1. TOPICS
Todaro dan Smith: Economic Development, 9th edition, Chapters 1-2; 4-10; 12; 14 Sadono Sukirno. Ekonomi Pembangunan: Proses, Masalah dan Dasar Kebijakan Mubyarto. Sistem dan Moral Ekonomi Indonesia Kindleberger, P. et al. Economic Development
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2. Two Quizzes : 15% Mid-term : 30% Final-Term : 40% Assignment : 15%
RULES
Two Quizzes : 15% Mid-term : 30% Final-Term : 40% Assignment : 15%
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3. CONCEPTS AND DEFINITIONS
ECONOMIC DEVELOPMENT
(Pembangunan Ekonomi):
concerted efforts in an economy to improve its economic activities to have , e.g. better infrastructures and technology, more firms/companies, as well as improved education, leading to higher employment opportunities, increased income and better welfare.
SOCIAL DEVELOPMENT, POLITICAL DEVELOPMENT, ETC
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4. CONCEPTS AND DEFINITIONS
DEVELOPMENT ECONOMICS
(Ekonomi Pembangunan):
a branch of economics dealing with development issues in the developing countries and the required policies to obtain economic development
LABOR ECONOMICS, POLITICAL ECONOMICS, THEORETICAL ECONOMIC, APPLIED ECONOMICS
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5. CONCEPTS AND DEFINITIONS
ECONOMIC GROWTH (EG)
(Pertumbuhan Ekonomi):
quantitative measure indicating growth of an economy during a certain period
e.g. Indonesia experienced 5% economic growth between
should be in real terms, adjusted by inflation
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6. CONCEPTS AND DEFINITIONS
ECONOMIC GROWTH PER CAPITA
EG, may not lead to improvement of people prosperity, need to take into account population growth, thus EG/capita
ECONOMIC DEVELOPMENT
Growth plus
Health, education, technology, infrastructure, etc
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7. Economics, Institutions and Development
Overview
Global Differences in Standard of Living
Nature of Development Economics
What is Development Economics
Purpose of Development Economics
Values in Development Economics
Economies as social systems
The Meaning of Development
New Economic View of Development
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8. Economics, Institutions and Development
The majority of the 6.4 billion people in the world live in absolute poverty.
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9. Economics, Institutions and Development
Part of the 6.4 billion people in the world live in luxury
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10. Economics, Institutions and Development
Global Differences in Living Standards
Differences in:
Household Size, Income and Property
Educational Attainment and Opportunities
Health and Nutrition
Access to basic necessities (e.g. clean water)
Life Expectancy
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11. Economics, Institutions and Development
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12. Economics, Institutions and Development
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13. Economics, Institutions and Development
Global Differences (Cont’d)
Employment Opportunities
Inequality within Countries/Cities
Interdependence:
Economic and Environmental interdependence in an ever-shrinking world
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14. Economics, Institutions and Development
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15. Economics, Institutions and Development
Average living condition, between countries
Variable
North America
Rural Asia
Nuclear family
4 persons
8 persons or more
Yearly average income
USD50,000,-
USD
Levels of living
Reasonably good
Bad
Economy
Developed
In some parts: Subsistence
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16. Economics, Institutions and Development
Average living condition, within country
Variable
DKI
Papua
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17. Development Measures by Country
Standard Measures
Malaysia
Brazil
Sudan
Canada
GDP per capita (PPP US$)
9,512
7,790
1,910
30,677
Combined Primary, Secondary, Tertiary Gross Enrolment Ratio (%) 71 91 38 94
Infant Mortality Rate (per 1000 live births) 7 33 63 5
Life Expectancy at birth (years)
73.2
70.5
56.4
80.0
Average Household Size
5.6
2.6
Population Living below $2/day
9.3
22.4
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Source: UNDP Human Development Report, 2005

18. The Nature of Development Economics
Traditional economics (neoclassical economics):
concerned with the efficient allocation of scarce productive resources and optimal growth of these resources to achieve sustained growth
deals with, e.g.:
an advanced capitalist world of perfect markets
consumer sovereignty
automatic price adjustments
assumes:
economic rationality
a purely materialistic, individualistic, self-interested orientation toward economic decision-making
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19. The Nature of Development Economics (cont’d)
Political economy:
analyzes how politics and economics are related; role of power in decision making
studies the social and institutional mechanisms through which decisions about the allocation of scarce productive resources are made.
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20. The Nature of Development Economics (cont’d)
Development economics has a broader scope.
It deals with:
efficient allocation of scarce resources and sustained growth, and
the role of economic, social, political and institutional mechanisms in promoting/hindering rapid and large-scale improvements in the well being of the people in LDCs
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21. The Nature of Development Economics (cont’d)
Some characteristics of LDCs (challenges)
Market imperfection:
most commodity and resource markets are highly imperfect
Informational asymmetry:
consumers and producers have limited information
Structural changes in the society and the economy
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22. The Nature of Development Economics (cont’d)
Some characteristics of LDCs (challenges)
Political and social considerations:
economic calculations dominated by political and social priorities; family, clan, religious, or tribal considerations may take precedence over private, self-interested utility or profit-maximizing calculations
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23. The Nature of Development Economics (cont’d)
Some characteristics of LDCs (challenges)
Requires larger government role, wide scale planning and coordinated efforts
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24. What is Development Economics
The economics of the contemporary poor, underdeveloped nations with varying ideological orientations, diverse cultural backgrounds, and very complex yet similar economic problems that usually demand new ideas and novel approaches.
