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What is Development Economics?

By Brendan McGuigan
Updated May 16, 2024
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Development economics is a branch of economics that looks at how development works from an economic perspective in developing nations. As a field, it looks not only at traditional economic rubrics, such as GDP or per-capita income, but also looks at things like standard of living, health care, education, and equal rights opportunities. As a result, this field concerns itself a great deal with political processes and agendas, as well as with more specific economic agendas.

Although some of the patterns of thought seen in development economics have existed in the field of economics for quite some time, as a cohesive discipline, it really grew out of the post-World War II period in Europe. With nations ravaged by the war, and their economies in shambles, particularly in Eastern Europe, it became necessary to look at the best ways to industrialize those nations to maximize their economic potential while protecting the citizenry. In subsequent years, the theories developed there began to be generalized and adapted to other developing regions of the world, including Latin America, Asia, and Africa.

Early thinkers in this branch of economics included Ragnar Nurkse, who wrote Problems of Capital Formation in Underdeveloped Countries in 1953; Martin Mandelbaum, who wrote The Industrialization of Backward Areas in 1945; and Paul Rosenstein-Rodan, who wrote Problems of Industrialization in Eastern and South Eastern Europe in 1943. Much of the contemporary thinking grews from these early seminal works, although the field has since grown far beyond its early roots into a more holistic look at all the disparate elements that make up a healthy society.

One of the early theories of the economics of development was the linear-stages-of-growth model. This model, popular during the 1950s, was built as a reaction to Karl Marx’s communist ideas, which were popular in Eastern Europe at the time. The basic premise was that development and healthy growth could be achieved by pooling and holding on to masses of capital, through using savings on the domestic and international level. Although popular when first developed, this theory quickly came under fire for failing to acknowledge that there were many other necessary preconditions for healthy development besides the simple accumulation of capital.

In the 1970s, as the developing world began to gain more a global voice, international dependency theory began to rise to the fore. This theory of development economics held that many of the obstacles to development did not, in fact, originate in the developing world itself, but were in fact imposed on these countries by external forces in the developed world. Although in many ways self-evident, the formulation of this simple idea had profound repercussions on how the developed world viewed its role in aiding the developing world to grow and develop.

Largely as a reaction to international dependency theory, the 1980s saw the formulation of a neoclassical theory of development economics. This theory is essentially a free market view of development, holding that the best way to help countries develop is to remove governmental limitations and controls. Within neoclassical theory, there are differing degrees of free market fundamentalism, with both the free market approach and the public-choice theory essentially holding that the market should be entirely unregulated, and the market-friendly approach, often promulgated by the World Bank, allowing for some limited government interference, while still holding to a free market ideal.

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Discussion Comments

By mutsy — On Dec 09, 2010

Bhutan- I agree with you. Helping the people of Haiti to develop their education might provide job opportunities in other countries.

For example, if the Haitians develop their command of the French language they could serve as interpreters or French language teachers anywhere in the world.

This is a sought after language that provides many opportunities. There could even be a governmental exchange program where upon completion the program graduates of the program could be sent to another country in order to develop their skills even further and work there.

People in developing countries need empowerment and need to find consistent work in order to raise their standard of living. Continuing with just offering financial aid to these corrupt governments is not going to work.

By Bhutan — On Dec 07, 2010

Sunny27- I think that this is the only way to help developing countries. For example, Haiti, one of the poorest countries in the world has so many problems due to the lack of infrastructure and corrupt government that the cycle of abject poverty seems endless.

A great trade to develop in Haiti is construction because most of the homes are not safe. Providing aid in the form of a training program to teach the Haitians how to build homes that can withstand hurricane conditions and offering them monetary support for the people working in the program would help the people of this poor nation.

Education is another important element with respect to poverty. The average citizen in Haiti only has a sixth grade education. This is area of a lot of opportunity.

By Sunny27 — On Dec 05, 2010

I think that Oprah Winfrey has recognized the contributions of a group of women in Rwanda that made beautifully weaved baskets and colorful chunky bracelets and as a result Macy’s carried some of the products.

I know that there is overwhelming poverty in many of these developing countries because corrupt governments that often lack basic infrastructure run most of these countries.

Simply giving these governments money in forms of aid will not help the people of these countries because the government usually keeps the money. It is best to help people in these countries learn some trades so that they could obtain some steady work.

By subway11 — On Dec 03, 2010

A great book on the subject of development economics is, “Leading Issues in Economic Development “by Gerald M. Meier and James E. Raunch.

It views development economics research for the last 35 years.

It takes a special look at how policy making has affected poverty rates and women’s issues with a review of development economics worldwide.

The leading issues in economic development are based on how to develop infrastructure in many developing countries and teach people in these countries how to maintain economic sustenance.

For example, there are international nonprofit organizations that go into developing countries and teach people various trades in order for them to earn a living.

Usually the poorest people live in rural communities with very little opportunities for obtaining a job.

Some organizations will go to rural areas of Afghanistan or parts of Africa and teach people how to plant crops and learn trades like basket weaving so that their goods could be sold on the market and they could earn some money.

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