CH 1 ( Introducing Economic Development: A Global Perspective )

Adam Smith

• Scottish economist and philosopher knows as the father of modern economics, author of “The Wealth of Nations”.

Absolute Poverty

• A situation of being unable to meet the minimum levels of income, food, clothing, health care, shelter, and other essentials.

Subsistence Economy

• An economy in which production is mainly for personal consumption and the standard of living yields little more than basic necessities of life—food, shelter, and clothing.

Development

• The process of improving the quality of all human lives and capabilities by raising people’s levels of living, self-esteem, and freedom.

Developing Countries

• Countries of Asia, Africa, the Middle East, Latin America, eastern Europe, and the former Soviet Union that are presently characterized by low levels of living and other development deficits.

• Used in the development literature as a synonym for less developed countries.

Traditional Economics

• An approach to economics that emphasizes utility, profit maximization, market efficiency, and determination of equilibrium.

Political Economy

• The attempt to merge economic analysis with practical politics — to view economic activity in its political context.

Development Economics

• The study of how economies are transformed from stagnation to growth and from low-income to high-income status, and overcome problems of absolute poverty.

More Developed Countries (MDCs)

• The now economically advanced capitalist countries of western Europe, North America, Australia, New Zealand, and Japan.

Less developed countries

• A synonym for developing countries.

Globalization

• The increasing integration of national economies into expanding international markets.

Social system

• The organizational and institutional structure of a society, including its values, attitudes, powerstructure, and traditions.

Values

• Principles, standards, or qualities that a society or groups within it considers worthwhile or desirable.

Attitudes

• The states of mind or feelings of an individual, group, or society regarding issues such as material gain, hard work, saving for the future, and sharing wealth.

Institutions

• Norms, rules of conduct, and generally accepted ways of doing things. Economic institutions are humanly devised constraints that shape human interactions, including both informal and formal “rules of the game” of economic life in the widely used framework of Douglass North.

Income per Capita

• Total gross national income of a country divided by its total population.

Gross National Income (GNI)

• 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.

Gross Domestic Product (GDP)

• The total final output of goods and services produced by the country’s economy, within the country’s territory, by residents and nonresidents, regardless of its allocation between domestic and foreign claims.

Amartya Sen

• An economist and philosopher who has emphasized the importance of individual capabilities and freedoms in assessing human well-being and development.

Functionings

• What people do or can do with the commodities of given characteristics that they come to possessor control.

Capabilities

• The freedoms that people have, given their personal features and their command over commodities.

Richard Layard

• An economist who studied the relationship between happiness and economic factors, highlighting the importance of factors such as family relationships, work, health, and personal values in determining happiness.

Three Core Values of Development

• Sustenance

• Self-Esteem

• Freedom

Sustenance: The Ability to Meet Basic Needs

• 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.

Self-Esteem: To Be a Person

• The feeling of worthiness that a society enjoys when its social, political, and economic systems and institutions promote human values such as respect, dignity, integrity, and self-determination.

Freedom from Servitude: To Be Able to Choose

• A situation in which a society has at its disposal of a variety of alternatives from which to satisfy its wants and individuals enjoy choices according to their preferences

The Three Objectives of Development

1. To increase the availability and widen the distribution of basic life-sustaining goods

2. To raise levels of living

3. To expand the range of economic and social choices

Millennium Development Goals (MDGs)

• A set of eight goals adopted by the United Nations in 2000: to eradicate extreme poverty and hunger; achieve universal primary education; promote gender equality and empower women; reduce child mortality; improve maternal health; combat HIV/AIDS, malaria, and other diseases; ensure environmental sustainability; and develop a global partnership for development.

• The goals are assigned specific targets to be achieved by 2015.

The 8 MDGs

1. Eradicate extreme poverty and hunger

2. Achieve universal primary education

3. Promote gender equality and empower women

4. Reduce child mortality

5. Improve maternal health

6. Combat HIV/AIDS, malaria, and other diseases

7. Ensure environmental sustainability

8. Develop a global partnership for development

Sector

• A subset (part) of an economy, with four usages in economic development: technology (modern and traditional sectors); activity (industry or product sectors); trade (export sector); and sphere (private and public sectors)