Development economics examines the factors necessary for economic development, including public welfare, education, health, and freedom. It recognizes that there is no formula for achieving economic development and that social and political strategies are also important. The Human Development Index, gender-related index, and Human Poverty Index are used to measure economic development, poverty, and income inequality. Development economics provides policy makers with a more powerful set of tools to promote the well-being of the entire population.
Traditional economics looks at how to bring about economic growth, but economists have noted that economic growth does not automatically lead to economic development, although it may be a necessary prerequisite for such development. The importance of development economics is that it examines the factors that must come together to bring about economic development. The level of economic development in a country can be measured by considering the levels of public welfare, education, health and freedom. Development economics aims to promote development by increasing people’s freedom, increasing participation in the system, empowering women, eradicating hunger and poverty, and promoting education and health.
Development economics was founded by economists such as Amartya Sen, who helped establish the Human Development Index as a measure of a country’s economic development. The importance of development economics lies in part in recognizing that there is no particular formula for achieving economic development and that the correct development strategy depends not only on economic factors but also on social and political strategies. The United Nations Development Program (UNDP) works with developing countries to create their own strategies to address the problem of economic development, producing the annual Human Development Report, which uses a variety of techniques to measure the level of economic development in developing countries.
The Human Development Index combines life expectancy, education levels and gross domestic product per capita (GDP) to measure the level of economic development. UNDP also uses a gender-related index to measure women’s empowerment and compiles the Human Poverty Index, which looks at life expectancy, literacy rates, school enrollment rates and GDP per capital to measure poverty levels. An economic development problem is that a boost to growth often leads to a wider gap between rich and poor, and that indices such as the Lorenz curve and the Gini index are used to measure the extent of income inequality in a country. The introduction of these influential development measures shows the importance of development economics.
Traditional economics has focused on developing economic growth through trade liberalization, privatization, and deregulation of industry. The importance of development economics has been rooted in the realization that while growth may benefit some parts of industry and society, it may not necessarily promote the well-being of the entire population in a country. The introduction of social and political strategies in addition to economic policies aimed at promoting greater well-being for the entire population has provided policy makers in developing countries with a more powerful set of tools to use to promote the development of their country.
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