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Review the theoretical / empirical literature on (economic) development and list out the 25 most
important citations from both books and articles. Write one small paragraph for each citation. This
should cover both historic and present context.
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Adam Smith
An Inquiry into the Nature and Causes of Wealth of Nations (1776)
Although the word development does not appear in it, in a way, this entire book is
about economic development or economic progression. Particularly the Book III (Of
the different progress in opulence in different nations) is devoted to investigate why
some countries are more developed - as per the meaning of the word in those days than the others. It was a time of transition from feudalism to capitalism and the
development was purely a matter of material wealth accumulated by a nation.
Therefore, though it is not often cited as a source in contemporary development
literature it would be a great injustice to ignore and abandon this masterpiece.
02.
David Ricardo
The Principles of Political Economy and Taxation (1817)
Ricardo (and the classical school economists) believed that development can only be
achieved, if at all, through increasing the capital. The accepted notion then, was that
when the population increases with limited number of acres of arable land, the law
of diminishing marginal returns gets into the picture and result in economic
stagnation if not economic decline. The effects of technological advancements were
overlooked.
Therefore one can safely argue that Ricardo did not perceive any development other
than economic growth and his idea of possible economic growth was also bleak.
His impression was economic stagnation and decline rather than any possible kind
of development.
03.
Karl Marx
The Capital (Das Kapital)
The views of Karl Marx are important as they offer an entirely different perspective
on development from the mainstream economics. Marx rejected the views of
political economy. The Marxist views cannot be identified as direct opposites (180
degrees opposed) to the classical economic thinking but they are indeed different
plane of thinking. Marx presented stages of (economic) development that a country
would undergo. These stages are based on the modes of production, i.e. the
relationships among the factors of production and how the production is carried out.
1. Primitive communism
2. Capitalism
3. Slavery
4. Socialism
5. Feudalism
6. Communism
According to Marx the ultimate development was perceived as the communist state
and his ideas of development was based on both economic as well as social
development. As far as the capitalist economic development through capital
accumulation and reinvestment is concerned Marx viewed the accrued capital as the
surplus produced by the labour and exploited by the capitalist class. He did not
believe in such a development and said that it would crash down sooner than later.
His view was that when the capitalism crashes down as a result of the revolution
against it by the working class the socialism would emerge and that would pave the
way for communism which is the ultimate form of development that can be
achieved. According to him the communism is characterized by features such as,
statelessness, propertylessness and classlessness.
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04.
W. W. Rostow
The Stages of Economic Growth A Non-Communist Manifesto (1960)
The basic intention of Rostow was to present a thesis on how development takes
place as a step by step gradual process and in doing so he has provided some
valuable insights to what he would have referred to as development. According to
him the final stage in the development process is the Age of high mass
consumption, which can be thought of as the state of development in his view. It
is characterized by,
David McClelland
The Achieving Society (1961)
According to his view development is a kind of overall modernization and is not
confined to an economic phenomenon; it encompasses institutional factors and
social change as well. These include social practices, beliefs, values, psychological
issues, political issues and customs. Development requires removal of certain
cultural and social barriers and these backward internal structures are bigger
obstacles in the course of development than the external factors. Also diffusion and
speed of change are important in the development process. Modernization
incorporates inculcating wealth oriented behavior and values in individuals and
investment in education and skills training.
These views have been further expanded by authors like Lipset, Inglehart and
Welzel with concepts such as democracy and modernization.
It has been criticized for being Eurocentric.
06.
Dudley Seers
The Meaning of Development (1969)
Seers was the first to present a definition for development going beyond the
traditional per capita income approach formally. There have been discussions among
the academic community about the inadequacy of the traditional measures to paint a
completed picture of the level of development of a particular country even before
Seers but it was him who for the first time conceptually defined development going
beyond mere economic growth. To him, development entails the improvements in
the level of poverty, unemployment and inequality apart from national income.
07.
Denis Goulet
The Cruel Choice: A New Theory in the Concept of Development (1971)
Goulet stated that development is not only a matter of economics. According to him
the state of underdevelopment is a sense of personal and societal impotence in the
face of calamity. Therefore development is a multidimensional process that requires
changes in social structures, attitudes and institutions as well as in economic growth.
