Introduction to Development Economics (course)

The purpose of this course is to impart some basic development economics knowledge for non-social scientists. It was developed by Dr. Tawanda Chingozha, development economist at the OAD. Please send your feedback on the course to tawanda at astro4dev.org.

Download the course in PDF format

Preamble

Governments, Non-Governmental Organizations (NGOs), professional associations and society in general always aspire to have improvements in human outcomes. Every society on Earth wants to have a better education for its children, more jobs, a healthcare system, zero crime and no poverty among other objectives. Achieving these objectives is not easy, given the competing nature of needs and wants. The field of Development Economics is concerned with enhancing understanding of all these issues: – why societies yearn them, what challenges they face, what are the factors affecting achievement of positive outcomes and the different ways in which everything interacts with one another in a fluid environment. Thus, achieving better development outcomes needs “all hands on deck”. In all this, the science community has an important part to play through the production of knowledge for development, as well as deploying that knowledge for the betterment of society. However, without a fundamental understanding of development as well as the economic trade-offs of different actions – it is even more difficult (especially for non-social scientists) to perfectly hit the right chords. The purpose of this course is to impart some basic development economics knowledge for non-social scientists.

Course Structure

The course is delivered as blog articles per chapter/topic. You can take the course at your own pace, but we recommend one article/blog post/lesson per day. Lesson 1 should be a 20 minute read while Lessons 2 – 7 should each be a plus or minus 1 hour read.

Learning Outcomes

After taking this course we hope you will:-

  1. Have a general grasp of Development Economics
  2. Understand the definition of Economics and the basic economic problem
  3. Have some understanding of some basic economics concepts
  4. Develop some grasp of the workings and limitations of the market system
  5. Obtain some appreciation of market failure and the need for intervention by Government and other actors
  6. Discuss ways of promoting cross-disciplinary collaboration
  7. Begin to shape your own role in Development Economics more firmly

Course Outline

The course is divided into 6 sections, with several topics falling under each of them.

  1. Real Life Development Economics Scenarios (Lesson 1) 
  2. What is Development Economics? (Lesson 2 & Lesson 3)
    2.1 Definitions and overview
    2.2 Key Features of Development Economics
    2.3 Characteristics of Developing Economies
    2.4 Assessing Developmental Progress
    2.4.1 The Sustainable Development Goals
    2.4.2 The Human Development Index (HDI)
  3. Review Classical Economic Theory (Lesson 4)
    3.1 The basic economic problem
    3.2 Market systems
    3.3 Centrally Planned Economy
    3.4 Free Market Economy
    3.5 Mixed Economy
    3.6 The verdict – which is the best market system?
    3.7 Consequences of Government Intervention on the Market
    3.7.1 Price floors
    3.7.2 Price ceilings
    3.8 Further Merits of the Free Market System
  1. Departure from Classical Economics (Lesson 5)
    4.1 Market Failure
    4.2 Examples of Market Failure
    4.3 Sources of market failure
  2. Sources of Economic Growth and Development (Lesson 6)
    5.1 Technology
    5.2 Institutions
    5.3 Human Capital
    5.4 Natural Resources Discovery
  1. Measuring Developmental Impact (Lesson 7)
    6.1 Operating in a Data Scarce Environment
    6.2 Some Examples of Remotely Sensed Datasets
    6.3 The Indispensable Need for Research Collaboration
    6.4 Econometric Identification
    6.5 Mimicking RCTs & Dealing with Endogeneity Issues – with RS Datasets

PROCEED TO Lesson 1>>

 

No time to take the course? Here are the highlights.

Course Highlights

Lesson 1

The covid-19 pandemic exposed huge inadequacies in global health systems the world over. Public healthcare is a public good that is naturally undersupplied. This is worsened by the fact that the pharmaceutical and medical equipment industries may be dominated by monopolies. Monopolies exist due to high start-up costs, high levels of regulation (to ensure safety of medicines and equipment) and the limited availability of industry information (e.g., formulas, procedures). Science has a role in breaking some of those barriers. These Canadian and South African examples show the role that science as the world fought the covid-19 pandemic in 2020.

Lesson 2

Knowledge of some characteristics of developing countries is key. For example, capital shortage means that there is high marginal productivity of capital hence small capital investments can achieve huge results.

Lesson 3

The Sustainable Development Goals (SDGs) are an important reference matrix for development practitioners. The Human Development Index (HDI) is a general measure of development and it shows that while economic growth (as measured real GDP increase) is important, education, health and quality of life are also important.  

Lesson 4

The basic economic problem arises from the need to allocate scarce resources to meet unlimited needs and wants. The Centrally Planned, Free Market and Mixed Market economies are the generic market systems. Market systems are allocative mechanisms that attempt to meet unlimited needs and wants given limited resources in the best possible way. Mixed markets – that are skewed towards free markets are the most common across the world. By and large, free markets achieve better economic outcomes.  

Lesson 5

There are also instances where the free market fails to achieve better socio-economic outcomes. For example, common access property such as nature reserves can be depleted through logging if the government does not intervene and impose penalties, levies and taxes. Similarly, an owner of a private beach has an incentive to keep it clean and free of pollution whereas such an incentive does not exist for a public beach. Therefore, the government needs to intervene. Also, in free markets the profit incentive may result in over-charging, and the government may also need to intervene one way or another.

Lesson 6

There are various sources of growth. These include technology, institutions, human capital and discovery of natural resources. Human capital is important in that higher quality workers achieve higher levels of productivity hence more output and overall higher national income. That is why STEM education is highly emphasized.

Lesson 7

Remotely Sensed (RS) datasets such as Night Lights have been used by economists to proxy for economic activity in data scarce contexts. To understand the causal effects of development policy interventions, quasi-experimental econometric techniques are important in order to deal with endogeneity issues.  

Recommended Textbooks and MOOCS for Deeper Understanding

Textbooks

  1. What Is Considered Development Economics? Commonalities and Differences in University Courses around the Developing World. David McKenzie & Anna Luisa Paffhausen, The World Bank Economic Review, Volume 31, Issue 3, October 2017, Pages 595–610
  2. A radical rethinking of the way to fight global poverty. Banerjee AV, Banerjee A, Duflo E. Poor economics: Public Affairs; 2011 Apr 26.
  3. The age of sustainable development. Sachs, J. D., Columbia University Press, 2015.
  4. Economics for South African students. Fourie, L., Mohr, P., & Fourie, L., Van Schaik Publishers.

MOOCs

  1. MRU Development Economics Course: https://mru.org/development-economics