Neither the same with economics of advanced capitalist nations nor to centrally planned economies.
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25. Ultimate Purpose of Development Economics
TO HELP US BETTER UNDERSTAND DEVELOPING ECONOMIES IN ORDER TO HELP IMPROVE THE MATERIAL LIVES OF THE MAJORITY OF GLOBAL POPULATION
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26. Questions asked in Development Economics:
Can traditional, low-productivity, subsistence societies be transformed into modern, high-productivity, high-income nations?
To what extent are the development goals of developing countries thwarted by the economic activities of developed nations?
How is it that extreme inequality can exist not only across continents but within cities and countries?
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27. What are the primary causes of extreme poverty?
More Questions:
What lessons can developing countries learn from the historical record of economic progress of developed countries?
What are the primary causes of extreme poverty?
What strategies have been most successful in eradicating poverty?
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28. Are deregulation and privatization the answer?
Even more questions:
What roles do population growth and migration play in the development process?
Do the educations systems in developing countries promote development and reduce inequality or do they help to sustain wealth and class structures?
Are deregulation and privatization the answer?
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29. Values in Development Economics
The goals of this discipline are derived from subjective value judgments about what is good and desirable.
The goals are:
Economic and Social Equality
Elimination of Poverty
Universal Education
Higher Living Standards
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30. Values (cont’d) National independence Institutional Modernization
Political and Economic Participation
Grassroots democracy
Self-reliance
Personal Fulfillment
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31. Economies as Social Systems
interdependent relationship between economic and noneconomic factors.
Noneconomic factors:
attitudes toward life, work, and authority; patterns and kinship and religion; cultural traditions; the authority and integrity of government agencies; levels of political participation; public and private bureaucratic, legal, and administrative structures; systems of land tenure; flexibility/rigidity of economic and social classes.
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32. The Meaning of Development
Traditional Measures
The capacity of a once relatively stagnant national economy to generate and sustain significant economic growth
Annual increases of 5% or higher in gross national product. Alternative measures include income per capita and real income per capita (‘real’ – accounting for inflation).
Changes in the structure of production
– shifts from agriculture towards manufacturing and services (i.e. industrialization)
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33. The Meaning of Development
Traditional Measures
Trickle down
Little attention paid to eradicating poverty, unemployment, inequality, and discrimination
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34. New Economic View of Development
Contemporary Measures
Broader:
include the reduction of poverty, unemployment and inequality within the context of a growing economy
Multidimensional:
No longer be just higher incomes, must also include e.g., better education, health and nutrition, equal opportunities, individual rights and freedoms, and clean environment
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35. Sen’s Capability Approach
“Economic growth cannot be sensibly treated as an end in itself. Development has to be more concerned with enhancing the lives we lead and the freedoms we enjoy.”
-Amartya Sen, Development as Freedom
1998 Nobel Laureate in Economics
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36. Sen’s Functionings and Capabilities
What matters is:
what a person is, or can be, and does or can do
What matters for well-being is ‘functioning’:
not the characteristics of commodities consumed, as in the utility approach, but what use the consumer can and does make of commodities
e.g. a book is of little value to an illiterate person (except as cooking fuel or a status symbol)
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37. Five Sources of Disparity between (measured) real incomes and actual advantages
Sen’s Five Sources:
Personal heterogeneities
Environmental diversities
Variations in social climate
Differences in relational perspectives
Distribution within households
Sen argues that changes in functions and capabilities are better measures of development
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38. Sen’s Functionings and Capabilities
“the freedom an individual possesses with respect to choice of functionings, given his/her personal features/traits (conversion of characteristics into functionings) and his command/control over commodities”
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39. Three Core Values of Development
Common goals:
1. Sustenance: the ability to meet basic needs
life-sustaining basic needs – food, shelter, health and protection.
“absolute underdevelopment” describes the absence or critical supply of these basic needs.
Rising per capita incomes, elimination of absolute poverty, greater employment opportunities, and lessening income inequalities, necessary but not sufficient conditions for development
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40. Three Core Values of Development
Common goals:
2. Self-Esteem: to be a person
a sense of worth and self-respect (i.e. identity, respect, honor, recognition, dignity).
a sense of not being used as a tool by others for their own end
‘development is legitimized as a goal because it is an important, perhaps even an indispensable, way of gaining esteem.
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41. Three Core Values of Development
Common goals:
3. Freedom from Servitude: to be able to choose
human freedom; emancipation from alienating material conditions of life and from social servitude to nature, ignorance, other people, misery, institutions, dogmatic beliefs, especially that poverty is predestination.
‘the advantage of economic growth is not that wealth increases happiness, but that it increases the range of human choice” (W.A. Lewis).
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42. Three Objectives of Development
The improvement in the availability and distribution of basic life-sustaining goods
The improvement of living standards
The expansion of the range of economic and social choices
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43. United Nations’ Millennium Development Goals
Eradicate Extreme Hunger and Poverty
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 Stability
Develop a Global Partnership for Development
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44. Next topic:
Comparative Development: Differences and Commonalities among Developing Countries
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