Adding another dimension to the quest of development Denis Goulet brought-in the
concepts of ethics and values to the development literature. Therefore the primary
question of development must be ethics. This was also an addition of a sub field into
development economics.
08.
Hollis B. Chenery
Patterns of Development 1950-1970 (1975)
Chenery and his colleagues studied the patterns of development for a number of
developing countries during the postwar period and found the development to be
owing to structural changes in the realms of both economic functions and
socioeconomic factors. In that sense this view of development differs from that of
Arthur Lewis where only the structural changes in relation to the economic factors
are considered. Therefore Chenery perceived development as progression through
transformation in production processes, composition in consumer demand,
international trade, resource usage as well as urbanization and growth and
distribution of the population. That means his perception of development includes,
in addition to economic growth, changes in the social structures and demography.
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09.
Robert Chambers
Rural Development - Putting the Last First (1983)
Chambers has suggested that the development policy should be centered on the poor
and marginalized segments of the society. According to him, development stems
from the reduction of poverty and uplifting of living standards of the rural
community.
With G. R. Convey, in 1991, he presented the first elaborate definition of sustainable
livelihoods, which reads as,
. A livelihood comprises the capabilities, assets (stores, resources, claims and
access) and activities required for a means of living: a livelihood is sustainable
which can cope with and recover from stress and shocks, maintain or enhance its
capabilities and assets, and provide sustainable livelihood opportunities for the next
generation; and which contributes net benefits to other livelihoods at the local and
global levels and in the short and long term.
This is a new way of thinking of the eradication of poverty; going beyond the
traditional manifestations and provide valuable guidelines for digging deeper into
the problem of underdevelopment and how to counter it.
10.
11.
Amartya Sen
Development as Freedom (1999)
Sen is perhaps the leading thinker on the meaning of development. According to
him the development means the capability to function as per the wishes of a
person (in a society) and that capability distinguishes between the poor and the nonpoor. Here functioning means either doing something or being someone; for
example, being healthy, well- nourished, having self-esteem, participating in the
community are all included in functioning. Capabilities refers to the freedom that
a person has in terms of functioning, given his personal features / characteristics. In
a nut shell, according to Sen, development means the notion of people being able to
be what they want to be, and being content with that. This covers a whole lot of
human needs ranging from physical needs to emotional needs.
12.
13.
Michael P. Todaro
Development Economics (2012)
According to Todaro, development is a multidimensional process of reorganization
and reorientation of both economic and social structures. It improves the quality of
all human lives by raising the living standards of people by increasing the income,
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From the above account it is clear how the concept of development has evolved over the
course of time along with the developments in the social sphere. First it was entirely an
economic growth phenomenon concerned with increasing the per capita income. But later
other components like poverty, unemployment and inequality in the distribution of national
income have come into the picture. The concerns about the environment and sustainability of
economic growth have taken the stage next.
Thereafter, gradually, other aspects of human life such as health and education have been
added. These factors are dependent on the level of income and also in turn contribute to the
increase of level of income.
However, even in the most recent thinking on development, the economic growth plays a
central role. Therefore we see that the theories of development and their models are almost
always presented in such a manner that they attempt to explain the economic growth (changes
in the per capita GDP). That is in other words, the development is proxied by the per capita
GDP figures. This is understandable as there is no widely accepted composite index for this
purpose other than the Human Development Indices (HDIs) and even in the HDI economic
growth appears as a major component.
The following table presents various theories of economic growth / development and some of
the important models under each theory developed by prominent economists. The important
citations are numbered whereas others are presented for the purpose of presenting the flow.
Theories of Economic Growth / Development
Classical growth theory
The classical growth theory says that in the long run the economies will return to
and equilibrium called the subsistence level from the temporary deviations upwards
or downwards from it. It did not give much regard to the technological advancement
and was highly influenced by the idea of scarcity of land that limited the (food)
production.
The main discourse in this tradition by David Ricardo was briefly described in the
preceding sections of this assignment.
