Matakuliah
Tahun
: <<EKONOMI PEMBANGUNAN>>
: <<2009>>
The Economics and Development Concept
Pertemuan 1
Our primary goal in development must be to reduce the
disparities across and within countries ….. The key
development challenge of our time is the challenge
inclusion.
James D. Wolfensohn. President, WB 1998
Development theory by itself has little value unless it is
applied, unless it translates into results, and unless it
improves people live.
Lewis T. Preston, Former President, WB
Bina Nusantara University
3
Material Outline
• The nature of Development Economics
• The important Role of values in Development
Economics
• Core values of Development
• Objectives of Development
• Theories of Development
Bina Nusantara University
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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 theese resources over time so as to
produce an ever expanding range of goods and services.
• Development economics has an ever greater scope. In
additional to being concerned with the efficient allocation of
existing scarce (or idle) productive resources and with their
sustained growth over time, it must also deal with the
economic, social, political, and institutional mechanisms, both
public and private.
Bina Nusantara University
5
The important Role of values in
Development Economics
• Economics is a social science
• It is concerned with human beings and the social
systems by which they organize their activities to
satisfy basic material needs (food, shelter, clothing)
and nonmaterial wants (education, knowledge,
spiritual full fillment)
Bina Nusantara University
6
Three Core Values of Development
1. Sustenance : the ability to meet basic needs
- All people have certain basic needs without
which life would be impossible theese life –
sustaining basic human needs include food,
shelter, health and protection
Bina Nusantara University
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Three Core Values of Development
2. Self Esteem : to be a person
- A second universal component of the good life is self
– esteem – a sense of worth and self – respect, of
not being used as a tool by others their own ends
- All peoples and societies seek some basic form of
self – esteem, although they may call it authenticity,
identity, dignity, respect, honor, or recognition.
Bina Nusantara University
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Three Core Values of Development
3. Freedom from Servitude : To be able to choose.
- A third universal value that we suggest should
constitute the meaning of development is the
concept of human freedom. Freedom here is to be
understood in the sense of emancipation from
alienating material conditions of life and from social
servitude to nature, ignorance, other people,
misery, institutions, and dogmatic beliefs.
Bina Nusantara University
9
Objectives of Development
1. To increase the availability and widen the distribution of basic
life–sustaining goods such as food, shelter, health and
protection
2. To raise levels of living, including, in addition to higher
incomes the provision of more jobs, better education, and
greater attention to cultural and humanistic values, all of
which will serve not only to enhance material well – being but
also to generate greater individual and national self – esteem
3. To expand the range of economic and social choices
available to individuals and nations by freeing them from
servitude and dependence not only in relation to other
people and nation – states but also to the forces of ignorance
and human misery.
Bina Nusantara University
10
Theories of Development
Leading theories of Economic Development : Five
Approaches
1. The linear stages of growth model
2. Theories and patterns of structural change
3. The international dependence revolution
4. The neoclassical, free – market counterrevolution
5. The new or endogenous theory of econ - growth
Bina Nusantara University
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The linear stages theory
1) Rostow’s Stages of growth
In the Rostow model, the advanced countries it was
argued had all passed the stage of “take – off into
self sustaining growth”, and the under developed
countries that were still in either the traditional
society or the “preconditions” stage had only to
follow a certain set of rules of development to take
of in their turn into self – sustaining economic
growth
Bina Nusantara University
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The linear stages theory
2) The Harrod-Domar Growth Model
- The economic mechanism by which more
investment leads to more growth.
Bina Nusantara University
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Structural change models
1) The Lewis Theory of Development
In the Lewis model, the underdeveloped economy
consists of two sectors: (a) a traditional,
overpopulated rural subsistence sector
characterized by zero marginal labor productivity,
(b) a high productivity modern urban industrial
sector into which labor from the subsistence sector
is gradually transferred
2) Structural change and Patterns of Development
Bina Nusantara University
14
The International Dependence Revolution
1) The Neocolonial Dependence Model
- The existence and continuance of under development primarily to the
historical evolution of a highly unequal international capitalist system of
rich country – poor country relationships.
2) The False – Paradigm Model
- Attributes under development to faulty and in appropriate advice provided
by well- meaning but often informed, biased, and ethnocentric international
“expert” advisers from developed country assistance agencies and
multinational donor organizations.
3) The Dualistic – Development Thesis
- Dualism is a concept widely discussed in development economics, it
represents the existences and persistence of increasing divergences
between rich and poor nations and rich and poor peoples on various levels.
Bina Nusantara University
15
The Neoclassical Counterrevolution
1) Challenging the Static Model : Free Markets, Public
Choice, and Market – Friendly Approaches
2) Traditional (old) Neoclassical Growth Theory
- Output growth results from one or more of three
factors : increases in labor quantity and quality,
increases in capital, and improvements in
technology.
Bina Nusantara University
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The New Growth Theory
Provides a theoretical frame work for analyzing
endogenous growth, persistent GNP growth that
is determined by the system governing the
production process rather than by forces outside
that system.
Bina Nusantara University
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