Transcript what do we mean by economic development

what do we mean by
economic
development
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economic growth is a necessary but not
sufficient condition for improving living
standards
necessary because with no growth,
individuals can become better off only through
transfers of income and growth from others
this is of limited effect in poor countries with
limited number of rich segment of people
with economic growth therefore, enables
some or even all people to become better off
without anyone becoming worse off.
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economic growth is not sufficient for improving
living standards because of problems related
to how income in spent and distributed:
1. governments may promote economic
growth to attain other goals other than
improving its citizens well-being
2. resources may be heavily invested in further
growth with the promise of “future”
consumption
3. “the rich get richer and the poor get poorer”
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therefore, economic development goal
(according to Sen), is to expand the
capabilities of people to live the lives they
choose to lead.
income is one factor in determining such
capabilities but not the one.
income is a mean to an end not an end by
itself.
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human development
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Countries based on World Bank income groupings for 2006 (calculated by GNI per capita, Atlas
method).
██ High income
██ Upper-middle income
██ Lower-middle income
██ Low income
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human vs. economic
development
the idea is the same: the distinction is
intended to expand the perception of
development as encompassing more than
increases in per capita income.
human development is a process of
enlarging people’s choice
three essentials choices/levels of
development are:
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to enjoy a healthy life, to acquire knowledge, and
to have access to resources needed for a decent
standard of living.
human development is associated with additional
choices:political and economic freedom,
opportunities for being creative and productive,
enjoying self-respect...
2 sides of human development: the formation of
human capabilities (such as improved health,
knowledge and skills) and the use people make
of their acquired capabilities (for leisure,
productive purposes, or being active in cultural,
social, and political affairs)
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measuring human
development
for each element of human development:
healthy life, to acquire knowledge, and to
have access to resources needed for a
decent standard of living, a specific
measure was constructed and aggregated
into an index, the Human Development
Index (HDI).
(The UNDP)
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what can we learn from
HDI?
HDI vs. GDP per capita as an index of
economic or human development
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most countries have different ranking for gdp per
capita than for HDI.
example: Peru: HDI ranking of 82, GDP per capita
(PPP) ranking of 96
this suggests that Peru has made more relative
progress in achieving human development than in
raising per capita income.
Kuwait: GDP per capita rank of 27, HDI rank of 46.
therefore, there is no automatic link between a
nation’s per capita income and its level of human
development.
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human development seems to progress
more rabidly than income growth
yet, economic growth at low income levels
seems disconnected from human
development.
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the trend in 2-4 confirms the result
computed in 2-3.
rising incomes systematically raises the
HDI
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is economic growth
desirable?
other prospectives: (examples:)
negative effects: spread of materialism,
westernization of world cultures, and the
destruction of traditional societies
environmental issues
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