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Home Economic Development Approaches to Economic Development


Approaches to Economic Development/Measurement of Economic Development in Terms of Quality of Life:


(1) Economic Development with Socio-Economic Indicators Approach:


To measure economic development with this approach a study was launched by United Nations Research Institute on Social Development (UNRISD) in 1970. This study was concerned with selection of the most appropriate Indicators of Development and an analysis of the relationship between these indicators at different levels of development. Accordingly, a composite "Social Development Index" was constructed. Originally, 73 indicators were examined. However, only 16 core indicators (9 social and 7 economic indicators) were selected.


Indicators of Economic Development:


They are as:


(i) The life expectancy, (ii) Percentage of population in localities of 20,000 and over, (iii) The per capita use of animal protein per day, (iv) The combined enrolment at primary and secondary level, (v) The vocational enrolment ratio, (vi) Average number of persons per room, (vii) News paper circulation per 1000 population (viii) Percentage of economically active population with electricity, gas, water etc., (ix) Agriculture production per male agri. worker, (x) Percentage of adult male labor in agri. (xi) Electricity consumption, KW per capita, (xii) Steel consumption, Kg per capita, (xiii) Energy consumption, Kg of coal equivalent per capita, (xiv) Percentage of GDP derived from manufacturing, (xv) Foreign trade per capita, in I960 US dollar, (xvi) Percentage of salaried and wage earners to total economically active population.


The above social and economic indicators were selected because there existed a big correlation between them regarding formation of a development index. And so the constructed development index is considered to be more suitable than per capita income approach to measure economic development. On the basis of such "Development Index", the ranking of certain countries differed from ranking made on the basis of GNP per capita. It was also found that the "Development Index" was more highly correlated with GNP per capita for developed countries than for developing countries. The study concluded that social development occurred at a more rapid rate than economic development up to a level of $500 per capita (at 1960's prices).


In respect of selection of indicators an other study has been conducted by Irma Adelman and Cynthia Morris who classified 74 UDCs on the basis of following 40 variables:


(i) Size of the traditional agri. sector, (ii) Extent of dualism, (iii) Extent of urbanization, (iv) Character of basic social organization, (v) Importance of indigenous middle class, (vi) Extent of social mobility, (vii) Extent of literacy, (viii) Extent of mass communication, (ix) Degree of cultural and ethnic homogeneity, (x) Degree of social tension, (xi) Crude fertility rate, (xii) Degree of modernization of outlook, (xiii) Degree of national integration and sense of national unity, (xiv) Extent of centralization of political power, (xv) Strength of democratic institutions, (xvi) Degree of freedom of political opposition and press, (xvii) Degree of competitiveness of political parties, (xviii) Pre-dominant basis of the political party system, (xix) strength of labor movement, (xx) Political strength of the traditional elite, (xxi) Political strength of the military, (xxii) Degree of administrative strength, (xxiii) Extent of leadership commitment to economic development, (xxiv) Extent of political stability, (xxv) Per capita GNP in 1961, (xxvi) Rate of growth of real per capita GNP between 1950-1951 and 1963-64, (xxvii) Abundance of natural resources, (xxviii) Gross investment rate (xxix) Level of modernization of industry (xxx) Change in degree of industrialization since 1950, (xxxi) Character of agricultural organization, (xxxii) Level of modernization of techniques in agriculture, (xxxiii) Degree of improvement in agri. productivity since 1950, (xxxiv) Level of adequacy of physical over head capital, (xxxv) Degree of improvement in physical over head capital since 1951, (xxxvi) Level of effectiveness of the tax system, (xxxvii) Degree of improvement in tax system since 1950, (xxxviii) Level of effectiveness of financial institutions, (xxxix) Degree of improvement in human resources, (XL) Structure of foreign trade.


All above mentioned social and economic factors have been linked with the level of economic development. The researchers found numerous correlations between certain key variables and economic development.




(i) The preparation of composite index on the basis of social indicators is objected on the ground that it suggests that economic development should be measured in terms of "Structural Change", rather in terms of "Human Welfare".


(ii) This approach also requires that the developing countries must also develop along the lines of the developed countries, as this measure stresses upon the use of indicators like animal protein consumption per capita or energy consumption per capita.


(iii) In this approach the greater stress has been laid upon the "Inputs" like the number of doctors or hospital beds per 1000 population or enrolment ratios in schools to measure health and education. But economic development is actually concerned with the "Outputs", as the case of life expectancy and literacy.


Thus because of such criticism there are certain economists who support in devising such a 'measure' which could measure economic development in terms of meeting the 'Basic Needs' of the majority of the people or in terms of "Physical Quality of Life".


(2) Economic Development with Basic Needs Approach or Physical Quality of Life Approach:


To measure economic development the traditional approaches are concerned with, (i) increase in GNP,            (ii) increase in per capita GNP. But with the passage of time a dissatisfaction developed against these measures. Rather these measures, it was emphasized to use the measures of "Employment and Distribution".


But so many economists are of the view that criteria of 'Increase in Employment' is not a suitable index of economic development. It is so because that the unemployment which is found in UDCs is different from that unemployment which exists in DCs. Therefore, it will be least attracting to attack economic development with increase in employment.


