This document is a course outline for 'Issues in Development Economics' (ECN 306) taught by Dr. Monica A. Orisadare at OAU, Nigeria. It includes objectives, key topics such as the history and scope of development economics, and various economic theories addressing development challenges. The course aims to educate learners on the complexities of economic development, underdevelopment factors, and the roles of government and international institutions.

1. Course Title: Issues in Development
Economics
Course Code: ECN 306
Dr Monica A. Orisadare
Department of Economics
OAU, Ile-Ife, Nigeria

2. Module 1
The general nature of the development
problem

3. 1.0 Objectives
At the end of this module, learners should be able to
• Define development economics
• Trace the history of development economics
• Explain the need for a new economic order
• Identify the scope of development economics
• Explain the emergence of development economics as
discipline

4. 2.0 Outline
• The meaning and history of development economics
• New International Economic Order (NIEO)
• Scope of development economics
• Emergence of development economics as
discipline
• The challenges of development
• Factors in the perpetuation of underdevelopment
• Assignment

5. The meaning of development economics
• The study of economic development is one of
the newest, most exciting, and most
challenging branches of the broader disciplines
of economics and political economy. Recall in
your ECN 203 –Introductory Applied
Economics I class; some basic concept of
economics;
• Traditional economics is concerned primarily
with the efficient, least-cost allocation of
scarce productive resources and with the
optimal growth of these resources over time

6. • Traditional neoclassical economics assumes economic
“rationality” and a purely materialistic, individualistic,
self-interested orientation toward economic decision
making.
• Political economy goes beyond traditional economics
to study, among other things, the social and
institutional processes through which certain groups of
economic and political elites influence the allocation of
scarce productive resources.
• Development economics to a greater extent than
traditional neoclassical economics or even political
economy, 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.

7. • It must focus on the mechanisms that keep
families, regions, and even entire nations in
poverty traps, in which past poverty causes
future poverty, and on the most effective
strategies for breaking out of these traps.
• Consequently, a larger government role and
some degree of coordinated economic
decision making directed toward transforming
the economy are usually viewed as essential
components of development economics.

8. The history of development economics
• The following are some of the factors for the
emergence of development economics as a discipline;
i. Post-WWII theories
• The origins of modern development economics are
often traced to the need for, and likely problems with
the industrialization of eastern Europe in the aftermath
of World War II- Paul Rosenstein-Rodan, Kurt
Mandelbaum, Ragnar Nurkse, and Sir Hans Wolfgang
Singer.
• Only after the war did economists turn their concerns
towards Asia, Africa and Latin America.
• Authors such as Simon Kuznets and W. Arthur
Lewis were analysts of not only economic growth but
also structural transformation.

9. ii. After the 1930s: Development economics as it is
commonly understood
Early studies of development ‘30s-’40s Latin
America;Western perspective (end of WWII): a
way to study (and control, monitor) what was
happening in previous colonies;“Studying the
underdeveloped world”; “the late comers” In
Rostow words once the America decides not to go
to war with Russia or China they have to find
other ways to protect their interests (a mixture of
political economic and military activity).
• Thus, the USA need to develop a more rigorous
economic policy in ASIA.

10. iii. Bretton Woods Institutions
In 1944 in the Bretton Woods Conference (USA) the new
rules governing the world economy were defined
parallel to the creation of the UN the year after
1. A fixed exchange rate system with the dollar as a
reference currency;
2. An International Monetary Fund (IMF), whose aim was
to monitor the monetary policies of the member
countries and provide short-term loans;
3. A World Bank, who should lend money to lower
income countries; these are long-term loans to
support economic development;
4. Opening of the international trade, with the GATT
(General Agreement on Trade and Tariffs) which then
became WTO in 1995.

11. iv. Failure of Economic theories
Linear-stages-of-growth model
• This theory modifies Marx's stages theory of
development and focuses on the accelerated
accumulation of capital, through the utilization of both
domestic and international savings as a means of
spurring investment, as the primary means of
promoting economic growth and, thus, development.
• The linear-stages-of-growth model posits that there are
a series of five consecutive stages of development
which all countries must go through during the process
of development.
• These stages are "the traditional society, the pre-
conditions for take-off, the take-off, the drive to
maturity, and the age of high mass-consumption"

12. • Simple versions of the Harrod–Domar
model provide a mathematical illustration of
the argument that improved capital
investment leads to greater economic growth.
• Such theories have been criticized for not
recognizing that, while necessary, capital
accumulation is not a sufficient condition for
development.
• This has led to the major criticism that the
theory assumes that the conditions found in
developing countries are the same as those
found in post-WWII Europe.

13. v. Structural-change theory
• Structural-change theory deals with policies focused on
changing the economic structures of developing
countries from being composed primarily of
subsistence agricultural practices to being a "more
modern, more urbanized, and more industrially diverse
manufacturing and service economy."
• There are two major forms of structural-change theory:
W. Lewis' two-sector surplus model, which views
agrarian societies as consisting of large amounts of
surplus labor which can be utilized to spur the
development of an urbanized industrial sector, and
• Hollis Chenery's patterns of development approach,
which holds that different countries become wealthy
via different trajectories.

14. • The pattern that a particular country will
follow, in this framework, depends on its size
and resources, and potentially other factors
including its current income level and
comparative advantages relative to other
nations.
• However, the structural-change approaches to
development economics have faced criticism
for their emphasis on urban development at
the expense of rural development which can
lead to a substantial rise in inequality between
internal regions of a country.

