country's territory.
• GDP per capita is calculated by dividing GDP by population.
• Gross national income (GNI) accounts for output claimed by the country's residents, and includes factor incomes from abroad.
• GNI per capita is GNI divided by midyear population.
• Developing countries (LDCs) are characterized by low living standards – are in Asia, Africa, the Middle East, Latin America, eastern Europe, and the former Soviet Union.

Countries Classified by Income

• The World Bank classifies countries based on income levels (Low, Lower-Middle, Upper-Middle, and High).
• These classifications are based on GNI per capita.

Four Stylized Living Standards Strata

• Real gross world product per capita has more than tripled from 1960-2023.
• These four strata should not be considered representative of real families and living conditions.
• Stylized strata offer a visualization aid for understanding living standard differences.

"Typical" Conditions in the Poorest of the Strata

• Close to billion people in the lowest stratum live below the $2.15 daily extreme poverty line.
• Experience hardship in acquiring food, shelter, and access to healthcare and schools.
• They often face various life challenges like lack of reliable water supplies, lack of transportation, and other difficulties.

"Typical" Conditions in the Second-lowest of the "Strata"

• Estimated 3.5 billion people in this stratum.
• This means that nearly half of the global population is living somewhere in this income band.
• The people in this stratum are nearly always living in urban, or peri-urban areas and depend on informal employment for a living.
• They usually do not enjoy secure employment or worker accommodations, often living in small family enterprises.

"Typical" family in the second highest of the strata

• More than two billion people fall into this category.
• They may have $15 per person daily income, well above the global poverty line.
• Often live in urban areas, and jobs are usually informal and unstable.
• Cooking on a manufactured burner and owning a television are common features of life for families in this stratum.

"Typical" family in highest of the strata

• These families live above the high-income level.
• They might live on $75 daily income, a comfortable lifestyle.
• Features include a suburban house with a yard or a large apartment, full indoor plumbing, central air conditioning, central heating, and a separate bedroom for each child.
• Families with access to amenities and comforts are common in this category.

Movement up Strata

• People in a stratum usually do not move outside much.
• There are cases in which a person climbs the economic ladder or improves their living experience very quickly.
• A study of the country case in general-and China in particular, is useful for understanding how societal dynamics of economic mobility can occur.

The Correct Answers

• These answers refer to multiple-choice questions based on Hans Rosling's video.
• The questions and correct choices in this section are from a test.

What Do We Mean by Development?

• Development is multifaceted and encompasses material and spiritual well-being.
• Sen's capabilities approach considers the freedom to choose a wide range of things, as well as basic needs.
• Economic growth isn't the sole goal.
• It also involves social inclusion and improving people’s opportunities.

Economic Well-being

• Factors like real income, health, and education matter when assessing economic well-being.
• People's experiences with money are measured using social indicators such as literacy, schooling, health, housing, and social/community life.

Well-Being: Freedoms

• People need more than just income. People also need a wide variety of freedoms to participate in social choices and public decisions to understand their well-being.

Capabilities and Functionings Approach

• This approach emphasizes the importance of freedoms and achievements people can attain in their lives.
• It focuses on what people are able to do and be to achieve their personal well-being.

Key Principles

• Freedom: The ability to make choices and pursue one's goals.
• Agency: The ability to take action.
• Participation: The ability to engage in social and economic activities.

Some Important "Beings" and "Doings" in Capability to Function

• This section details the elements of positive well-being, considering the factors that contribute to a person’s overall life fulfillment.

Growth is Not An End In Itself

• Economic growth has a role in development; it makes it possible.
• However, it doesn't guarantee increases in overall happiness.
• The effects of winning the lottery or being in happy relationships can have a positive effect on people’s well-being.

Amartya Sen’s “Capability” Approach

• Sen's approach highlights the importance of basic capabilities to overcome poverty.
• These capabilities relate to human liberties, education, and health.
• Capabilities are defined as freedoms, while functionings are the outcomes of achieved actions.
• People need to have the means to use these capabilities.

Details on Amartya Sen's Capability Approach 1, 2, 3, 4

• This section expands on Sen's Capability Approach and addresses important considerations and nuances.
• It focuses on the meaning of well-being beyond economic indicators.
• It considers non-economic factors that influence well-being.

The New Economic View of Development

• Development is a multifaceted process that enhances the lives of individuals, social groups, and societies in general.

Economies as Social Systems & Role of Values in Development Economics

• Development economics is more than just economics; it factors into a social system and how people's attitudes and values combine to affect the overall structure of a society.
• Economic behavior is tied to an individual’s attitude and social context.

