The Development Theories
Rational Choice Theory — states that
individuals use rational calculations to make
rational choices and achieve outcomes that are
aligned with their own personal objectives.
 these results are also associated with
maximizing an individual's self-interest.
Adam Smith — is usually credited as the father
of the Rational Choice Theory.
 Rational choice theory is associated
with the concepts of rational actors,
self- interest, and the invisible hand.
Evolutionary Economics — is a theory
proposing that economic processes evolve and
that economic behavior is determined both by
individuals and society as a whole.
The term was first coined by Thorstein Veblen,
an American economist and sociologist. It shuns
the rational choice theory of traditional
economics, arguing that psychological factors
are key drivers of the economy.
Evolutionary Economics — believe the
economy is dynamic, constantly changing, and
chaotic, rather than always tending toward a
state of equilibrium.
Conspicuous consumption — is the purchase of
goods or services for the specific purpose of
displaying one's wealth.
Austrian economist Joseph Schumpeter also
played an important role in the development of
evolutionary economics.
His model of Creative Destruction described the
essential nature of capitalism as a relentless
drive toward progress, expanding on Veblen’s
early observations.
Schumpeter argued that human entrepreneurs
are the main drivers of economic development
Folk-Urban Continuum — e categorize
settlements along a continuum, as there are
many settlements that show both rural and
urban features this idea was promulgated by
Robert Redfield
In folk-urban-continuum, folk society comes in
contact with urban civilization and inherits
certain characteristics.
Linear Growth Theories — one of the first
growth theories was that proposed by American
economic historian Walt Whitman Rostow in
the early 1960s.
Conflict Theory — first developed by Karl Marx, is a theory that society is in a state of perpetual conflict.
As a vigorous advocate of free market
capitalism, Rostow argued that economies
must go through a number of developmental
stages towards greater economic growth.
Linear Growth Theories
 Traditional society — dominated by
agriculture and barter exchange.
 Pre-take-off stage — with the
development of education and an
understating of science, technology and
transport
 Take-off — with positive growth rates
in particular sectors and where
organized systems of production
 Drive to maturity — with an ongoing
movement towards a diverse economy,
with growth in many sectors.
 Stage of mass consumption — where
citizens enjoy high and rising
consumption per head, and where
rewards are spread more evenly.
The importance of savings and investment is
also central to the work of Roy F. Harrod and
Evsey D. Domar.
According to Harrod and Domar's theory, there
are TWO determinants of the rate of growth of
a country.
 First looks at the relationship between
changes in the capital stock of a
country, that is its capital investment,
and its output, called the capital-
output ratio.
 The second element of the model
considers the relationship between
savings and national income is called
the savings ratio.
Harrod & Domar's Linear Growth Theory
Structural Functionalism — origin of
contemporary references to social structure can
be traced to the French social scientist Émile
Durkheim
Conflict theory — holds that social order is maintained by domination and power, rather than by
consensus and conformity.

 it ascribes most of the fundamental developments in human history, such as democracy and civil
rights, to capitalistic attempts to control the masses.

International dependence Revolution — view Third World countries as beset by institutional, political,
and economic rigidities, both domestic and international.

Neocolonial Dependence Model — is an indirect outgrowth of Marxist thinking.

False Paradigm Model — second and a less radical international- dependence approach to
development.

 attributes Third World underdevelopment to faulty and inappropriate advice provided by well-
meaning

Dualistic-Development Thesis — a world of dual societies, of rich nations and poor nations and, in the
developing countries

Dualistic-Development Thesis
Four key elements:

 Different sets of conditions

 This coexistence is chronic and not merely transitional.
 Not only do the degrees of superiority or inferiority.
 The interrelations between the superior and inferior.

Neoclassical Counter Revolution — this advocates for freer markets and the dismantling of public
ownership

New Growth Theory — humans' desires and unlimited wants foster ever-increasing productivity and
economic growth.

 knowledge is treated as an asset for growth that is not subject to finite restrictions or
diminishing returns like other assets.