COMPARATIVE ECONOMIC PLANNING

Definition of economics
Economics is one of the most exciting disciplines in social sciences. The word
economy comes from the Greek phrase ―one who manages a household. The science
of economics in its current form is about two hundred years old. Adam Smith – generally
known as the father of economics – brought out his famous book, ― An Inquiry into the
Nature and Causes of Wealth of Nations, in the year 1776. Though many other writers
expressed important economic ideas before Adam Smith, economics as a distinct
subject started with his book.
Economics is a social science which studies about efficient allocation of scarce
resources so as to attain the maximum fulfillment of unlimited human needs. As
economics is a science of choice, it studies how people choose to use scarce or limited
productive resources (land, labour, equipment, technical knowledge and the like) to
produce various commodities.
The following statements are derived from the above definition.
 Economics studies about scarce resources;
 It studies about allocation of resources;
 Allocation should be efficient;
 Human needs are unlimited
 The aim (objective) of economics is to study how to satisfy the unlimited human
needs up to the maximum possible degree by allocating the resources efficiently.
Scope of economics
The field and scope of economics is expanding rapidly and has come to include a vast
range of topics and issues. In the recent past, many new branches of the subject have
developed, including development economics, industrial economics, transport
economics, welfare economics, environmental economics, and so on. However, the
core of modern economics is formed by its two major branches: microeconomics and
macroeconomics. That means economics can be analyzed at micro and macro level.
A. Microeconomics is concerned with the economic behavior of individual decision
making units such as households, firms, markets and industries. In other words,
it deals with how households and firms make decisions and how they interact in
specific markets.
B. Macroeconomics is a branch of economics that deals with the effects and
consequences of the aggregate behaviour of all decision making units in a
certain economics. In other words, it is an aggregative economics that examines
the interrelations among various aggregates, their determination and the causes
 of fluctuations in them. It looks at the economy as a whole and discusses about
the economy-wide phenomena.
Economics - A Science and an Art
a) Economics is a science: Science is a systematized body of knowledge that
traces the relationship between cause and effect. Another attribute of science is
that its phenomena should be amenable to measurement. Applying these
characteristics, we find that economics is a branch of knowledge where the
various facts relevant to it have been systematically collected, classified and
analyzed. Economics investigates the possibility of deducing generalizations as
regards the economic motives of human beings. The motives of individuals and
business firms can be very easily measured in terms of money. Thus, economics
is a science.
b) Economics is also an art. An art is a system of rules for the attainment of a
given end. A science teaches us to know; an art teaches us to do. Applying this
definition, we find that economics offers us practical guidance in the solution of
economic problems. Science and art are complementary to each other and
economics is both a science and an art.
IMPORTANCE OF STUDYING ECONOMICS
We study economics for the following reasons
Allocation of resources:
I. It enables the individuals, households, firms, and the government to know how
limited resources can be used effectively and efficiently.
II. Reduction of resource wastage: Economics helps to reduce wastage in resource
allocation. Economic decision-makers channel their resource to areas where they
are mostly needed.
III. Solution to basic economic problems: The study of Economics provides students
with basic skills for analyzing economic problems
IV. Technique of reasoning and critical thinking: Economics teaches the techniques
of reasoning and power of critical thinking.
V. Provision of basic tools for analysis: Economics equips the economic agents with
the tools of economic analysis to understand and solve current issues and
economic problems confronting the society e.g. oil glut, oil spillage, oil theft,
unemployment etc.
VI. Rational decision-making; economics enables individuals, and other economic
agencies to be rational or reasonable in the application of scare resources to
satisfy unlimited wants. A normal individual takes decisions in the most
acceptable and beneficial ways.
VII. Helps government economic policies and development: economics helps us to
weigh the economic policies of the government, determine their advantages and
disadvantages and offer the right suggestions on the way forward e.g. problem of
unemployment, ‘white-elephant’ projects, inflation, budget etc
THE CONCEPT OF DEVELOPMENT
Definitions of Development
 For almost every writer a different definition of development exists
 Important to first distinguish between:
a. Development as a state or condition- static
b. Development as a process or course of change- dynamic
Meaning of Development-Todaro
 Development is not purely an economic phenomenon but rather a multi-
dimensional process involving reorganization and reorientation of entire
economic AND social system
 Development is process of improving the quality of all human lives with three
equally important aspects. These are:
Todaro’s Three Objectives of Development
1. Raising peoples’ living levels, i.e. incomes and consumption, levels of food,
medical services, education through relevant growth processes
2. Creating conditions conducive to the growth of peoples’ self-esteem through the
establishment of social, political and economic systems and institutions which
promote human dignity and respect
3. Increasing peoples’ freedom to choose by enlarging the range of their choice
variables, e.g. varieties of goods and services.
Alternative Interpretations of Development (Mabogunje)
 Development as Economic Growth- too often commodity output as opposed to
people is emphasized-measures of growth in GNP. Note here the persistence of
a dual economy where the export sector contains small number of workers but
draws technology as opposed to traditional sector where most people work and
is dominated by inefficient technology
 Development as Modernization- emphasizes process of social change which is
required to produce economic advancement; examines changes in social,
psychological and political processes;
 How to develop wealth oriented behavior and values in individuals; profit seeking
rather than subsistence and self sufficiency
  Shift from commodity to human approach with investment in education and skill
training
 Development as Distributive Justice- view development as improving basic
needs.
 Interest in social justice which has raised three issues:
1. Nature of goods and services provided by governments
2. Matter of access of these public goods to different social classes.
3. How burden of development can be shared among these classes.
 Target groups include small farmers, landless, urban under-employed and
unemployed
Alternative Interpretations of Development
 Development as Distributive Justice- view development as improving
basic needs
 Interest in social justice which has raised three issues:
1. Nature of goods and services provided by governments
2. Matter of access of these public goods to different social classes
3. How burden of development can be shared among these classes

