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
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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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