Types 103

TABLES.1 Measures of Human Capital

Life Expectancy Infant Mortality Human
(at Birth, for males; In years) (per 1,000 live births) Literacy Development Index
Country (2015) (2016) Rate(%) (HDI) Rank, 2016

Brazil 72 14 90.4 79

China 75 9 95.1 90

France BO 3 >99 21

Germany 79 3 >99 4

India 67 35 62.8 131

Iran 75 13 85.0 69

Japan 81 2 >99 17

Mexico 75 13 93.5 77

Nigeria 52 67 51.1 152

Russia 65 7 >99 49

South Korea 79 3 >99 18

United Kingdom BO 4 >99 16

United States 76 6 >99 10

Sources: Life expec_tcu"'Cy and infant mortality, World Q.)nkOpen Data, https.J/data.worldbank.Drg, acces!.ed November 4, 2017; literacy Rate, United NatiOn!. Human
~pment Report. 2014; HOI Rank, United Nations Human Development Report 2016, http://hdr.ur"'dp.org/erv'com~iteJHDt, ace~ November 4, 2017.

Satisfaction and Happiness

For many people, development is really about each person's satisfaction or hap-
p iness in life. U nderstanrung development in these terms recognizes that income
is a means to an end and not an end in itself. People usually seek higher incomes
because it gives them access to other things they desire, or the opportunity to
consume things they like, such as good food, or better housing, or access to higher
education, or luxury items, or a vacation.The most fundamental concept in eco-
nom ics for measuring people's ability to fulfill their p references is not income, but
utility. Utility gives a notion of the value people derive from consuming or having ut ility The value that people
access to that which pleases them. lfl like Coca- Cola more than Pepsi Cola, I will denvefrom resources to which they
"derive more utility" f rom drinking a Coca-Cola, while a f riend who p refers Pepsi haveacces~
to Coke "gets more utility" from a Pepsi.
Others have argued that utility is insufficient as a measure of people's well-
being or happiness. U tility captures people's p references. To say that I get more
utility from one thing than another is, in essence, to say that I will select the former
rather than the latter ifl have to choose between them. But people may not always
choose the things that make them happier. Indeed, people may sometimes choose
104 Chapter 5: Development
environmental sustainability The
quality that one or another prac-
tice has with being compatible
With the long-term health of the
environment.
things that leave them in a worse state of subjective well-being (think, for example,
of an addict who chooses to continue to use drugs). Motivated by such cases,
some scholars have tried to measure happiness by asking people to rate their own
level of happiness, life satisfaction, and related concepts. Other scholars, though,
argue that people's self-perceptions may be less reliable than studying their "util-
ity" through analyzing their behavior.
Happiness comes from more than just consuming goods and services. It may
come from having f ree time, or social status, or strong ties to family and friends,
or from living a spiritually fulfilling life. Social scientists face major challenges in
trying to measure human happiness, but they continue to make efforts. In recent
years, the mountainous nation of Bhutan (in the Himalayas) made a splash in-
ternationally by publishing its own measures of"Gross National Happiness." I n-
creasingly, more countries and more scholars are following suit; and even C hi na,
Canada, France, and the Unh ed Kingdom have recently begun to think about how
to measure their peoples' happiness.
Cultural Development
For many people around the world, part of development m ight mean retaining
and deepening one's own culture. I n this view, economic modernization does not
necessarily improve a society: if economic growth brings commercialization and
cultural disintegration, some people(s) will wish to have none of it and will p refer
to define development as exercising the right to self- determ ination, living autono-
mously from the rest of the world, and enjoying the rich cultural traditions they
hold dear. Perhaps an indigenous group will wish to protect its own language and
traditions while avoiding the influences of Hollywood and "Western values." For
many people, "development" might not even be a positive word but might instead
signify a push by outsiders- intentional or unintentional- to undermine local
practices.9 Increasingly, many researchers, sensitive to these concerns, argue that
citizens of the countries we study should play a central role in defining develop-
ment goals. The desire to protect traditional cultures is not limited to small and
remote indigenous groups bu t can also be seen in many large, post- industrial na-
tions w restli ng with questions of growth and development, such as France (as seen
in the case study on globalization in chapter 16).
Sustainability
Finally, environm ental su stainability is an important aspect of development.
W ith increasing attention to the issue of climate change, many scholars argue
that if an approach to development is not sustainable, it won't work. Sustainable
development can be defined as development that conserves resources to respect
the needs of future generatio ns. Only by stewarding its resources effectively and
not depleting them too rapid ly will any society remain viable over the long run. To
incorporate sustainability into development discussions, some scholars have even
proposed replacing G D P with new measures that account for the use of resources.
They note that cutting down a tree increases GDP, as do many pollution-causing
activities, even though these activities may be "using up" a society's natural endow-
ments.10 We discuss the concept and the challenge of sustainability in chapter 16.
Among the main political challenges in promoting sustainable development are
 Causes and Effects: Why Does Development Happen? 105

the difficulties of securing collective action between many countries when each
country has incentives to "freeride" on the efforts of others.

Causes and Effects: Why Does

Development Happen?
To examine the causes of development, we focus mainly on GDP growth per
capita, for two reasons. First, as noted earlier, these measures are the most com-
monly used in studies of development. Second, G DP growth per capita often
goes hand in hand with several other indicators of development listed previously.
In particular, countries that grow in terms of GDP p er capita often also advance
on other soda! indicators, with improved health, mo re education, higher levels of
happiness, and reductions in poverty. O f course, this is not true in all cases, and
rising GDP is not the only determinant of these other indicators, but it is true
quite often. For this reason, and since it is more comprehensive than many of
those other indicators, development scholars often use it when they're seeking a
single measure. That said, there can be trade-offs between GDP growth and other
indicators, such as inequality, as we have noted; and GDP/capita certainly does
not capture every dimension of development. These strengths and limit ations of
the measure should be kept in rrund.
The central question here is why economies grow, diversifY, and become more
productive and successful. What allows countries t o essentially liberate people
from their small farming plots to work in dties, factories, law offices, research
labs, banks, and hospitals? Why have people and societies been able to accumu-
late capital that they can use to foster even more productive economic activity?
The answers to these questions are debated extensively, and several theories have
arisen to ex'Plain them. We group the focal points of these theories into four
categories:
1. the role of the market and the state in promoting development, a topic we
explored in the p revious chapter in the context of "developed" countries;
2. institutions such as legal rules and social norms that shape the behavior of
economic actors;
3. cultural values; and
4. the domestic and international structures that conilltion development, in-
cluding a country's place in the international system.

Institutions: The Market-State Debate, Revisited market-led development An

approach to economic manage-
A leaillng institutional argument about the causes of development reflects a major
ment in which the state aims to
debate in political economy, whlch we emphasized in chapter 4. The issue is the
control economic behavior as little
relative merits of market-led development versus state-led development . Ac-
as possible.
corillng to the pro- market argument, individual decisions of free and independent
economic agents will lead to a more efficient allocation of resources. As people try state-led development An
to maximize their own gains, the society as a whole becomes better off. Allowing approach to economic manage-
the market to work freely leads to prosperity. ment in which the state plays a
On the other side of the debate, advocates for state-led approaches argue that prominent role in coordinating the
development requires an actor capable of coorillnating illsparate agents, plan- behavior of economic actors and
ning for the long term, and supplying capital for big development pushes in intervening in the economy.