What is development economics?
Development economics is a branch of economics that focuses on improving fiscal, economic and social conditions in developing countries. Development economics takes into account factors such as health, education, working conditions, national and international policies and market conditions with an emphasis on improving conditions in the most affluent countries. poor of the world.
The field also examines macroeconomic and microeconomic factors related to the structure of developing economies and to national and international economic growth.
Key points to remember
- Development economics is a branch of economics aimed at improving fiscal, economic and social conditions in developing countries.
- The areas on which development economics focuses include health, education, working conditions and market conditions.
- Development economics seeks to understand and shape macro and microeconomic policies in order to lift poor countries out of poverty.
- The application of development economics is complex and varied because the cultural, social and economic frameworks of each nation are different.
- Four common theories of development economics include mercantilism, nationalism, the linear stages of the growth model, and the theory of structural change.
Understanding development economics
Development economics studies the transformation of emerging nations into more prosperous nations. Strategies for transforming a developing economy tend to be unique as countries’ social and political backgrounds can vary widely. Not only that, but each nation’s cultural and economic frameworks are also different, such as women’s rights and child labor laws.
Economics students and professional economists create theories and methods that guide practitioners in determining practices and policies that can be used and implemented at the national and international political level.
Some aspects of development economics involve determining the extent to which rapid population growth helps or hinders development, the structural transformation of economies, and the role of education and health care in development.
They also include international trade, globalization, sustainable development, the effects of epidemics, such as HIV, and the impact of disasters on economic and human development.
Prominent development economists include Jeffrey Sachs, Hernando de Soto Polar, and Nobel laureates Simon Kuznets, Amartya Sen and Joseph Stiglitz.
Types of development economics
Commercialism is considered to be one of the earliest forms of development economics that created practices to promote the success of a nation. It was a dominant economic theory practiced in Europe from the 16th to the 18th century. The theory favored increasing state power by reducing exposure to rival national powers.
Like political absolutism and absolute monarchies, mercantilism promoted government regulation by prohibiting colonies from dealing with other nations.
Commercialism has monopolized markets with basic ports and banned exports of gold and silver. He believed that the higher the supply of gold and silver, the richer it would be. In general, it sought a trade surplus (exports greater than imports), did not allow the use of foreign vessels for trade, and optimized the use of domestic resources.
Economic nationalism reflects policies that focus on national control over capital formation, the economy and labor, using tariffs or other barriers. It restricts the movement of capital, goods and labor.
Economic nationalists generally disagree with the benefits of globalization and unlimited free trade. They focus on an isolationist policy so that industries in one country can develop without the threat of competition from companies established in other countries.
The economy of the early United States is a prime example of economic nationalism. As a new nation, it sought to develop without being too dependent on outside influences. It adopted measures, such as high tariffs, so that its own industries could develop unhindered.
Linear Stages of Growth Model
The linear stages of growth model was used to revitalize the European economy after World War II.
This model asserts that economic growth can only come from industrialization. The model also recognizes that local institutions and social attitudes can restrict growth if these factors influence people’s savings rates and investments.
The linear stages of growth model depicts a well-designed capital addition associated with public intervention. This injection of capital and the restrictions of the public sector lead to economic development and industrialization.
Theory of structural change
Structural Change Theory focuses on changing the overall economic structure of a nation, which aims to shift society from a predominantly agrarian society to a predominantly industrial society.
For example, Russia before the Communist Revolution was an agrarian society. When the Communists overthrew the royal family and took power, they quickly industrialized the nation, allowing it to become a superpower.