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TOPICS

TOPICS. Todaro dan Smith: Economic Development, 9 th 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. RULES.

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TOPICS

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  1. TOPICS Todarodan Smith: Economic Development, 9thedition, Chapters 1-2; 4-10; 12; 14 SadonoSukirno. Ekonomi Pembangunan: Proses, MasalahdanDasarKebijakanMubyarto. Sistemdan Moral Ekonomi IndonesiaKindleberger, P. et al. Economic Development

  2. RULES Two Quizzes : 15%Mid-term : 30%Final-Term : 40%Assignment : 15%

  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

  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

  5. CONCEPTS AND DEFINITIONS • ECONOMIC GROWTH (EG) (PertumbuhanEkonomi): • quantitative measure indicating growth of an economy during a certain period • e.g. Indonesia experienced 5% economic growth between 2009-2010 • should be in real terms, adjusted by inflation

  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

  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

  8. Economics, Institutions and Development • The majority of the 6.4 billion people in the world live in absolute poverty.

  9. Economics, Institutions and Development • Part of the 6.4 billion people in the world live in luxury

  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

  11. Economics, Institutions and Development

  12. Economics, Institutions and Development

  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

  14. Economics, Institutions and Development

  15. Economics, Institutions and Development Average living condition, between countries

  16. Economics, Institutions and Development Average living condition, within country

  17. Development Measures by Country 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

  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.

  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

  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

  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

  23. The Nature of Development Economics (cont’d) • Some characteristics of LDCs (challenges) Requires larger government role, wide scale planning and coordinated efforts

  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.

  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

  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?

  27. 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?

  28. 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?

  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

  30. Values (cont’d) • National independence • Institutional Modernization • Political and Economic Participation • Grassroots democracy • Self-reliance • Personal Fulfillment

  31. Economies as Social Systems • Social system: 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.

  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)

  33. The Meaning of Development • Traditional Measures • Trickle down • Little attention paid to eradicating poverty, unemployment, inequality, and discrimination

  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

  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.” -AmartyaSen, Development as Freedom 1998 Nobel Laureate in Economics

  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)

  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

  38. Sen’s Functionings and Capabilities • 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”

  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

  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.

  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).

  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

  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

  44. Next topic: Comparative Development: Differences and Commonalities among Developing Countries

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