Development Economics By Michael P. Todaro | Stephen C. Smith Detailed Summary of Chapter 1,2,3,4,5,6,7,8,10,15

Development Economics By Michael P. Todaro | Stephen C. Smith
Summary of:
Principles and concepts
Chapter 1: Introducing Economic Development
Chapter 2: Comparative Economic Development
Chapter 3: Classic Theories of Economic Growth and Development
Chapter 4: Contemporary Models of Development and Underdevelopment
Problems and policies: Domestic
Chapter 5: Poverty, Inequality and Development
Chapter 6: Population Growth and Economic Development
Chapter 7: Urbanization and Rural-Urban Migration
Chapter 8: Human Capital
Chapter 10: The Environment and Development
Problems and policies: International and macro
Chapter 15: Finance and Fiscal Policy of Development

Note: questions enclosed by ~ signs signify questions marked by the teacher.


1: Introducing Economic Development: A Global Perspective
Perspectives on the meaning of development:

Traditional Economic Measures (1)
Development has traditionally meant achieving sustained rates of growth of
income per capita. Focused on increasing output (GDP).
 Seen as a purely economic phenomenon.
Countries managed to reach higher GNI levels, but the majority of people was
still living in poverty.

Income per capita = Total gross national income of a country divided by
total population.

Gross national income (GNI) = The total domestic and foreign output
claimed by residents of a country. It comprises gross domestic product
(GDP) plus factor incomes accruing to residents from abroad, less the
income earned in the domestic economy accruing to persons abroad.

Gross domestic product (GDP) = The total final output of goods and
services produced by the country’s economy, within the country’s
territory, by residents and nonresidents, regardless of its allocation
between domestic and foreign claims.


The New Economic View of Development (2)
With economic growth targets reached but with the levels of living of the masses
remaining unchanged a new view developed. Economic development was
redefined: The reduction or elimination of poverty, inequality, and



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,unemployment within the context of a growing economy.  “redistribution
form growth” became the new slogan.


Amartya Sen’s ‘Capability” Approach
Amartya Sen:
 Nobel price winner economics 1998
 Leading thinker on the meaning of development
 Main publication: Development as Freedom

~ How dos Amartya Sen define development? ~
Amartya Sen defines development as the “capability to function” from a poor to a
non- poor person. Sen argues that poverty cannot be properly measured by
income, but should be measured by what a person is, or can be, and does, or can
do. This also means looking not only at the characteristics of the commodities
consumed, but also how they are consumed. (Called = Functionings)

Book: Development as Freedom
 Development is the process of expanding freedoms that people enjoy;
 Growth of GNI can be very important as a means to expanding freedoms
enjoyed;
 But freedom also depends on other determinants, such as social and
economic arrangements (e.g. facilities for education and health care) as
well as political and civil rights.
 Development requires the removal of major sources of unfreedom
(tyranny, poverty, social deprivation, neglect of public facilities etc).
 Despite unprecedented increases in overall wealth, the modern world
denies elementary freedoms to vast numbers, perhaps even the majority,
of people.


Three Core Values of Development
• Sustenance: The Ability to Meet Basic Needs
• Self-Esteem: To Be a Person
• Freedom from Servitude: To Be Able to Choose


The Three Objectives of Development
1. Increase availability of life-sustaining goods
 Food
 Shelter
 Health
 Protection
2. Raise levels of living
 Higher incomes
 More jobs
 Better education
 Greater attention to cultural and human values



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, 3. Expand range of economic and social choices
 By freeing individuals and nations from servitude and dependence.


The Millennium Development Goals
Millennium Development Goals (MDGs) A set of eight goals adopted by the
United Nations in 2000: to eradicate extreme poverty and hunger; achieve
universal primary education; promote gender equality and empower women;
reduce child mortality; improve maternal health; combat HIV/AIDS, malaria, and
other diseases; ensure environmental sustainability; and develop a global
partnership for development. The goals are assigned specific targets to be
achieved by 2015.

The millennium development goals for 2015:
1. Eradicate extreme poverty and hunger
2. Achieve universal primary education
3. Promote gender equality and empower woman
4. Reduce chill mortality
5. Improve maternal health
6. Combat HIV/AIDS, malaria and other diseases
7. Ensure environmental sustainability
8. Develop a global partnership for development

Conclusions
Development economics is an extension of both traditional economics and
political economy, with the focus on the economic, social and situational
mechanisms needed to bring about rapid and large-scale improvements in
standards of living. Furthermore the formulation of public policies is needed to
decrease the gap between ambitions and reality. This is why the new role of
development economics has been defined much broader than the traditional
neoclassical economic analysis.

Case study: Brazil, “growth without development”


2: Comparative Economic Development
10 common features of developing countries:
1. Lower levels of living and productivity
2. Lower levels of human capital
3. Higher levels of inequality and absolute poverty
4. Higher population growth rates
5. Greater social fractionalization
6. Larger rural population - rapid migration to cities
7. Lower levels of industrialization and manufactured exports
8. Adverse geography
9. Underdeveloped financial and other markets
10. Colonial Legacies


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