Development Economics: Core Themes

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Development Economics Core Themes Prospects

• Sripad Motiram
• Associate Professor, IGIDR

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Outline

• Overview of changes in thinking on development
• Sub-field of development economics
• Development policy
• Fruitful areas of research/policy
• Link these to changes in the larger socioeconomic
  and political context

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Early Development Economics

• 1940s especially post WW II
• Developed Developing or Underdeveloped
• First/Second/Third World
• Newly independent colonies
• Antecedents
• Classical Pol Econ (17th,18th, early 19th)
• Steurt, Hume, Smith, Ricardo, Marx, Malthus
• Britain - going through industrial transformation

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Early Development

• Mid to late 19th century protectionist
  arguments to promote development (List,
  Manoilescu, Ranade)
• Early 20th century Soviet Union
• Capital accumulation in a dual economy, surplus
  mobilization from agriculture, dynamics of a
  family farm
• Preobrazhenski, Feldman, Chayanov

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Early Development

• Development thinking characterized by
• A belief that orthodox/neoclassical economics was
  irrelevant/inapplicable
• Faith in a major role for the state
• Pessimism towards trade/gains from trade
• Keynesian Influence Great Depression
  Structuralism Colonial experience Somewhat of a
  consensus on the state

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Early Development

• Big Ideas
• Rosenstein-Rodan (Big Push) Nurkse
• Albert Hirschman (Unbalanced Growth)
• Arthur Lewis (Development via Surplus Labor)
• The most influential idea
• Criticism/Debate Empirical Studies on (lack of)
  surplus labor Importance of agriculture
  Migration Agrarian arrangements

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Breakdown in the 1970s/80s

• Increasing negativity towards the state
• State failures became apparent
• Cutting across the ideological spectrum Neo
  Marxist, Non Marxist, Neoclassical
• Weaknesses in Keynesian framework and policies
  were exposed
• Conservative governments in US, UK

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Breakdown

• Misinterpretation of East Asian success
• Washington Consensus
• Smaller role for the state
• Getting prices right
• Higher growth, which would be good for poverty
  reduction
• Bias against agriculture would be removed

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Growth Performance
1960-80 1980-99
Developed 3.2 2.2
Developing 3.0 1.5
Latin America 3.1 0.6
Sub Saharan Africa 2.5 -0.2
Mid East N. Africa 2.0 -0.7
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What Next?

• More recent literature has incorporated earlier
  ideas
• Endogenous growth increasing returns,
  externalities, complementarities
• Major role for institutions
• Coase, Demsetz, Alchian, Williamson and North
• Roots in older/classic works
• Non-methodologically individualistic approaches
• Informational considerations
• Akerlof, Stiglitz and Spence
• Explicit treatment/modeling of the state

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• Thank You