Chapter 1
Economics, Institutions, and Development: A Global
Perspective
Index
How the Other Three-Quarters Live
Economics and Development Studies
The Nature of Development Economics
Why Study Development Economics? Some Critical Questions
The Important Role of Values in Development Economics
Economies as Social Systems: The Need to Go Beyond Simple
Economics
What Do We Mean by Development?
Traditional Economic Measures
The New Economic View of Development
Sen’s “Capabilities” Approach
Three Core Values of Development
Sustenance: The Ability to Meet Basic Needs
Self-Esteem: To Be a Person
Freedom from Servitude: To Be Able to Choose
The Three Objectives of Development
Conclusions
KEY CONCEPTS
& COMMENTARY
Attitudes, 14
Glossary: A state of mind or feeling of an individual, group,
or society regarding issues such as material gain, hard work, saving for the
future, sharing wealth, etc. See also values.
Commentary:
Capabilities, 20
Glossary: The freedoms that a person has to be or to do, given their personal features and their command over
commodities. See the discussion of Amartya Sen’s approach to
defining development in Chapter 1.
Commentary:
Development
Economics, 9
Glossary: The study of how economies are transformed from
stagnation to growth and from low-income to high-income status. See development.
Development The process of improving the quality of all human
lives. Three equally important aspects
of development are (1) raising people’s living levels - their incomes and
consumption levels of food, medical services, education etc., through relevant
economic growth processes; (2) creating conditions conducive to the growth of
people’s self-esteem through the establishment of social, political, and
economic systems and institutions that promote human dignity and respect; and
(3) increasing people’s freedom by enlarging the range of their choice
variables, as by increasing varieties of consumer goods and services.
Commentary:
Developing Nations, 6
Glossary: The present countries of Asia, Africa, the Middle
East, Latin America and East Europe and the Former Soviet Union, mainly
characterized by low levels of living, high rates of population growth, low
income per capita, and general economic and technological dependence on
developed economies.
Commentary:
Freedom, 21
Glossary: A situation in which a society has at its disposal a
variety of alternatives from which to satisfy its wants. See also development.
Commentary:
Functionings, 18
Glossary: What people do or can do with the commodities of
given characteristics that they come to possess or control (see Chapter 1).
Commentary:
Globalization, 11
Glossary: The increasing integration of national economies
into expanding international markets.
Commentary:
Gross National Product (GNP), 15
Glossary: The total domestic and foreign output claimed by
residents of a country. It comprises
gross domestic product (GDP) plus factor incomes accruing to residents from
abroad, less the income earned in the domestic economy accruing to persons abroad. See also national
income.
Commentary:
Income Per Capita, 15
Glossary: Total gross national product of a country divided by
total population. Per capita income is
often used as an economic indicator of level of living and development. It can, however, be a biased index because it
takes no account of income distribution and the ownership of the assets that
are employed to generate part of that income.
Commentary:
Institutions, 14
Glossary: Norms, rules of conduct, and generally accepted ways
of doing things. Social institutions are
well-defined, formal organizations of society that govern the way that society
operates - for example, the class system, private versus communal ownership, or
the educational system. Political
institutions are the systems that govern the operations of the government of a
particular society - formal power structures, political parties, and mechanisms
for obtaining power.
Commentary:
Schlicht, E., On Custom in the Economy, Introduction, Oxford Clarendon Press, 1998, 1-8.
Schlicht, E., Aestheticism in the Theory of Custom, Journal des Economistes et des Etudes Humaines, Volume 70, numéro 1, Mars 2000, pp 33-51.
Less Developed Countries (LDCs), 9
Glossary: See developing
countries
Commentary:
More Developed Countries (MDCs), 9
Glossary: See developed world
Developed World The now economically advanced capitalist countries of
Commentary:
Non-economic Variables, 14
Glossary: Elements of interest to economists in their work but
not given a monetary value or expressed numerically because of their intangible
nature. Sometimes non-economic variables
such as educational, health, cultural, political, and institutional factors are
more important than the quantifiable economic variables in promoting
development.
Commentary: Arguably some
of what the authors treat as non-economic are in fact economic, e.g., property rights.
