Nature of Development Economics:

 
The Traditional Economics deals basically with the efficient, least cost allocation of scarce productive
resources and with the optimal growth of these resources overtime so as to produce an ever-expanding
range of goods and services. The traditional economics consists of economic theory of classical and neo-
classical economists. It is concerned with advanced capitalistic world of perfect markets, consumer
sovereignty; free play of forces of demand and supply; utility calculations, and making of economic
decisions on the basis of marginal private benefit. Thus, according to traditional economic theory, all the
economic decisions are made on the basis of price mechanism and the goods market, resource market
and financial markets are cleared on the basis of demand and supply. Hence, the traditional economics or
economic theory believes in rationality, materialism, self-interest and individualistic approach in respect of
economic decisions. Thus this economics deals the matters subjectively.
 
The 'Political Economy' is also a branch of economics where a relationship is established between
politics and economics. Here the role of power in economic decision making is also evaluated. Broadly,
the political economy analyses the social and institutional processes through which certain groups of
economic and political elites like feudals, businessmen, industrialists, politicians, trade unions and
bureaucrats etc., influence the scarce productive resources either for their own vest-interests or perhaps
for the interest of the whole economy. This branch of economics portrays the process of economic and
political life where from the nations of the world like US, UK and France etc. have passed through, and
the existing nations are passing through.
 
Development Economics is beyond traditional economics and political economy. In addition to efficient
allocation and sustained growth of resources, it deals with economic, social, political and institutional
mechanism (both public as well as private) which could bring about rapid and large scale improvements in
levels of living for the masses who are poverty stricken, malnourished, backward and illiterate peoples of
Africa, Asia and Latin America. Quite against the developed countries (DCs) in the less developed
countries (LDCs) the goods and the labor markets are highly imperfect, consumers and producers have
limited information regarding commodity and factor markets, the society and economy are experiencing
structural changes, and the disequilibrium is often the destiny of the markets. In such poor economies the
political decisions overweigh the economic decisions regarding resource allocation. These economies are
clutched into tribal and ethnic conflicts, sectarianism, cultural, religious and linguistic problems. More
appropriately, development economies deals with poverty alleviation measures, standard of living
improvement methods and creating a harmony between the rich and the poor nations of the world, rather
just following the principles of profit maximization and self-interest.
 
Thus, the Development Economies is something more than neo-classical economics and Political
Economy. And it is concerned with the economic, cultural and political requirements which are necessary
for structural and institutional transformations of entire societies in a manner that the fruits of economic
growth could be provided to the largest segment of the society the poor class. For such all, a greater role
of government and coordination amongst the decision making unite is required, rather just depending
upon the 'Invisible Hand' and 'Market Forces'.
 
Thus, the Development Economies in the light of traditional economic principles (as well as against them)
aims at understanding the Third World economies so that the material lives of three-quarters of the global
population could be improved.