While humanity shares one planet, it is a planet on which there are two worlds, the world of the rich and the world of the poor.
—Raanan Weitz, 1986

More than three-fourths of the world's people live in developing countries, but they enjoy only 16% of the world's income—while the richest 20% have 85% of global income.
—United Nations Development Program, Human Development Report, 1995

Our primary goal in development must be to reduce the disparities across and within countries .... The key development challenge of our time is the challenge of inclusion.
—James D. Wolfensohn, President, World Bank, 1998

How The Other Three-Quarters Live

Economics and Development Studies

The Nature of Development Economics

Why Study Development Economics? Some Critical Questions

The Important Role of Value in Development Economics

Economies as Social Systems: The Need to Go Beyond Simple Economics

What Do We Mean by Development?

Traditional Economic Measures

The New Economic View of Development

Sen's "Capabilities" Approach

Three Core Values of Development

The Three Objectives of Development

Conclusions

Development economics is a distinct yet very important extension of both traditional economics and political economy. While necessarily also concerned with efficient resource allocation and the steady growth of aggregate output over time, development economics focuses primarily on the economic, social, and institutional mechanisms needed to bring about rapid and large-scale improvements in levels of living for the masses of poor people in developing nations. As such, development economics must be concerned with the formulation of appropriate public policies designed to effect major economic, institutional, and social transformations of entire societies in the shortest possible time. Otherwise, the gap between aspiration and reality will continue to widen with each passing year. It is for this reason that the public sector has assumed a much broader and more determining role in development economics than it has in traditional neoclassical economic analysis.

As a social science, economics is concerned with people and how best to provide them with the material means to help them realize their full human potential. But what constitutes the good life is a perennial question, and hence economics necessarily involves values and value judgments. Our very concern with promoting development represents an implicit value judgment about good (development) and evil (underdevelopment). But development may mean different things to different people. Therefore, the nature and character of development and the meaning we attach to it must be carefully spelled out. We did this at the end of the chapter and will continue to explore these definitions throughout the book.

The central economic problems of all societies include traditional questions such as what, where, how, how much, and for whom goods and services should be produced. But they should also include the fundamental question at the national level about who actually makes or influences economic decisions and for whose principal benefit these decisions are made. Finally, at the international level, it is necessary to consider the question of which nations and which powerful groups within nations exert the most influence with regard to the control, transmission, and use of technology, information, and finance. Moreover, for whom do they exercise this power?