development because some of the increase in income gets spent on human development such as educationand health.According to Ranis (2000 we view economic growth to human development as a two-way relationship.Moreover, Ranis suggested that the first chain consist of economic growth benefiting human developmentwith GNP. Namely, GNP increases human development by expenditure from families, government andorganizations such as NGOs. With the increase in economic growth, families and individuals will likelyincrease expenditures with the increased in incomes, which leads to increase in human development.Further, with the increased in expenditures, health, education tend to increases in the country and later willcontribute to economic growth.In addition to increasing private incomes, economic growth also generate additional resources that can beused to improve social services (such as healthcare, safe drinking water etc...). By generating additionalresources for social services, unequal income distribution will be limited as such social services aredistributed equally across each community; benefiting each individual. Thus, increasing living standardsfor the public.To summarize, as noted in Anand’s article (1993 we can view the relationship between humandevelopment and economic development in three different explanations. First, increase in average incomeleading to improved in health and nutrition (known as Capability Expansion through Economic Growth).Second, it is believed that social outcomes can only be improved by reducing income poverty (known asCapability Expansion through Poverty Reduction). Thirdly, (known as Capability Expansion throughSocial Services), defines the improvement of social outcomes with essential services such as education,health care, and clean drinking water.
Models of economic development
The 3 building blocks of most growth models are: (1) the production function, (2) the saving function, and(3) the labor supply function (related to population growth). Together with a saving function, growth rateequals s/β (s is the saving rate, and β is the capital-output ratio). Assuming that the capital-output ratio isfixed by technology and does not change in the short run, growth rate is solely determined by the savingrate on the basis of whatever is saved will be invested.