DEVELOPMENT ECONOMICS Online course Instructor : Swarna Sadasivam - - PowerPoint PPT Presentation

DEVELOPMENT ECONOMICS

Online course Instructor : Swarna Sadasivam Vepa Course GE 10 EE-Elective MADRAS School of Economics

Lecture Notes # 1 Concept of Development – Amartya Sen

■ Part A : Gross Domestic Product Per capita is not good enough for development ■ Part B: Development, Wellbeing and Capability Approach ■ Part C: Characterizing Development

LECTURE ONE

PART- A

Part A: lecture #1 GDP per capita is not good enough

■ Concept of Development in Economics ■ Economic Growth and Economic Development - example ■ Sources of Distinction between economic growth and development

Economic growth and development – how they can change over time

Economic Growth versus Economic Development Per Capita (USD) GNI/GNP Life expectancy (Yrs) Country 1984 2019 1984 2019 China 310 10410 69 76.5 Sri Lanka 360 4020 70 77.1 Brazil 1720 9130 64 77.0 Mexico 2040 9180 66 75.15 South Africa 2340 6040 54 63.54 India 468 2130 55 70 Note: Figures are approximate values and not adjusted for for purchasing power parity

What does the table convey

■ In In t the e eighties c china a and S Sri L Lanka h had s seven t times l less g gross n national p product p per c capita compared t to S South A Africa, b , but t the l life e expectation w was m much l lower t than t that o

• f C

China a and S Sri L Lanka ■ In In 1 1984 o

• bviously G

GNP g growth d did n not r reflect t the d development a achieved b by C China a and S Sri L Lank i in terms o

• f l

length o

• f l

life l lived b by p people w which i is m much b better t than t the o

• ther t

three c

• countries. H

. Hence i it is o

• bvious t

that g growth i is d divorced f from d development ■ At t that t time In India’s ’s G GNP w was h higher s slightly t than t that o

• f C

China a and S Sri L Lanka b but t the l life e expectancy was v very l low, s , showing a a l low l level o

• f D

Development. ■ In In 2 2019 C China h has t the h highest p per c capita g gross n national i income b but t the l life E Expectancy i is n not t the highest. . ■ However S Sri L Lank r remained o

• n t

the t top f for l life e expectancy a and a at t the b bottom f for G Gross n national In Income p per c capita ■ In India d did m much b better o

• n L

Life e expectancy, b , better t than s south A Africa w with l lowest l level o

• f P

Per c capita income. . ■ It It i is o

• bvious t

that l life e expectancy w will g grow m more s slowly t than t that o

• f N

National In Income p per c capita. . ■ It It a appears t that c china i is n now m more g growth o

• riented t

than b before a and l less d development o

• riented.

. ■ Example s shows t that d development i is n not a automatic b but n needs c consistent e efforts a and b built i in systems t to m maintain i it a as i in S Sri L Lanka, n , no m matter w what t the n national In Income p per c capita i is. .

Difference between growth and Development

■ Growth l leaves o

• ut D

Distributional i impact ■ Negative a and P Positive e externalities o

• f g

growth g get l

• lost. S

. Social a and environmental l losses b become i invisible ■ Market p prices c create b biases i in t the v valuation o

• f c

commodities a and service t that e enter i into t the G GDP c calculations ■ In Interdependencies o

• ver t

time a are n neglected, s , since t the i income p per capita o

• f o
• nly o
• ne p

period i is c considered. ■ GNP p per c capita m measures o

• nly t

the m means a and n not t the ac achievements ts

LECTURE ONE

PART- B

Development and Wellbeing

■ Alternatives t to GP GPP Growth h have b been s suggested s soon a after d development e economics as b branch o

• f e

f economics w was e established a after t the s second w world w war. .

