Dr. K. Murugan Assistant Professor Department of Economics Guru Nanak College Chennai-42.

1. Development: Concepts
and Definition
By
K. Murugan
Asst. Professor in Economics
Guru Nanak College, Chennai-42.

2. Development- Definition
Michael Todaro's definition -- development
should be perceived as a
multidimensional process involving the
reorganization and reorientation of
entire economic and social systems
• Multidimensional
• Reorientate & Reogranize
• Economic & Social system

3. Breakdown
• multidimensional process – not just
economic
• reorganization and reorientation -- implies
that development is a dynamic process that is
continuous
• entire economic and social systems -- this
means that increased Women's rights in the
United States can be a form of development.
What about minority rights or LGBTQ? What
about democracy in a Third World nation?

4. Creative Destruction
In Capitalism, Socialism and Democracy, Schumpeter
popularized and used the term to describe the process of
transformation that accompanies radical innovation.[2] In
Schumpeter's vision of capitalism, innovative entry by
entrepreneurs was the force that sustained long-term
economic growth, even as it destroyed the value of
established companies and laborers that enjoyed some
degree of monopoly power derived from previous
technological, organizational, regulatory, and economic
paradigms.
http://www.answers.com/topic/creative-destruction
In a Nutschell: http://bigthink.com/videos/creative-destruction-from-
genesis-to-picasso-to-apple-computers-2

5. Jury Still out.
http://edq.sagepub.com/content/15/1/90.short

6. Development
Rubenstein’s Definition:
A process of improvement in the material
conditions of people through diffusion of
knowledge and technology.
Note this only deals with economic
development – material goods

7. Development
Indirectly Rubenstien implies development
includes Economic, Social, and
Demographic Characteristics
As will be seen throughout this Chapter

8. “Index City” – Or so many ways to divide the
world into “North” (developed) and “South”
(developing)
Human Development Index:
Ordinal Combination of
1. Economics -- Measure of GDP (Gross Domestic
Product)
2. Education -- Literacy Rate and Amount of
Education
3. Demographics – Life Expectancy (Health)

9. Human Development Index (HDI)

10. Human Development Index (HDI)

11. Recent HDI Results

12. Variation on HDI
• Difference: Subtract from the HDI Ranking
the Per Capita GDP Ranking
– basically how well are you doing (HDI) versus
your economic potential (per capita income)
• Note how Africa Shows a different pattern
then simply HDI, also notice the North
American Variation

13. Red represents poor use of
Economic Potential Green above
average use Beige as neutral

14. Difference in Africa
HDI Measure
HDI Rank
minus Wealth
Rank
Algeria & Madagascar Reverse Patterns – Appears
Madagascar uses its limited wealth more wisely

15. Pattern over
time

17. HDI
Note the
USA
Position in
2013

18. HDI
Note the
USA
Position in
2018

19. Note How much lower the US is
on the IHDI

20. Criticism (Blah Blah Blah – for those who want to know)
HDI for a sample of 150 countries shows a very high correlation with logarithm of GDP per capita.
The Human Development Index has been criticised on a number of grounds, including failure to include any
ecological considerations, focusing exclusively on national performance and ranking, not paying much attention
to development from a global perspective and based on grounds of measurement error of the underlying
statistics and formula changes by the UNDP which can lead to severe misclassifications of countries in the
categories of being a 'low', 'medium', 'high' or 'very high' human development country.[22] The index has also been
criticized as "redundant" and a "reinvention of the wheel", measuring aspects of development that have already
been exhaustively studied.[23][24] The index has further been criticised for having an inappropriate treatment of
income, lacking year-to-year comparability, and assessing development differently in different groups of
countries.[25]
Economists Hendrik Wolff, Howard Chong and Maximilian Auffhammer discuss the HDI from the perspective of
data error in the underlying health, education and income statistics used to construct the HDI.[22] They identify
three sources of data error which are due to (i) data updating, (ii) formula revisions and (iii) thresholds to classify
a country’s development status and find that 11%, 21% and 34% of all countries can be interpreted as currently
misclassified in the development bins due to the three sources of data error, respectively. The authors suggest
that the United Nations should discontinue the practice of classifying countries into development bins because
the cut-off values seem arbitrary, can provide incentives for strategic behavior in reporting official statistics, and
have the potential to misguide politicians, investors, charity donators and the public at large which use the HDI.
In 2010 the UNDP reacted to the criticism and updated the thresholds to classify nations as low, medium, and
high human development countries. In a comment to The Economist in early January 2011, the Human
Development Report Office responded[26] to a January 6, 2011 article in the magazine[27] which discusses the Wolff
et al. paper. The Human Development Report Office states that they undertook a systematic revision of the
methods used for the calculation of the HDI and that the new methodology directly addresses the critique by
Wolff et al. in that it generates a system for continuous updating of the human development categories whenever
formula or data revisions take place.
Each year, UN member states are listed and ranked according to the computed HDI. If high, the rank in the list can
be easily used as a means of national aggrandizement; alternatively, if low, it can be used to highlight national
insufficiencies. Using the HDI as an absolute index of social welfare, some authors have used panel HDI data to
measure the impact of economic policies on quality of life.[28]
Ratan Lal Basu criticises the HDI concept from a completely different angle. According to him the Amartya Sen-
Mahbub ul Haq concept of HDI considers that provision of material amenities alone would bring about Human
Development, but Basu opines that Human Development in the true sense should embrace both material and
moral development. According to him human development based on HDI alone, is similar to dairy farm economics

