Economic Development

Dr.Shereen Ahmed Abdallah

Chapter 2: The meaning and measurment of
economic development
:Main Points

Traditional Economic Measures .1

The New Economic View of Development .2

Difference between Economic Growth and Economic Development .3

Different definitions of development .4

Development and Happiness .5

The Central Role of Women .6

The Three Objectives of Development .7

The Future of the Millennium Development Goals .8

 Traditional Economic Measures.1
 In strictly economic terms,
development has traditionally meant
achieving sustained rates of growth of
income per capita to enable a nation
to expand its output at a rate faster
.than the growth rate of its population
 Traditional Measures of Economic
Development
GNI Gross National Income GNP Gross National Product –
measures the amount of money a it shows how wealthy (rich) a
country earns and it shows how rich country is. It dos not take
a country is. GNI per head (capita) account of some taxes. GNP
measures the average amount of per head (capita) of USA is
money each person earns before and Bangladesh is $43,743
tax. GNI per capita in USA is $44,710 .$467
. and in Bangladesh is $480

GNP and GNI are a confusing way of showing how developed

a country is because they do not tell us how happy or
.satisfied people are
 The New Economic View of Development-2
 The experience of the first decades of post–World War II
and postcolonial development in the 1950s, 1960s, and
early 1970s, when many developing nations did reach
their economic growth targets but the levels of living of
the masses of people remained for the most part
unchanged, signaled that something was very wrong with
.this narrow definition of development
 In short, during the 1970s, economic development came
to be redefined in terms of the reduction or elimination
of poverty, inequality, an unemployment within the
context of a growing economy. “Redistribution from
.growth” became a common slogan
 Difference between Economic Growth and .3
Economic Development
economic developmentandgrowtheconomicbetweendifferenceThe
:are
Economic Growth is quantitative while economic development is .1
.qualitative
conceptnarrowa comparativelyis growthEconomic .2
and
.development is much more comprehensive
Economic growth refers to increase in the total output of final .3
goods and services in a country over a long period of time. In
contrast, economic development refers to progressive change in
the socio-economic structure of the country. It includes gender
equality, change in composition of output, shift of labour force
.from agriculture to other sectors
 Difference between Economic Growth and .3
Economic Development
Economic growth is easy to realize as only monetary aspect .4
is involved. But, it is very difficult to attain the goal of
development as it involves many socio-economic-political
.aspects
Economic growth can easily be estimated by real GDP or .5
Real Per Capital income. But it is very difficult to measure
development as it has some aspects that can’t be quantified.
Economic development however is indicated by Human
.Development Index
Economic growth can take place without Economic .6
development; however, economic development can’t take
.place without economic growth
?How different economists defined development -4
We will study the definition of
:development according to 3 economists

Dudley Seers Denis Goulet Amartya Sen

:Dudley Seers’s definition of development
Dudley Seers posed the basic question about the meaning 
:of development succinctly when he asserted
“The questions to ask about a country’s development are 
therefore: What has been happening to poverty? What has
been has What unemployment?to happeningbeen
theseof threeall If inequality?tohappening have
declined from high levels, then beyond doubt this has
been a period of development for the country concerned.
If one or two of these central problems have been growing
worse, especially if all three have, it would be strange to
call the result “development” even if per capita income
”doubled
 This assertion was neither idle speculation nor
the description of a hypothetical situation.A
number of developing countries experienced
relatively high rates of growth of per capita
income during the 1960s and 1970s but
showed little or no improvement or even an
actual decline in employment, equality, and
the real incomes of the bottom 40% of their
populations. By the earlier growth definition,
these countries were developed; by the newer
poverty, equality, and employment criteria,
.they were not
 :Denis Goulet’s definition of development

 According to Denis Goulet, Development

must be conceived of as a
multidimensional process involving major
changes in social structures, popular
attitudes, and national institutions, as well
as the acceleration of economic growth,
the reduction of inequality, and the
.eradication of poverty
 Is it possible, then, to define or broadly conceptualize
what we mean when we talk about development as the
sustained elevation of an entire society and social system
?toward a “better” or “more humane” life
 The appropriate answer for developing nations today is
not necessarily the same as it would have been in
previous decades. But at least three basic components or
core values serve as a conceptual basis and practical
guideline for understanding the inner meaning of
development. These core values—sustenance, self-
esteem, and freedom—represent common goals sought by
all individuals and societies
 Sustenance The basic goods and services, such as food, 
clothing, and shelter, that are necessary to sustain an
.average human being at the bare minimum level of living
Self-esteem The feeling of worthiness that a society 
enjoys when its social, political, and economic systems
and institutions promote human values such as respect,
. dignity, integrity, and self-determination
Freedom A situation in which a society has at its disposal 
a variety of alternatives from which to satisfy its wants
and individuals enjoy real choices according to their
.preferences
 Amartya Sen’s “Capability” Approach -3
 Amartya Sen, the 1998 Nobel laureate in economics,
argues that the “capability to function” is what really
.matters for status as a poor or nonpoor person
 In effect, Sen argues that poverty cannot be properly
measured by income or even by utility as conventionally
understood; what matters fundamentally is not the
things a person has—or the feelings these provide—but
what a person is, or can be, and does, or can do. What
matters for well-being is not just the characteristics of
commodities consumed, as in the utility approach, but
what use the consumer can and does make of
.commodities
To make any sense of the concept of human well-being in 
general, and poverty in particular, we need to think
beyond the availability of commodities and consider their
use: to address what Sen calls functionings, that is,
what a person does (or can do) with the commodities of
given characteristics that they come to possess or
.control
Sen identifies five sources of disparity between (measured) real incomes
and actual advantages

