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) Life expectancy GNI/GNP (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 of C China a and S Sri L Lanka ■ In In 1 1984 o obviously 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 of l length o of l life l lived b by p people w which i is m much b better t than t the o other t three c countries. H . Hence i it is o obvious 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 of 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 of 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 on 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 on L Life e expectancy, b , better t than s south A Africa w with l lowest l level o of P Per c capita income. . ■ It It i is o obvious t that l life e expectancy w will g grow m more s slowly t than t that o of 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 oriented t than b before a and l less d development o oriented. . ■ 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 out D Distributional i impact ■ Negative a and P Positive e externalities o of 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 of c commodities a and service t that e enter i into t the G GDP c calculations ■ In Interdependencies o over t time a are n neglected, s , since t the i income p per capita o of o only o one p period i is c considered. ■ GNP p per c capita m measures o only 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 of 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 one 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 of m f means .
Functions and Capability and freedom ■ Functioning i is a an i important p part o of C f Capability a approach ■ To b be a able t to d do w what o one w wants t to d do a and b being w what o one 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 of fu f functionings a achieved d define t the C Capability s set o of a f a p person ■ Expansion o of c f capability s set o of 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 of f functionings t fu to c chose fr from i is m more c capable t than a a p person w who h has f fewer o options ot ot choose fr from ■ Exercise o of 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 of fu f functionings i included i in t the w well b being e evaluation o of 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 on. . ■ Deprivation o of c f capability f for a any r reason, b , based o on r resources p possessed o or discrimination o or a any o other 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 of t f the a achieved fu functions d defines d development ■ In Intersection p partial o ordering o of 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 ordering In Intersection m method h helps i in resolving m many p problem o of v value h heterogeneity ■ Scientific e evidence s sometimes h helps t to r resolve difference o of O Opinion ■ Additional i information o on 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 ordering 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 of h hesitation ■ Treat t the v value a as t the u ultimate j judge o of de develo lopment ■ Value i is t the v very e essence o of D Development a and j just not a a m method o or i instrument
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