21. Another index
http://www.transparency.org/files/content/pressrelease/CPI2013_map-and-country-
results_english_embargoed.pdf

22. 2018
https://www.transparency.org/cpi2018

23. Rank and Changing Score
Where do you think the US fits on this scale?
https://en.wikipedia.org/wiki/Corruption_Perceptions_Index

24. 9.2 Standard of Living: Economic
Indicators
Gross Domestic Product per captia
• Gross Domestic Product (GDP) = all
goods and services produced in a country
in one year measured usually in US $
• GDP per capita = GDP/ total population
• All kinds of problems with these measures
not the least being every fluctuating
exchange rates between foreign
currencies and US $

25. GDP Percapita for 2012

26. Adjusted for purchasing power

27. But how well is wealth shared:
GINI Coefficient
https://data.worldbank.org/indicator/SI.POV.
GINI?type=shaded&view=map&year=2013

28. Economic Structure:
Development and Job Type
• Less Developed more primary employment
– Agriculture, logging, primary resource extraction
• More Developed more secondary employment
– Manufacturing – think China today
• Most Developed more tertiary & quarternary
– More Tertiary Service jobs (as well as Quarternary
Information based jobs – also referred to as IT or
Information Technology

29. As development occurs employment type migrates from
primary to secondary to tertiary (and today to quarternary jobs)

30. Productivity
• How much input (labor, capital, raw
materials)
• Vs output
• Example labor productivity in China is
lower than in the US to make a car, but
labor costs in China are much lower
• Developed countries can only continue to
compete by increasing productivity

31. Secondary – Manufacturing Value added per worker: note huge
productivity difference of developed countries

32. Automation in China
https://www.cnbc.com/video/2019/08/23/what-china-is-doing-in-
automation-is-unprecedented.html

33. % Enrolled in School

34. Percent of Adults that are Literate

35. Lagging in many areas

36. Maps to check out
Note which continent is lowest & where are
China and India
• Years of schooling
• Expected years of schooling
• Pupil/Teacher ratio
• Literacy Rates

37. 9.3 Health
% Undernourished

38. Obesity
http://metrocosm.com/map-world-obesity/

40. http://metrocosm.com/craz
american-obesity-in-three-
graphics/

41. Health Care Expenditures
But who is
healthier – show of
hands
Diagnosis: Healthier in Europe : By most
standards, Western Europeans are in better
medical shape than Americans. And costs
are sharply lower. But bureaucracies and
under-the-table payments mar the system.
http://articles.latimes.com/1992-12-30/news/mn-2582_1_health-care-system/2

42. 9.4 Unequal and Uneven
Development
• Inequality adjusted HDI (IHDI)
– Basically how well are things shared inside a
country
– For USA and world – review earlier slides
• Widening Inequality in Developed World

43. Core and Periphery
Results in part from Imperial Age

44. 9.5 Gender Based Measures
• Gender Inequality Index (GII)
– Compares reproductive health, empowerment, education,
employment… across genders

45. Not in your book
• Gender Empowerment Measurement
(GEM)
• Definition and calculation: The GEM
was designed to measure "whether
women and men are able to actively
participate in economic and political life
and take part in decision-making" (UNDP,
1995, p. 73)(Klasen 257).

47. Look over all of the maps
• Are there any surprises here?
• For example look at how High School
Graduation and Labor Force
Participation has a strong cultural
feature -- Hint compare Libya to India
or China
• Again look at Africa, China and India
across all maps

48. Literacy Rate female to males

49. Incomes relationship

50. Percent of seats in national legislature

51. 9.6 Two Paths of Development
For a more complete
discussion of this area see
the additional Power Point
we used in class Chap 9 --
Development -- How to &
Rostow's 5 Stages

52. Key Concepts
• Self-sufficiency erects barriers to trade – all
equally well-off/poorly-off – equality by design
• International trade path allocates scarce
resources to few activities – some get rich
before others – division of wealth by design
http://www.theatlantic.com/china/archive/2013/09/
mapping-chinas-income-inequality/279637/

53. Bolivia And Trade
• The economy of Bolivia is the 95th
largest in the world
• Lower Middle Income country.
• Human Development Index 0.663
ranked 108th (medium human
development).
• The Bolivian economy has had a
historic pattern of a single-commodity
focus. From silver to tin to coca
Tin Mining

54. As Development Goes Up
Population Growth Slows

55. • Social movement
• Helps 3rd world producers
• Creates better trade
(income/employment) conditions
• Higher payment directly to
producers
• Promotes sustainability
• Environmental
• Economic
• Cultural

56. Vikings for Fair Trade is a club to promote Fair Trade and inform
people about the issues surrounding it.
Organization Contact
The mission of Vikings of Fair Trade is: To promote Fair Trade as a
movement and a product on Western's campus…
http://asclubs.wwu.edu/show_profile/48177-vikings-for-fair-trade

57. Many times referred to as the
North-South divide – almost
all developed countries are in
the Northern Hemisphere
9.10 Millenial
Goals

58. 9.10 Millennium Goals
Slowly but surely the
Goals appear to be
obtainable.

59. Study Question
• Be sure to review all study question for
this chapter and the powerpoint on
Development – How to and Rostow’s 5
Stages