Development Microeconomics

Development Microeconomics

Development Microeconomics

Development Microeconomics

Synopsis

Traditional development economics has recently been revolutionized by the application of new economic tools and concepts. Development Microeconomics is the first in a series of books which will look at the entire spectrum of development economics issues, combining the strengths of conventionaldevelopmental thought with the insights of contemporary mainstream economics. The main new conceptual tool used is the application of the theory of imperfect information and the effects this has on the the behaviour of economic agents. This helps to explain why perfect competition models rarely have success when dealing with developing economies. The authors also stress thenecessity of balance in dealing with many of the classic problems in development studiesthe importance of both the individual as economic agent and cultural norms as the framework of social behaviour; the dual relationship between equity and efficiency in economic policy-making; the importance ofmarket rivalry and the potential of market breakdown. Designed specifically for graduate students, this book analyses the key microeconomic problems facing the very poorest sectors of developing economies. It utilises simple theoretical models, and is presented in a compact and analytical form. High technical sophistication is avoided, and the onlypre-requisite is some familiarity with the tools of general microecomic theory at a first-year graduate or advanced undergraduate level.

Excerpt

Tolstoy begins Anna Karenina with the famous sentence: 'All happy families are alike but an unhappy family is unhappy after its own fashion.' Perhaps that is also the case in the world of economic misery and well-being. The diversity of experience of the poor countries in the world is much wider and sharper than that of the rich countries. This is partly because the number of people and countries that are poor is much larger (and, socially, geographically, and institutionally, far more heterogeneous) than that of rich countries. Under these circumstances, to aim at capturing even the broad contours of this diversity of development experience in a short textbook is hopeless. To any generalization about this experience that such a textbook may venture to suggest, one can easily cite many counter-examples from different parts of the world.

In this textbook we do not even attempt any comprehensive or broad representation of the issues of development and underdevelopment. Our intention is to be selective and illustrative, to give examples of analytical thinking on some of the major issues. In the choice of issues, our focus is on those that are more relevant to the very poor countries (not so much to the middle-income developing countries, or even, in the latter countries, on issues that are more relevant to the poorest sections of their population). Hence, for example, our frequent emphasis on the rural and the more unorganized or informal sectors of the economy.

The issue of relevance should not, however, be interpreted in the sense of immediate applicability in matters of practical policy. Our treatment of problems in this book is largely theoretical (though not technically at a highly sophisticated level). We do not try to capture the variety of empirical experience in different parts of the world that have accumulated over the last few decades (and the many careful econometric estimates that are now available on the basis of the data collected). We occasionally refer to some empirical work, but more as an example to highlight the theoretical point that we happen to be making. Even in the theoretical treatment we are highly selective, not comprehensive. While in our choice of issues we have to keep analytical tractability and ease of exposition in mind, we like to think that we have not done theory for theory's sake, but have chosen problems that have some, at least faint, resonance in the more complex, real world. (With our own background of empirical work in some of the poorest parts of the world—South Asia for one author, sub-Saharan Africa for the other—we are painfully aware of the difficulty of

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