■ Rationale of lowering of income inequality and wealth inequality through taxation comes from utility theory. Welfare economics assumes that all individuals get the same utility form the same commodity basket or same level of income. ■ Concept of distributive justice advocates policies that reduce inequality of wealth and

• income. John Rawl’s theory of justice as fairness supports basic minimum needs - basic

things that citizens need,

■ Basic m minimum n needs d differ fr from o

• ne s

society t to a another, T , They a are m means a and n not ends. . ■ How t the m means c convert i into e ends a achieved i is a a c

• complex. H

. Hence a a m measure t that looks a at e ends a achieved i is b better t than t the m measure o

• f m

f means.

Functions and Capability and freedom

■ Functioning i is a an i important p part o

• f C

f Capability a approach ■ To b be a able t to d do w what o

• ne w

wants t to d do a and b being w what o

• ne w

wants t to b be i is a a satisfy fying a achievement ■ Sen C Calls t these b beings a and d doings a as F Functionings ■ The b bundle o

• f fu

f functionings a achieved d define t the C Capability s set o

• f a

f a p person ■ Expansion o

• f c

f capability s set o

• f p

f people i is d desirable f for d development ■ Freedom t to c choose i is c crucial t to c

• capability. A

. A p person w who h has s several b bundles o

• f

f fu functionings t to c chose fr from i is m more c capable t than a a p person w who h has f fewer o

• ptions ot
• t

choose fr from ■ Exercise o

• f F

f Freedom i itself c f can b be c considered a as a a fu functioning

Capability and Development

■ The n number o

• f fu

f functionings i included i in t the w well b being e evaluation o

• f a

f a p person a are

• restrictive. O

. Only s some d desirable fu functioning a are i included ■ The e entire c capability s set i is n not r relevant f for d development d domain. . ■ One’s ’s a ability t to c convert r resources t to c capability d differs a according t to c circumstances, o , of f age, g , gender, e , ethnicity, e , envi vironment a and s so o

• n.

. ■ Deprivation o

• f c

f capability f for a any r reason, b , based o

• n r

resources p possessed o

• r

discrimination o

• r a

any o

• ther c

condition i is u unacceptable. ■ Public a action m must s strive t to r remove t these c conditions ■ An e evaluation o

• f t

f the a achieved fu functions d defines d development ■ In Intersection p partial o

• rdering o
• f a

f achieved fu functioning g gives t the d desirable fu functions t to be a achieved f for d development. .

LECTURE ONE

PART- C

Characterizing Development

■ It is Not easy to characterize development. What constitutes Development and what does not is not easy to resolve ■ Valuation of development is attaching value to the components included in the development. ■ When valuation differs from one person to another it is value heterogeneity ■ When value change inter temporally over a period it is value endogeneity ■ These problems must be resolved before the public policy and public action is decides as to what to promote

Resolving value Heterogeneity

■ Partial o

• rdering In

Intersection m method h helps i in resolving m many p problem o

• f v

value h heterogeneity ■ Scientific e evidence s sometimes h helps t to r resolve difference o

• f O

Opinion ■ Additional i information o

• n w

what p people v value and w what t they w want a also h helps

Resolving Value endogeneity

■ If If t the a aspect c considered i is p prospectively b better t than the a available a alternatives a and r retrospectively b better than t the r rejected a alternatives i it i is a an i improvement. . Partial o

• rdering i

intersection m method h helps. . ■ If If t the a aspect w was w worse i in e earlier v value a and g good i in new v value, In , Intersection a approach i is n not p possible ■ Objectivity a and r rational A Assessment h help r resolve t the is issue

Choosing aspects of development for public policy

■ First s separate C Controversial f from u uncontroversial ■ Next C Clarify w what c can b be a asserted w with c confidence and w what c cannot b be a asserted a after a a l lot o

• f h

hesitation ■ Treat t the v value a as t the u ultimate j judge o

• f

de develo lopment ■ Value i is t the v very e essence o

• f D

Development a and j just not a a m method o

• r i

instrument