first, personal ,such as those connected with disability, illness, age

heterogeneities .or gender
second, Such as heating and clothing requirements in the
environmental cold or infectious diseases in the tropics, or the
diversities impact of pollution

third, variations
such as the prevalence of crime and violence
in social climate

as unevenly,distributedbe mayresourcesfamily
fourth,distribution when girls get less medical attention or education
within the family ;than boys do

fifth, differences
meaning that some goods are essential because of
in relational
perspectives .local customs and conventions
 According to sen :looking at real income levels or even the levels of
consumption of specific commodities cannot be sufficient as a
measure of well-being. One may have a lot of commodities, but these
are of little value if they are not what consumers desire. (ex.bread)
 A functioning is thus different both from (1) having goods (and the
corresponding characteristics), to which it is posterior, and (2) having
utility (in the form of happiness resulting from that functioning), to
which it is, in an important way, prior.(ex.bicycling vs possessing a
bike)
 Sen then defines capabilities as “the freedom that a person has in
terms of the choice of functionings, given his personal features
(conversion of characteristics into functionings) and his command over
”. commodities
 According to sen :Real income is essential, but to
convert the characteristics of commodities into
functionings, in most important cases, surely
.requires health and education as well as income
 For Sen, human “well-being” means being well, in
the basic sense of being healthy, well nourished,
well clothed, literate, and long-lived, and more
broadly, being able to take part in the life of the
community, being mobile, and having freedom of
.choice in what one can become and can do
 Development and Happiness -5
happiness is part of human well-being, and greater happiness may in itself
expand an individual’s capability to function
One of the findings of an empirical study is that the average level of
.happiness or satisfaction increases with a country’s average income
 .studies show that financial security is only one factor affecting happiness
Richard Layard identifies seven factors that surveys show affect average
national happiness: family relationships, financial situation, work, community
.and friends, health, personal freedom, and personal values
The government of Bhutan’s attempt to make “gross national happiness” 
rather than gross national income its measure of development progress.
Informed by Sen’s work, its indicators extend beyond traditional notions of
.happiness to include capabilities such as health, education, and freedom
Happiness is not the only dimension of subjective wellbeing of importance. It 
includes different aspects (cognitive evaluations of one’s life, happiness,
satisfaction, positive emotions such as joy and pride, and negative emotions
such as pain and worry): each of them should be measured separately to
.derive a more comprehensive appreciation of people’s lives
 The Central Role of Women -6
In light of the information presented so far, it should come as no 
surprise that development scholars generally view women as playing
. the central role in the development drama
Globally, women tend to be poorer than men. They are also more
.deprived in health and education and in freedoms in all its forms
 studies from around the developing world confirm that mothers tend
to spend a significantly higher fraction of income under their control
. for the benefit of their children than fathers do
. Women also transmit values to the next generation
 To make the biggest impact on development, then, a society must
.empower and invest in its women
 The Three Objectives of Development -7
Development in all societies must have at least the following three
:objectives

To increase the availability and widen the distribution of basic life- .1

sustaining goods such as food, shelter, health, and protection

To raise levels of living, including, in addition to higher incomes, the .2

provision of more jobs, better education, and greater attention to cultural
and human values

To expand the range of economic and social choices available to .3

individuals and nations by freeing them from servitude and dependence,
not only in relation to other people and nation-states, but also to the forces
.of ignorance and human misery
The Future of the Millennium Development Goals -8
Millennium Development Goals (MDGs) A set of eight goals adopted
:by the United Nations in 2000
;to eradicate extreme poverty and hunger .1

;achieve universal primary education .2

;promote gender equality and empower women .3

;reduce child mortality .4

;improve maternal health .5

;combat HIV/AIDS, malaria, and other diseases .6

;ensure environmental sustainability .7

.develop a global partnership for development .8