Economic Development

Plan1. Economics.2. Microeconomics and Macroeconomics.3. Supply and demand.4. Linear-stages-of-growth model.5. Economic nationalism.

Introduction What is development economics

about? More than growth. We expect economies to grow, yet there are vast differences in the growth experiences of countries. Developing countries are not like young children — requiring time and nutrition to grow. Some developing countries have been poor for a long time, others have made rapid strides in short periods of time.

Economics Economics is

the social science that studies economic activity to gain an understanding of the processes that govern the production, distribution and consumption of goods and services in an economy.

The term economics comes from the Ancient Greek from and , hence "rules of the house (hold for good management)". 'Political economy' was the earlier name for the subject, but economists in the late 19th century suggested "economics" as a shorter term for "economic science" to establish itself as a separate discipline outside of political science and other social sciences.

Microeconomics and Macroeconomics Microeconomics (from Greek prefix mikro- meaning "small" and economics) is a branch of economics that studies the behavior of individuals and small impacting organizations in making decisions on the allocation of limited resources. Typically, it applies to markets where goods or services are bought and sold. Microeconomics examines how these decisions and behaviors affect the supply and demand for goods and services, which determines prices, and how prices, in turn, determine the quantity supplied and quantity demanded of goods and services.

This is in contrast to macroeconomics, which involves the "sum total of economic activity, dealing with the issues of growth, inflation, and unemployment." Microeconomics also deals with the effects of national economic policies (such as changing taxation levels) on the aforementioned aspects of the economy.

Particularly in the wake of the Lucas critique, much of modern macroeconomic theory has been built upon 'microfoundations'—i.e. based upon basic assumptions about micro-level behavior.

One of the goals of microeconomics is to analyze market mechanisms that establish relative prices amongst goods and services and allocation of limited resources amongst many alternative uses. Microeconomics analyzes market failure, where markets fail to produce efficient results, and describes the theoretical conditions needed for perfect competition.

Supply and Demand Supply and demand is a model of microeconomics. It describes how a price is formed in a market economy. There are two determining factors on such a market, the number of things made available, called supply, and the number of things consumers want, called demand. Supply and demand shows how producers and consumers interact with each other. This relationship will fix the price for a certain type of good. In Perfect competition, the quantity demanded (demand) and the quantity supplied will be equal. This will fix the price.

Graphical representation of supply and demand Although it is normal to regard the quantity

demanded and the quantity supplied as functions of the price of the goods, the standard graphical representation, usually attributed to Alfred Marshall, has price on the vertical axis and quantity on the horizontal axis, the opposite of the standard convention for the representation of a mathematical function.

Linear-stages-of-growth modelSuch theories have been criticized for not

recognizing that, while necessary, capital accumulation is not a sufficient condition for development. That is to say that this early and simplistic theory failed to account for political, social and institutional obstacles to development.

Furthermore, this theory was developed in the early years of the Cold War and was largely derived from the successes of the Marshall Plan. This has led to the major criticism that the theory assumes that the conditions found in developing countries are the same as those found.

Economic nationalism Following mercantilism was the related theory of economic nationalism, promulgated in the 19th century related to the development and industrialization of the United States and Germany, notably in the policies of the American System in America and the Zollverein in Germany.

The names most associated with 19th-century economic nationalism are the American Alexander Hamilton, the German-American Friedrich List, and the American Henry Clay. Hamilton's 1791 Report on Manufactures, his magnum work, is the founding text of the American System, and drew from the mercantilist economies of Britain under Elizabeth I and France under Colbert.

Conclusion All in all, education is not necessarily

the sole determinant of economic growth. Different factors, such as gender equality and foreign investment, need to be taken into consideration in explaining prosperity. The importance of education towards growth is questioned so much so that many believe, instead, that economic growth influences education.

Bibliography1. Behrman, J.R. (2001). "Development, Economics of," International

Encyclopedia of the Social & Behavioral Sciences.2. Clive Bell (1987). "Development economics," The New Palgrave: A

Dictionary of Economics.3. Easterly, William (2002), Elusive Quest for Growth: Economists'

Adventures and Misadventures in the Tropics, The MIT Press.4. Gerald M. Meier (2005), Biography of a Subject: An Evolution of

Development Economics, Oxford University Press.5. Gerald M. Meier, Dudley Seers [editors] (1984), Pioneers in

Development, World Bank.6. Dwight H. Perkins, Steven Radelet, Donald R. Snodgrass, Malcolm Gillis

and Michael Roemer (2001). Economics of Development, 5th edition, New York: W. W. Norton.

7. Jeffrey D. Sachs (2005), The End of Poverty: Economic Possibilities for Our Time, Penguin Books.