Chapter 1

Economics, Institutions, and Development: A Global Perspective

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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
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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
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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
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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
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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
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Happiness and Development

Factors affecting happiness: Family relationships Financial conditions Work satisfaction Community and friends Health and health-care services Personal freedom Personal values
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Income and Happiness Across Countries

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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
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Objectives of Development
To increase the availability and distribution of basic human necessities
To improve the standard of living for the majority of the people To expand the range of economic and social choices and opportunities
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Millennium Development: Goals and Targets for 2015

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Millennium Development Goals and Targets for 2015

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Economic Development
Inclusion of non-economic variables in designing development strategies
Achieving the Millennium Development Goals One future-or none at all

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