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Neo-Marxist theory
Neo-Marxism refers to the twentieth century refinements, both amendments and
extensions, to the Marxism based on other intellectual doctrines such as critical
theory or psychoanalysis. This is heterogeneous in nature as many scholars have
contributed to the doctrine in their own way. One of the main traditions of NeoMarxism social theory has been the Frankfurt school.
Neo-Marxism connects to development economics through dependency theory and
world system theory. Prominent figures in Neo-Marxian economics are Michal
Kalecki, Paul Baran and Paul Sweezy.
Paul Baran
The Political Economy of Growth (1957)
Baran was a Neo-Marxian economist and he introduced the concept of economic
surplus which extended the concept of surplus value of Karl Marx and used this
concept to analyze the developing economies. In his view development depends on
producing a surplus, more than what is to be consumed, and using part of that
surplus for capital accumulations. However according to Baran, in developing
countries, most of the surplus is either spent on luxury goods by the land owners or
transferred to developed countries as profits by the foreign investor thereby bringing
down the amount available for investment to a minimal.
16.
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17.
18.
O-Ring Theory
Michael Kremer
The O-Ring Theory of Economic Development (1993)
In this theory Kremer argues that production consists of many processes / functions all of which should be successfully completed in order to obtain a product with full
value - and thus presents a new production function where quantity cannot be
substituted for quality. This requires the workers of same skill level to be matched
rather than mixing the workers with different skill levels together. Accordingly, less
advanced countries will have more of primary production and advanced countries
will have more of higher levels of production, respectively in their GNPs. Perhaps
this theory would reinforce the argument of international division of labour thereby
strengthening the basis of higher productivities and complex manufactured items
originating from developed countries versus the lower productivities and simpler
products from less developed countries.
19.
21.
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Apart from these theories of economic development there are many other empirical studies
carried out by various economists on relationships between development (economic growth)
and other economic and social phenomena. Some of these empirical studies have been
developed into theories already and the others position themselves in the economic literature
as extensions to the existing theories or theories in making. The important citations in this
regard are briefly discussed below.
Empirical Literature on Economic Growth / Development
22.
Openness
Ann Harrison
Openness and Growth: A Time Series, Cross-Country Analysis for Developing
Countries (1994)
New growth theories suggest that openness results in economic growth through
technological advancements of the imported inputs and the increase of market size
which in turn increase the returns on innovation. Considering measures of both trade
volumes as well as trade policies this paper finds that there is a strong tie between
the openness and economic growth. Further research is needed to examine causality
and to distinguish between short and long terms effects of policies on growth
23.
Financial Development
Ross Levine
Financial Development and Economic Growth: Views and Agenda (1997)
Although historically economists have held different opinions on this, now it is
established that the financial development causes economic growth. Financial
markets and financial intermediaries reduce the financial frictions (namely, the
information costs and transaction costs) by performing the financial functions
(savings mobilization, resource allocation, exerting corporate control, facilitating
risk management and facilitating the exchange of goods and services) which in turn
promote the channels to growth (capital accumulation and technological innovation)
thereby causing an economy to grow. At lower levels of financial development the
economic growth gets retarded as the Mckinnon Shaw hypothesis (also) shows.
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24.
Human Capital
Jess Benhabib and Mark M. Spiegel
The role of human capital in economic development: Evidence from aggregate
cross-country data (1994)
When traditional Cobb-Douglas production function is used with Human Capital it
does not show a significant effect on economic growth but when an alternative
model is used it shows a positive effect. This suggests that the human capital enters
the growth equation in a different manner than what is specified by the standard
Cobb-Douglas relationship. Therefore it appears that the human capital does not
constitute a direct factor of production such as physical capital but it enhances
growth by contributing as an engine for attracting physical capital and as a
determinant of a countrys Solow residual.
25.
Social Capital
Michael Woolcock and Deepa Narayan
Social Capital: Implications for Development Theory, Research and Policy (2000)
Social capital refers to the norms and networks that enable people to act collectively.
Research on social capital and economic development can be of view of either
communitarian, networks, institutional or synergy. It can affect the economic
activity by facilitating exchanges, lowering transaction costs, reducing the cost of
information, permitting trade in the absence of contracts, and encouraging
responsible citizenship and the collective management of resources. Therefore, there
is an emerging and growing literature on nexus between social capital and growth.
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