Three Core Values of Development

• This section discusses fundamental values that have sustained human societies throughout history: sustenance, self-esteem, and freedom.
• It explores how societies meet basic needs, establish value systems, and provide choice and opportunity.

What Do We Mean by Development?: The Central Role of Women

• Women's well-being and participation are pivotal to development.
• Recognizing their contributions to child-rearing impacts generational poverty.
• Their knowledge and input influence the next generation—and society overall.

What Do We Mean by Development?

• This section delves into the essential aspects of development, which goes beyond GDP.

The Central Role of Women

• Women's well-being is a key factor in broader society.
• Women often carry primary responsibility for raising children and support families.

Happiness of Greek Antiquity

• This section explores the Greek concept of happiness associated with eudaimonia.
• A fulfilling life is found in pursuing virtues, self-discipline, and living a morally excellent life, rather than fleeting pleasures.

Happiness in the Modern Western

• This section examines various modern approaches to understanding happiness.
• These approaches include hedonism, utilitarianism, existentialism, and modern psychology.
• They emphasize various factors like pleasure, good relationships, and meaning.

Happiness in Aztecs Perspective

• This section explores the Aztec perspective on happiness, focusing on the concept of being rooted (neltiliztli).
• They valued a balanced approach to life, encompassing body, mind, community, and connection with nature/the divine.

Pathways to Happiness in the East

• Eastern philosophies (Buddhism, Taoism) offer different pathways to happiness.
• This approach emphasizes inner peace, spiritual growth, and detachment from material desires.

Figure 1: Income and Happiness: Comparing Countries

• Real income, family relationships, work, community, health, personal values, freedom is used to assess happiness.
• Survey evidence demonstrates a link between these factors and higher happiness levels.

Does Money Lead to Happiness?

• The Easterlin Paradox suggests that increasing income doesn't automatically lead to increased happiness after basic needs are met.
• Happiness is more about relative income compared to others than absolute income levels.

The Human-centric GNH (Gross National or Domestic Happiness)

• The Bhutanese GNH is an approach with a spiritual aspect, focusing on various domains.
• The government uses surveys to evaluate well-being, considering factors like living conditions, social aspects, and religious values, to inform policies and development efforts.

Top 25 of Happiest Countries

• The Gallup World Poll is a worldwide survey that measures and ranks countries according to their happiness.
• Based on annual surveys, it assesses life satisfaction on a scale, with 10 being the highest.

Millennium Development Goals (MDGs)

• The Millennium Development Goals (MDGs) were a set of eight goals established by the United Nations in 2000.
• Their purpose was to address issues of extreme poverty and hunger, education, gender equality, child mortality, maternal health, HIV/AIDS, malaria, environmental sustainability, and global partnerships.

MDG Retrospective: Was the Glass Half Full or Half Empty?

• The MDGs had some success, but also faced significant implementation challenges/shortcomings.

Some criticisms of the original MDGs framework

• Ambitious to be accomplished in 15 years.
• Goal focus did not encourage partnership/complementarity between goals.
• The intensity of poverty may not be addressed by a low $1.25 daily income benchmark.
• Didn't adequately include gender equity, issues of human rights or global climate change.

Sustainable Development Goals (SDGs)

• The SDGs were adopted by the UN in 2015 to be achieved by 2030.
• They are a more comprehensive set of interconnected goals compared to the MDGs.

Table 1.2: Global Ambitions: Selected Targets of the Sustainable Development Goals

• A list of targets of the Sustainable Development Goals (SDGs) that were set by the United Nations (UN).

Discussion Topic: The SDGs

• The SDGs have been critiqued concerning their scope and applicability.
• The universality principle is discussed concerning its necessity and usefulness for application in development goals, and broader impacts on people.
• Many other criticisms or recommendations for potential improvement are discussed.

Concluding Observations

• Development strategies should consider the non-economic dimensions.
• Capabilities as a central concept is advocated.
• The attainment of SDGs are of importance.

Concepts for Review

• This section lists key economic concepts.
• Covers absolute poverty, attitudes, capabilities, developing countries, globalizations, gross domestic product (GDP), functionings, gross national income (GNI), income per capita, institutions, and other economic terminologies/definitions.
• Defines terms for less developed countries, and more developed countries, along with types of economies and approaches to study social systems.

Copyright

• Acknowledges ownership rights with respect to copyrighted material.
• It stresses that unauthorized distribution is restricted and is intended for instructors' use within their teaching.