In the same way, to link 'Redistribution of Income' with economic development may not be accepted as it may happen that poverty is existing in a country despite equal distribution of income, or unequal income distribution is co-existing with fall in absolute poverty. In such state of affairs the economic development would require the abolition of absolute poverty and adversity, which could be possible only if people get the 'Basic Needs'

of life. Therefore, the economists us the criterion of basic needs to measure economic development. According to this approach if people are in a position to avail more amount of food, have better access to educational facilities, and have greater command over the civic amenities like water supply, water sewerage, health care and shelter etc., all such would represent economic development.


Therefore, according to this approach whether GNP and per capita GNP increase or not, whether a fairer distribution of income is made or not, the real matter lies with the 'Provision of Basic Needs or facilities to the people'. This index identifies the components of the produced goods and the segments of the society which are benefited by such goods and services. Therefore, if people fail to get more goods and services even GNP has gone up, it will not represent economic development. Therefore, for the sake of economic development we shall have to make such a measures whereby the availability of basic needs to the masses could be made sure.


Accordingly, to measure economic development we will have to select those measures which are concerned with the basic needs, despite certain differences. As in case of country like Pakistan the supply of doctors is increasing, but a common man fails to get medical facilities as the doctors are reluctant to go to small cities and villages, and majority of the doctors and medical services remain confine to big cities. In such situation, the increase in doctors and medical services will be of least benefit to the common men. Again, if the infant mortality rates are decreased in cities while such may not occur in case of rural areas. Moreover, if in so many countries it is stressed upon to enhance education facilities but the educational system is not made effective, the defects of educational system are not removed and the ratio of students to teachers is not improved, in such situation just expansion in educational facilities can not be accorded as an indicator of economic development. Thus, in spite of lot of flaws in the indicators of increase in education, health, water supply, level of calories and shelter, this measure of economic development presents a realistic picture of economic development than, GNP, GNP per capita and GNP redistribution methods. These measures represent the determination on the part of govt. regarding supply of social services. Thus, the basic needs approach presents a better explanation to remove poverty than the "Redistribution Theory".


Thus in the basic needs approach, the following aspects are analyzed:


(i) How much goods and services are produced?


(ii) What goods and services are being produced?


(iii) How goods and services are being produced?


(iv) What will be the effects of production and distribution on the society?


This shows that in this theory the 'Amount of goods and services' is of crucial importance and the increase in the quantity of goods and services will help in removing poverty. The increase in GNP per capita represents the rise in standard of living. But the criterion of 'Basic Needs' tells us what are the components of GNP and which segments of the society have utilized such components. This approach works like social indicators of economic development. We will have to define some better indicator for each basic need. Basically, the more important needs are concerned with the provision of foods, basic education, health services, water supply, water sewerage, residential facilities and infrastructure.


On the basis of stipulated indicators regarding Basic Needs, we can make comparison between the countries. These indicators or measures will reflect the relative difference between the rich and the poor countries.


Moreover, with these measures we can find that which countries are serious regarding provision of basic needs, and which are non serious. Thus, according to the proponents of the Basic Needs approach to economic development, following indicators can become helpful to measure economic development:


(i) Health Standard: Here it is considered; (a) the life expectancy of the citizens of the country, (b) the infant mortality rates (IMR) in the country.


(ii) Education Level: Here it is considered the 'Literacy Rate' in the country. Moreover, what is the enrolment ratio at primary level.


(iii) Food Availability: Here it is considered that what is per capita food availability in the country.


(iv) Water Supply: What is the percentage of the population which is getting the facility of clean water supply.


(v) Water Drainage: Here it is assessed that what is the percentage of the population which is getting the facility of water drainage etc.


(vi) Shelter And Residence: Here it is estimated that what is the ratio of the population who is having suitable shelter and residences.

Relevant Articles:

Why Economic Development

Lorenz Curve and GINI-Coefficient

Economic Development Vs Economic Growth
Different Definitions of Economic Development
Measurement of Economic Development By Traditional Approach
Approaches to Economic Development/Measurement of Economic Development in Terms of Quality of Life
Physical Quantity of Life Index (PQLI)
Growth of GNP Versus Basic Needs Approach
Human Development Index (HDI)
Good Governance and Humane Governance Index
Measurement of Humane Governance/Good Governance
Measurement of Economic Development with Combining GDP and Life Expectancy
Growth Versus Distribution
Re-Distribution with Growth (RWG)
International Inequalities
New/Modern Economic View of Development
Human Poverty Index (HPI) as a Measure of Economic Growth

Principles and Theories of Micro Economics
Definition and Explanation of Economics
Theory of Consumer Behavior
Indifference Curve Analysis of Consumer's Equilibrium
Theory of Demand
Theory of Supply
Elasticity of Demand
Elasticity of Supply
Equilibrium of Demand and Supply
Economic Resources
Scale of Production
Laws of Returns
Production Function
Cost Analysis
Various Revenue Concepts
Price and output Determination Under Perfect Competition
Price and Output Determination Under Monopoly
Price and Output Determination Under Monopolistic/Imperfect Competition
Theory of Factor Pricing OR Theory of Distribution
Principles and Theories of Macro Economics
National Income and Its Measurement
Principles of Public Finance
Public Revenue and Taxation
National Debt and Income Determination
Fiscal Policy
Determinants of the Level of National Income and Employment
Determination of National Income
Theories of Employment
Theory of International Trade
Balance of Payments
Commercial Policy
Development and Planning Economics
Introduction to Development Economics
Features of Developing Countries
Economic Development and Economic Growth
Theories of Under Development
Theories of Economic Growth
Agriculture and Economic Development
Monetary Economics and Public Finance

History of Money

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