Economics and Development studies

We are more aware of global poverty and inequality at the present time than at any
previous time in history. Through the media, tourism and the campaigning activities of
pressure groups and non-governmental organisations (NGOs), people in the developed
market economies of Europe, North America, Japan and Australasia, both directly and
indirectly, have an awareness of poverty and deprivation in low income economies that
even a generation ago was inconceivable.
What is Development Economics?
Development economics is a branch of economics that focuses on improving
fiscal, economic and social conditions in developing countries. Development economics
considers factors such as health, education, working conditions, domestic and
international policies, and market conditions.
Economic development is the growth of the standard of living of a nations people
from a low-income (poor) economy to a high-income (rich) economy. When the local
quality of life is improved, there is more economic development. When social scientists
study economic development, they look at a lot of things.
BREAKING DOWN Development Economics Development economics studies
the transformation of poor countries into more prosperous nations. Strategies for
transforming a developing economy tend to be unique because the social and political
background of countries varies dramatically.
Common characteristics of developing countries
 Low level of productivity
 Imperfect world Markets
 Low living Standard
 Colonial dominance and dependence
 High levels of population growth
 Overdependence on agriculture
 High levels of unemployment
Economic Growth Vs. Economic Development
Economic Growth
An increase in the amount of goods and services produced per head of the
population over a period of time. Economic growth enables an increase in the indicators
like GDP, per capita income, etc
Economic Development enables improvement in the life expectancy rate, infant
mortality rate, literacy rate and poverty rates. Economic Development
GNI Vs. GDP
Gross national income is the sum of a nation's gross domestic product and the net
income it receives from overseas.
GDP Gross domestic product is a monetary measure of the market value of all the
final goods and services produced in a period of time, often annually or quarterly.
Human Development Index - HDI
The Human Development Index (HDI) is a tool developed by the United Nations
to measure and rank countries' levels of social and economic development. Four
principal areas of examination are used to rank countries: mean years of schooling,
expected years of schooling, life expectancy at birth and gross national income per
capita.