Development economics

Development economics or development economics refers to that part of economics that deals with differences in the development of individual economies. The main focus is on developing countries, economic reasons for their underdevelopment (development theory) and recommendations for a development policy.

Today's definition of development generally moves away from purely economic indicators (such as national income, growth, distribution) and also takes into account socio-economic factors such as the illiteracy rate, child mortality and educational attainment.

With regard to the causes of economic underdevelopment, a distinction is made between endogenous (internal) and exogenous (external) causes.

Development economics comprises both a macroeconomic and a microeconomic view. While the macroeconomic view deals with long-term economic growth and structural changes in the growth process, the microeconomic view addresses incentive problems at the level of individual households and firms.

Development economics also deals with institutional issues, such as the functions of the World Bank and the IMF (International Monetary Fund). A special topic is failed states, the causes of their failure and approaches to overcoming this situation.

Antecedent

The earliest precursor of development economics can be seen as 17th century mercantilism, which linked growth and national prosperity to an increase in the foreign trade surplus, which was to be promoted through protectionism. However, here the colonies were seen only as sources of raw materials and outlets for manufactured goods of the mother country. Alexander Hamilton was the first to criticize protectionism as an obstacle to the development of any industrialization. Subsequently, for the mainstream of economists, free trade was seen as the guarantor of development. As a precursor of development economics in the narrower sense can be considered Colin Clark, who proposed to use national income as an indicator and basis for international comparisons. He developed the concept of economic growth measured by the growth rate of national income. The problem of the development of poorly developed countries and regions came into the focus of economics only after 1945.

Important representatives

Major contributors, ranked by the year of publication of their most important contribution to development economics, are:

• Paul Rosenstein-Rodan (1902-1985): His 1943 study Problems of the Industrialisation of Eastern and South-Eastern Europe was, according to the development economist Hans-Heinrich Bass, "probably the first work of the sub-discipline of development economics ever". Rosenstein-Rodan argued that the uncoordinated private sectors were overwhelmed by the task of stimulating growth. The necessary complementarity of the development of industries and the possibility of economies of scale a development strategy required state-induced, large-scale industrialization (big push in Rosenstein-Rodan's 1957 diction) combined with long-term oriented state planning. Rosenstein-Rodan was therefore also a proponent of the development economics strategy of balanced growth.
• Raúl Prebisch (1901-1986): The paper The Economic Development of Latin America and its Principal Problems, published by the Argentinean Prebisch in 1949 (Spanish) and 1950 (English) (as well as Hans Singer's paper Postwar Price Relation Between Underdeveloped and Industrialized Countries, 1949, written for the UN) argued that there was a secular deterioration in the terms of trade of developing countries in world trade (Prebisch-Singer thesis).
• Ragnar Nurkse (1907-1959): His 1953 paper Problems of Capital Formation in Underdeveloped Countries focused on the concept of the vicious circle of poverty as a cause of economic backwardness. To overcome structural poverty, Nurkse also argued for the concepts of big-push industrialization and balanced growth.
• Sir William Arthur Lewis (1915-1991): The Briton described a dual economy in a 1954 article, Economic Development with Unlimited Supplies of Labour. He referred to the duality of the market in developing countries between a traditional agricultural sector and a modern industrial sector (Lewis model). Lewis received the Alfred Nobel Memorial Prize in Economic Sciences.
• Walt Whitman Rostow (1916-2003): The US economist made a contribution to modernization theory with his 1960 book The Stages of Economic Growth: A Noncommunist Manifesto.

Contemporary exponents of development economics are (in alphabetical order):

• Irma Adelman (1930-2017), a professor in the Department of Agricultural and Resource Economics at the University of California, Berkeley, developed the strategy of agricultural-demand led industrialization in her 1984 essay Beyond Export-Led Growth.
• Daron Acemoğlu, professor of applied economics at the Massachusetts Institute of Technology, points to poor institutional frameworks as a major reason for the differences in the degree of economic development between different former colonies (see The colonial origins of comparative development).
• Abhjit Banerjee, Indian economist at the Massachusetts Institute of Technology, recipient of the 2019 Alfred Nobel Memorial Prize in Economic Sciences along with his wife Esther Duflo and Michael Kremer.
• Kaushik Basu, an Indian economist at Cornell University and editor of the Oxford companion to economics in India, laments, among other things, the retreat of democracy as a result of globalization.
• Esther Duflo, Abdul Latif Jameel Professor of Development Economics at the Massachusetts Institute of Technology and Co-Director of the Abdul Latif Jameel Poverty Lab (J-PAL), recipient of the 2019 Alfred Nobel Memorial Prize in Economic Sciences along with her husband Abhjit Banerjee and Michael Kremer.
• Chang Ha-joon, South Korean, Reader in the Political Economy of Developmentat Cambridge University since 2005, has published several books on development policy, including: Kicking away the ladder. Policies and institutions for economic development in historical perspective (2002), which won the Gunnar Myrdal Prize in 2005. He argues that, for a limited time, protectionist measures can be justified to protect the development of an underdeveloped country.
• Robert Kappel (born 1946), former President of the German Institute of Global and Area Studies, Leibniz Institute of Global and Area Studies (GIGA), focused on the growth conditions for small and medium-sized enterprises (SMEs) in developing countries.
• Dani Rodrik, a Turkish economist and professor at Harvard University, is a prominent critic of free trade. In his book "The Globalization Paradox" (2011), he postulates that free trade, democracy, and nation-statehood are incompatible with each other - one must decide against one of the three.
• Jeffrey D. Sachs, US economist and special advisor to the Millennium Development Goals since 2002, is committed to extensive debt relief for extremely poor countries and to the fight against diseases, especially HIV/AIDS in developing countries.
• Amartya Sen (born 1933), Indian economist and economic philosopher, Professor of Economics at Harvard University, Alfred Nobel Memorial Prize in Economic Sciences, is concerned with the problem of poverty and issues of welfare economics. He was instrumental in the development of the Human Development Index and related indicators. His work "Poverty and Famines. An Essay on Entitlement and Deprivation" was published in 1982. Sen was awarded the book Economics for the People. Wege zu Gerechtigkeit und Solidarität in der Marktwirtschaft, in which he explains the concept of the capability approach in a generally understandable way.
• Hernando de Soto (born 1941), Peruvian economist, deals primarily with issues of the informal economic sector. His most important work was published in 1986 under the title El otro sendero.
• Paul Collier, Professor of Economics and Director of the Centre for African Economies at Oxford University, previously Head of Research at the World Bank, wrote the book: The Bottom Billion. Why the poorest countries are failing and what can be done about it (Bundeszentrale für Politische Bildung, Bonn 2008).
• Joseph E. Stiglitz, US economist, Alfred Nobel Memorial Prize in Economic Sciences, addresses the problems of globalization in various writings, including: The Shadows of Globalization and The Opportunities of Globalization, he addresses the problems of globalization and calls for a global social contract.
• Erik Thorbecke (born 1929), developer of the social accounting matrix and the Foster-Greer-Thorbecke indices for measuring regional poverty and regionally unequal income distribution
• Michael Todaro (born 1942), US economist, author of what is probably the most widely used textbook on economic development, researched in particular the causes of migration, which he formulated in a dynamic model (Harris-Todaro model).
• Karl Wohlmuth (born 1942), an Austrian economist, studied the conditions for innovation in the process of catch-up economic development.