Extract: The Competitiveness of Nations
in a Global Knowledge-Based Economy
10.84 The nature of Physiocratic public intervention was also radically
different from Marxian ‘ownership of the means of production’ and Keynesian
management of aggregate demand. Accepting that private property and
self-interest were the drivers of economic growth and development, the Physiocrats reached beneath the surface of the laissez
faire, laissez passer marketplace. They reached down to the legal
foundations of capitalism (Commons 1924) to
manipulate the nature of property rights themselves. For the Physiocrats, “the public interest is manifest in the
continuing modification or reconstitution of the bundle of rights that comprise
private property at any given time (Samuels 1962, 161).
10.85 In effect, the Physiocrats wanted to ‘load the dice’ to raise the
‘commanding heights’ of the national economy. They wanted to use the
conscious manipulation of capitalist self-interest – accumulation of marketable
property – to foster and promote the economic growth and development of the
nation. The Physiocrats thus viewed
property rights as instruments of economic policy. They also saw them as
providing the foundation of the economy itself defining what is bought and
sold, how and where. Accordingly, the Physiocrats:
implicitly recognize that the basic economic
institutions (the organization of economy) are legal in character; that law is
an instrument for the attainment of economic objectives and that economy is an
object of legal control (Samuels
1962, 162).
Per Capita GNP, 15
Glossary: See income per
capita
Commentary:
Political Economy, 9
Glossary: The attempt to merge economic analysis with
practical politics - to view economic activity in its political context. Much of classical economics was political
economy, and today political economy is increasingly being recognized as
necessary for any realistic examination of development problems.
Commentary:
Self-Esteem, 21
Glossary: The feeling of worthiness that a society enjoys when
its social, political, and economic systems and
institutions promote human respect, dignity, integrity, self-determination,
etc. See development.
Commentary:
Social Indicators, 15
Glossary: Non-economic measures of development, such as life
expectancy at birth, infant mortality rate, literacy rate, and physicians per
100,000 population.
Commentary:
Social System, 14
Glossary: The organizational and institutional structure of a
society, including its value premises, attitudes, power structure, and
traditions. Major social systems include
political processes, religions, and ethnic divisions.
Commentary:
Subsistence
Economy, 5
Glossary: An economy in which production is mainly for
personal consumption and the standard of living yields no more than the basic
necessities of life - food, shelter, and clothing. See also subsistence farming.
Commentary:
Sustenance, 21
Glossary: The basic goods and services, such as food,
clothing, and shelter, that are necessary to sustain
an average human being at the bare minimum level of living.
Commentary: The question
arises as to whether ‘sustenance’ is an absolute, e.g., calories of food per
day, or relative, i.e., what is a luxury to people in an under-developed
country is a necessity for sustenance in a developed country, e.g., access to a
telephone, television or even the internet.
Traditional Economics, 8
Glossary: The economics of capitalist market economies
characterized by consumer sovereignty, profit maximization, private enterprise,
and perfect competition. The major focus
is on the efficient allocation of scarce resources (see economic efficiency)
through the price system and the forces of supply and demand. See also microeconomics,
macroeconomics, laissez-faire, invisible hand, and market economy.
Commentary:
Value Premises, 13
Glossary: See values
Commentary:
Values, 14, 21
Glossary: Principles, standards, or qualities considered
worthwhile or desirable. A value
judgment reflects personal or class beliefs.
See also normative economics.
Commentary: The authors
do not discuss equity which together with efficiency and effectiveness is one
of the 3 ‘Es’ of economics. Behind the
motivation for international development is a sense of ‘inequity’. Equity is a concept that emerged out of the
Anglo-American Common law. When England
was taken by William the Conqueror in 1066 there was a patchwork of legal
systems reflecting the different peoples settled in various parts of the
country – Angles, Celts, Danes, Jutes, Saxons, etc. The same crime or
offense often had dramatically different penalties. Over time the King established ‘courts of
equity’ to mitigate such differences as well as to provide a venue for appeal
by the poor and weak to the Crown against the strong and powerful, e.g., the nobles.. The rationale was that even though the law
may have been properly applied, its outcome was unfair, unequal or not
equitable. Out of this legal concept
that of economic equity developed especially with respect to taxation. In economics there are two primary dimensions
to equity. Horizontal equity requires
‘like treatment of like’. Vertical
equity requires ‘unlike treatment of unlike’.