Understanding Economic Development

Understanding Economic Development

A Global Transition from Poverty to Prosperity?

Colin White

This fascinating book considers one of the most important problems in economics: the inception of modern economic development. There is at present no satisfactory explanation of the inception of modern economic development; an excessive focus on either pure theory or on unique histories limits the explanatory power. This book realises the need to integrate the two approaches, moving beyond the proximate causes of economic theory to review the role in an analytic narrative of significant ultimate causes – geography, risk environments, human capital, and institutions.

Chapter 3: The Optimist’s View: Convergence

Colin White

Subjects: development studies, development economics, economics and finance, development economics


. . . the rule of growth in developing countries is that anything can happen and often does. The instability of growth rates makes talk of the growth rate almost meaningless. (Pritchett 2000) In the simplest neoclassical model, all economies should be converging on a single developed state, with a high level of capital per head and selfsustaining economic growth at a rate reflecting the growth of the pool of technical and organizational knowledge available in the world. Such an expectation of convergence in income levels reflects an optimistic view of the future universality of economic development; all countries will eventually develop economically. Convergence is a short-hand for the spread of modern economic development. In other words, all countries will become developed and follow the pattern of the most developed economy, at the present the USA. Such a viewpoint accords with the optimism of the liberal perspective, which argues that, freed to make unconstrained choices, individuals tend to make rational choices which optimise their situation. In this case, it is strongly argued that they lead to economic development. Most textbooks contain powerful arguments that free untrammelled markets lead to economic success at both micro and macro levels.1 This implication of convergence needs to be tested and the theory adjusted, if the real world does not show such convergence. A critical question to be asked at this stage is the empirical one: does any change in the economic condition of the world in the recent past accord with this anticipation of neoclassical economic growth...

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