3. Introduction
What is development economics
about? More than growth. We expect
economies to grow, yet there are vast
differences in the growth experiences
of countries. Developing countries are
not like young children — requiring
time and nutrition to grow. Some
developing countries have been poor
for a long time, others have made rapid
strides in short periods of time.
4. Economics
Economics is the social
science that studies
economic activity to gain an
understanding of the
processes that govern the
production, distribution and
consumption of goods and
services in an economy.
5. The term economics comes from the Ancient Greek from
and , hence "rules of the house (hold for good
management)". 'Political economy' was the earlier name for
the subject, but economists in the late 19th century
suggested "economics" as a shorter term for "economic
science" to establish itself as a separate discipline outside
of political science and other social sciences.
6. Microeconomics and Macroeconomics
Microeconomics (from Greek
prefix mikro- meaning "small" and
economics) is a branch
of economics that studies the behavior
of individuals and small impacting
organizations in making decisions on
the allocation of limited
resources. Typically, it applies
to markets where goods or services are
bought and sold. Microeconomics
examines how these decisions and
behaviors affect the supply and
demand for goods and services, which
determines prices, and how prices, in
turn, determine the quantity supplied
and quantity demanded of goods and
7. This is in contrast to macroeconomics, which involves the
"sum total of economic activity, dealing with the issues
of growth, inflation, and unemployment." Microeconomics
also deals with the effects of national economic policies (such
as changing taxation levels) on the aforementioned aspects of
the economy.
Particularly in the wake of
the Lucas critique, much of
modern macroeconomic
theory has been built upon
'microfoundations'—i.e.
based upon basic
assumptions about micro-
level behavior.
8. One of the goals of microeconomics is to analyze
market mechanisms that establish relative
prices amongst goods and services and allocation of
limited resources amongst many alternative uses.
Microeconomics
analyzes market failure,
where markets fail to
produce efficient results,
and describes the
theoretical conditions
needed for perfect
competition.
9. Supply and Demand
Supply and demand is a model of microeconomics. It describes how
a price is formed in a market economy. There are two determining
factors on such a market, the number of things made available,
called supply, and the number of things consumers want, called demand.
Supply and demand shows how producers and consumers interact with
each other. This relationship will fix the price for a certain type of good.
In Perfect competition, the quantity demanded (demand) and the quantity
supplied will be equal. This will fix the price.
10. Graphical representation of
supply and demandAlthough it is normal to regard the quantity demanded
and the quantity supplied as functions of the price of the
goods, the standard graphical representation, usually
attributed to Alfred Marshall, has price on the vertical axis
and quantity on the horizontal axis, the opposite of the
standard convention for the representation of a
mathematical function.
11. Linear-stages-of-growth model
Such theories have been criticized for not recognizing
that, while necessary, capital accumulation is not a
sufficient condition for development. That is to say
that this early and simplistic theory failed to account
for political, social and institutional obstacles to
development.
12. Furthermore, this theory
was developed in the early
years of the Cold War and
was largely derived from
the successes of
the Marshall Plan. This has
led to the major criticism
that the theory assumes
that the conditions found in
developing countries are
the same as those found.
13. Economic nationalism
Following mercantilism was the related theory
of economic nationalism, promulgated in the 19th
century related to the development and
industrialization of the United States and Germany,
notably in the policies of the American System in
America and the Zollverein in Germany.
14. The names most associated
with 19th-century economic
nationalism are the
American Alexander Hamilton,
the German-American
Friedrich List, and the
American Henry Clay.
Hamilton's 1791 Report on
Manufactures, his magnum
work, is the founding text of
the American System, and
drew from the mercantilist
economies of Britain under
Elizabeth I and France under
Colbert.
15. Conclusion
All in all, education is not necessarily the sole
determinant of economic growth. Different
factors, such as gender equality and foreign
investment, need to be taken into consideration in
explaining prosperity. The importance of
education towards growth is questioned so much
so that many believe, instead, that economic
growth influences education.
16. Bibliography
1. Behrman, J.R. (2001). "Development, Economics of," International
Encyclopedia of the Social & Behavioral Sciences.
2. Clive Bell (1987). "Development economics," The New Palgrave: A
Dictionary of Economics.
3. Easterly, William (2002), Elusive Quest for Growth: Economists'
Adventures and Misadventures in the Tropics, The MIT Press.
4. Gerald M. Meier (2005), Biography of a Subject: An Evolution of
Development Economics, Oxford University Press.
5. Gerald M. Meier, Dudley Seers [editors] (1984), Pioneers in Development,
World Bank.
6. Dwight H. Perkins, Steven Radelet, Donald R. Snodgrass, Malcolm Gillis
and Michael Roemer (2001). Economics of Development, 5th edition,
New York: W. W. Norton.
7. Jeffrey D. Sachs (2005), The End of Poverty: Economic Possibilities for Our
Time, Penguin Books.
