What is 'Development Economics'
Development economics is a branch of economics that focuses on improving the economies of developing countries. Development economics considers how to promote economic growth by improving factors such as health, education, working conditions, domestic and international policies, and market conditions in developing countries. It examines both macroeconomic and microeconomic factors relating to the structure of a developing economy and how that economy can create effective domestic and international growth.
BREAKING DOWN 'Development Economics'
Development economics seeks to determine how poor countries can be transformed into prosperous ones. Strategies for transforming a developing economy tend to be unique because the social and political background of countries can vary dramatically. Some prominent development economists include Jeffrey Sachs, Hernando de Soto Polar, and Nobel Laureates Simon Kuznets, Amartya Sen and Joseph Stiglitz. In development economics, students and professionals create theories and methods that guide practitioners in determining practices and policies that can be used and implemented on the domestic and/or international level.
Mercantilism was a dominant economic theory practiced in Europe during the 16th to the 18th century. It promoted augmenting state power by lowering exposure to rival national powers. Much like political absolutism and absolute monarchies, mercantilism promoted governmental regulation by not allowing colonies to transact with other nations. It monopolized markets with staple ports, banned gold and silver exports, did not allow the use of foreign ships for trade and optimized the use of domestic resources.
Economic nationalism covers policies that focus on domestic control of capital formation, the economy and labor with the acceptance of the use of tariffs and other limits, and restrictions on the movement of capital, goods and labor. To an extent, economic nationalists do not agree with the benefits of globalization and unlimited free trade. As such, economic nationalism may adhere to import substitution and protectionism.
Linear Stages of Growth Model
The linear stages of growth model was used to revitalize the European economy after the second world war. It states that economic growth can only stem from industrialization. It also agrees that local institutions and social attitudes can restrict growth, specifically if these influence people's savings rates and investments. The liner stages of growth model portrays an appropriately designed addition of capital partnered with public intervention. This injection of capital and restrictions from the public sector lead to economic development and industrialization.
Other notable theories include the structural change theory, the international dependence theory and the neoclassical theory.