1. Chapter 11
Development Policymaking and the Roles of Market, State, and Civil Society
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2. The Planning Mystique
In the past, few doubted the importance and usefulness of national economic plans
Recently, however, disillusionment has set in
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3. The Nature of Development Planning
Basic concepts
Planning in mixed developing economies
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4. The Rationale for Planning in Developing Economies
Market failure
Resource mobilization and allocation
Attitudinal or psychological impact
Foreign aid
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5. The Planning Process: Some Basic Models
Characteristics of the planning process
Planning in stages: 3 basic models
Aggregate growth models
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6. Aggregate Growth Models
(11.1)
Where
K(t) is capital stock at time t
Y(t) is output at time t
k is the average and marginal
capital-output ratio
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7. Aggregate Growth Models
(11.2)
Where
I(t) is investment at time t
s is the savings rate
S is national savings
 is the depreciation rate
If g is the targeted rate of output growth, then
(11.3)
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8. Aggregate Growth Models
(11.4)
(11.5)
(11.6)
Where n is the labor force growth rate and p
is the growth rate of labor productivity
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9. Aggregate Growth Models
(11.7)
Where W and  are wage and profit incomes
(11.8)
Where s and sW are the marginal propensities
to save from wage income and profit
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10. Aggregate Growth Models
(11.9)
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11. The Planning Process: Some Basic Models
Characteristics of the planning process
Planning in stages: 3 basic models
Aggregate growth models
Multi-sector models and sectoral projections
Project appraisal and social cost-benefit analysis
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12. Project Appraisal and Social Cost-Benefit Analysis
Basic concepts and methodology
Setting objectives
Computing shadow prices and social discount rates
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13. The Social Rate of Discount
Net present value, or NPV is given by
(11.10)
Where
Bt is the expected benefit at time t
Ct is the expected cost at time t
r is the government’s social rate of
discount
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14. Project Appraisal and Social Cost-Benefit Analysis
Basic concepts and methodology
Setting objectives
Computing shadow prices and social discount rates
Choosing projects: some decision criteria
Conclusions: planning models and plan consistency
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15. Problems of Plan Implementation and Plan Failure
Theory versus practice
Factor prices, choice of technique, and employment creation
Rural-urban imbalances
Demand for education
Structure of the economy
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16. Reasons for plan failures
The Crisis in Planning: Problems of Implementation and Plan Failures (cont’d)
Reasons for plan failures
Deficiencies in plans and their implementation
Insufficient and unreliable data
Unanticipated economic disturbances
Institutional weaknesses
Lack of political will
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17. Problems of government intervention in LDCs
Government Failure and the Resurgent Preference for Markets Over Planning
Problems of government intervention in LDCs
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18. The Market Economy
The market economy sociocultural preconditions and economic requirements
Role and limitations of the market in LDCs
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19. The “Washington Consensus” on the State in Development
1980s and 1990s (see Table 11.1)
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20. Table 11.1
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21. The “Washington Consensus” on the State in Development
1980s and 1990s
Toward a new consensus
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22. Development and Political Economy
Understanding voting patterns on policy reform
Institutions and path dependency
Democracy versus autocracy: which facilitates faster growth?
Role of NGOs in development and the broader citizen sector (see Figure 11.1)
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23. Figure 11.1
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24. Trends in Governance and Reform
Tackling the problem of corruption
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25. Figure 11.2
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26. Figure 11.3
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27. Trends in Governance and Reform
Tackling the problem of corruption
Decentralization
Development participation- alternate interpretations
Genuine participation and role of NGOs
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28. Developing Planning and the State: Concluding Observations
Pragmatism is needed in dealing with the role and limitations of economic policies in LDCs
Regardless of ideology, governments in LDC have been heavily involved in the economy
LDC governments shouldn’t necessarily do less, but do better
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29. Concepts for Review Accounting prices Aggregate growth model
Comprehensive plan
Cost-benefit analysis
Development Participation
Economic infrastructure
Economic plan
Economic planning
Government failure
Input-output model
Interindustry model
Internal rate of return
Market failure
Market prices
Net present value
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30. Concepts for Review (cont’d)
NGOs
Partial plan
Path dependency
Planning process
Political will
Project appraisal
Rent seeking
Shadow prices
Social profit
Social rate of discount
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