PASIG CATHOLIC COLLEGE

Economic Development
Chap. 1. Economics, Institutions and
Development: A Global Perspective

Professor: Dr. Ronaldo A. Poblete, CFMP

 The Nature of Development
Economics
Traditional economics : is
concerned primarily with the
efficient, least cost allocation of
scarce productive resources and
with the optimal growth of these
resources over time so as to
produce an ever expanding range
of goods and services.
 The Nature of Development
Economics
Political economy : goes beyond
traditional economics to study,
among other things, the social and
institutional processes through which
certain groups of economic and
political elites influence the allocation
of scarce productive resources now
and in the future.
 Why Study Development
Economics?
1. What is the real meaning of development,
and how can different economic concepts
and theories contribute to a better
understanding of the development process?
2. What are economic institutions, and how do
they shape problems of under development
and prospects for successful development?
3. How can the extreme between rich and poor
be so very great?
 Why Study Development
Economics?
4. What constraints most hold back
accelerated growth, depending on local
conditions?
5. How can improvements in the role and
women have an especially beneficial
impact on development prospects?
6. What are the causes of extreme poverty,
and what policies have been most effective
for improving the lives of the poorest of the
poor?
 Why Study Development
Economics?
7. Is rapid population growth
threatening the economic progress
of developing nations?
8. Why is there so much
unemployment and
underemployment in the developing
world especially in the cities?
 Why Study Development
Economics?
9. What is the impact of poor public
health on the prospects for
development and what is needed to
address these problems?
10. Why do so many developing
countries select such poor
development policies and what can
be done to improve these choices.
Economic Development
 Development = Growth plus Change

 Growth: sustained improvement in

the level of per capita income

 Change: sustained improvement in

institutions and organizations that
support growth
 Growth
 Gross Domestic Product (GDP):
Market value of all final goods and
services an economy produces in one
year
 Real GDP: GDP in constant prices
 GDP Per Capita = (Real GDP /
Population) or income per person
 Economic Growth = percentage
change in Real GDP per capita
 Institutions
 Family:respect the authority & share
resources

 Culture: propensity to save & invest

 Religion: ability to bring about change

 Law: protect property rights and civil

liberties and enforce contracts
 Organizations
 Government: produce public goods and
regulate economic activities
 Education: increase productivity and
expand the range of economic and social
opportunities
 Health: enable proactive participation in
economic and social activities
 Business: provide incentive for profit
making, resulting in growth and expansion
Happiness and Development
 There is not a perfect correlation
between happiness and per capita
income: people could be poor, but
happy; rich, but and unhappy

 Once per capita income increases

above $10,000 to $20,000, the
percentage of people who say they
are happy tends to increase
 Happiness and Development
Factors affecting happiness:
 Family relationships
 Financial conditions
 Work satisfaction
 Community and friends
 Health and health-care services
 Personal freedom
 Personal values
Income and Happiness Across
Countries
 Three Core Values of
Development
 Sustenance: The ability to meet basic
human needs including shelter, food,
health, education, safety
 Self-Esteem: To be a person with a
sense of self-respect and self-worth. To
live with dignity, respect, and honor
 Freedom from Servitude: To be able to
choose the path to prosperity and have
the opportunity to improve
Objectives of Development
 To increase the availability and
distribution of basic human
necessities
 Toimprove the standard of living for
the majority of the people
 Toexpand the range of economic
and social choices and opportunities
Millennium Development:
Goals and Targets for 2015
Millennium Development
Goals and Targets for 2015
Economic Development
 Inclusion of non - economic
variables in designing
development strategies
 Achieving the Millennium
Development Goals
 “…One future-or none at all”