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Development Economics Definition
Development economics is a field of economics that focuses on improving the economic and social status of local communities and developing nations. This branch of economics pays attention to the quality of life, quality education, health care, and other factors that improve the well-being of people in a community or nation.
Development economics encourages the economic and social growth of low-income countries. Development economics improves the conditions and well-being of the poorest economies by developing standards, structures, and policies that help low-income countries develop into modern and developed countries. Therefore, this field of economics focuses on transforming the poorest economics into the most prosperous nations of the world.
A Little More on What is Development Economics
The major economists that are ardent proponents of development economics include Amartya Sen, Jeffrey Sachs, Hernando de Soto Polar, Joseph Stiglitz, and Nobel Laureates Simon Kuznets. Development economics takes into account macroeconomic and microeconomic factors that are capable of stimulating economic growth and good economic structures in the poorest countries. According to this branch of economics, both human influences and monetary policies can affect the development of a country, adequately harnessing such factors will stimulate growth in the nation.
Development economists posit there are strategies that can lift a country out of its dejected and poor state and elevate it into a fully developed country. These strategies can either take the form of macroeconomics or microeconomics.
Real World Example – Mercantilism
Mercantilism is an economic theory that was predominantly practiced between the 16th to the 18th centuries. This theory allowed governments to reduce competing and rivalry national powers by regulating the country’s economy to promote the state’s power. In a nutshell, mercantilism promoted exports at the expense of imports, thereby encouraged the consolidation of state or regional power and limitation of rival national powers.
This type of approach to economy banned states and colonies from engaging in trade deals with other nations. The state or regional government ensured this through strict regulations as well as monopolized markets.
Economic Nationalism as an Example
Economic nationalism is another economic concept that is targeted at improving the well-being of an economy. It involved the imposition of certain policies and regulations by the government which restricts the formation of capital to its domestic domain and not outside the economy. This means goods, labor and capital are moved freely within the domestic domain rather than outside of the nation. For imports of goods from places outside of the nation, heavy tariffs and trade barriers are imposed. In economic nationalism, countries do not align with the benefits of international trade and globalization, instead, they restrict the movement of goods, labor, and capital to their locality.
Example of the Linear Stages of Growth Model
There are numerous models used by development economists to drive economic growth in the poorest economies. Sometimes, the desire to transform an emerging economy into an industrialized economy takes a steady process. The linear stages of growth model are mostly applicable, in this model, economic growth and development are stimulated in a country through industrialization.
A good example of the linear stages of growth model in practice was when it was used to recuperate the European economy at the end of World War II. The growth model creates an achievable design through which local bodies can drive economic growth through industrialization.