15. • The two-sector surplus model, which was
developed in the 1950s, has been further
criticized for its underlying assumption that
predominantly agrarian societies suffer from a
surplus of labor.
• Actual empirical studies have shown that such
labor surpluses are only seasonal and drawing
such labor to urban areas can result in a
collapse of the agricultural sector.
• The patterns of development approach has
been criticized for lacking a theoretical
framework.

16. vi. International dependence theory
• International dependence theories gained
prominence in the 1970s as a reaction to the
failure of earlier theories to lead to widespread
successes in international development.
• Unlike earlier theories, international dependence
theories have their origins in developing countries
and view obstacles to development as being
primarily external in nature, rather than internal.
• These theories view developing countries as being
economically and politically dependent on more
powerful, developed countries which have an
interest in maintaining their dominant position.

17. • There are three different, major formulations
of international dependence
theory: neocolonial dependence theory, the
false-paradigm model, and the dualistic-
dependence model.
• The first formulation of international
dependence theory- neocolonial dependence
theory, has its origins in Marxism and views
the failure of many developing nations to
undergo successful development as being the
result of the historical development of the
international capitalist system

18. vii. Neoclassical theory
• With the rise of several conservative governments in
the developed world during the 1980s, neoclassical
theories represent a radical shift away from
International Dependence Theories gained prominence.
• Neoclassical theories argue that governments should
not intervene in the economy; in other words, these
theories are claiming that an unobstructed free market
is the best means of inducing rapid and successful
development.
• Competitive free markets unrestrained by excessive
government regulation are seen as being able to
naturally ensure that the allocation of resources occurs
with the greatest efficiency possible and the economic
growth is raised and stabilized.

19. • Within the realm of neoclassical theory, there are
several different approaches each with subtle, views
regarding the extent to which the market should be left
unregulated.
• These different takes on neoclassical theory are the free
market approach, public-choice theory, and the market-
friendly approach.
• Of the three, both the free-market approach and
public-choice theory contend that the market should be
totally free, meaning that any intervention by the
government is necessarily bad.
• Public-choice theory is arguably the more radical of the
two with its view, closely associated with libertarianism,
that governments themselves are rarely good and
therefore should be as minimal as possible.

20. • The market-friendly approach, unlike the other
two, is a more recent development and is
often associated with the World Bank.
• This approach still advocates free markets but
recognizes that there are many imperfections
in the markets of many developing nations and
thus argues that some government
intervention is an effective means of fixing
such imperfections.
•

21. New International Economic Order (NIEO)
• The New International Economic Order (NIEO) was a set of proposals
put forward during the 1970s by some developing countries through
the United Nations Conference on Trade and Development to
promote their interests by improving their Term of trade by
increasing exports from the third to the first world transfers of
capital to the third world, transfers of technology to the third world
• increased development assistance, as well as provisions for
increasing aid and to alter the international monetary system
• developed-country tariff reductions, and other means.
• It was meant to be a revision of the international economic system
in favour of Third World countries, replacing the Bretton Woods
system, which had benefited the leading states that had created it –
especially the United States.
• This order was demanded by the Non-Aligned Movement.

22. Scope of development economics
The following are examples of some of the need
behind studying development and what is to be
studied in development economics:
• Problem of World Poverty
• Meaning Of Economic Development
• Models Of Economic Growth
• Theories Of Under-Development And
Development
• Problems Of Population (Population explosion-
limited resources, unemployment, migration,
urbanization and environment )- Optimal
population?

23. • Dualistic Theories- i.e., they have a few
developed cities and so many backward cities,
use of capital intensive technologies along
with rising unemployment; and the existence
of mass poverty accompanied by a few rich etc
• World Development Institutions and Foreign
Aid

24. Scope of development economics Cont’
The following are some of the questions addressed
in development economics:
• 1. What is the real meaning of development? Do
the Development Goals fit with these meanings?
• 2. What can be learned from the historical record
of economic progress in the now developed
world? Are the initial conditions similar or
different for contemporary developing countries
from what the developed countries faced on the
eve of their industrialization or in their earlier
phases?

25. • 3. What are economic institutions, and how do
they shape problems of underdevelopment and
prospects for successful development?
• 4. How can the extremes between rich and poor
be so very great?
• 5. What are the sources of national and
international economic growth? Who benefits
from such growth and why?
• 6. Why do some countries make rapid progress
toward development while many others remain
poor?

26. • 7. Which are the most influential theories of
development, and are they compatible? Is
underdevelopment an internally (domestically) or
externally (internationally) induced phenomenon?
• 8. What constraints most hold back accelerated
growth, depending on local conditions?
• 9. How can improvements in the role and status
of women have an especially beneficial impact on
development prospects?
• 10. What are the causes of extreme poverty, and
what policies have been most effective for
improving the lives of the poorest of the poor?

27. Recap
• This module looked at the definition
development economics;
• Trace the emergence and history of
development economics as a discipline
• Identify the scope of development economics
• Some of the questions addressed by
development economics

28. Assignment
• Distinguish between traditional economics,
political economics and development economics
• Mention some factors responsible for the
development of development economics as a
discipline
• Identify five scope of development economics
• State three major question that development
economics addresses

29. • Thank You