Glossary Flashcards
A closed economy that attempts to be
completely self-reliant.
Autarky
The number of units of capital per unit of labor. In traditional neoclassical growth theory, lower capital-labor ratios in LDCs
should mean higher returns to new investment and greater flows of capital from MDCs to LDCs.
Capital-labor ratio
Total output or product divided by
total factor input (e. g. , the average product of labor is equal to total output divided by the total amount of
labor used to produce that output).
Average product
The increase in total output resulting from the use of one additional unit of a
variable factor of production. In the Lewis two-sector model, surplus labor is defined as workers whose marginal product is zero.
Marginal product
Also known as endogenous growth theory, an extension and modification of
the traditional growth theory designed to explain why long-run equilibrium growth can be positive and divergent among countries and why capital tends to flow from poor to rich countries despite the formers low capital-labor ratios.
New growth theory
In dependence theory, the economic developed world.
Center
In dependence theory, local elites who act as fronts for foreign investors.
Comprador groups
A corollary of dominance; a situation in which the LDCs have to rely on developed country domestic and international economic policy to stimulate their own economic growth. Dependence can
also mean that the LDCs adopt developed-country education systems, technology, economic and political systems, attitudes, consumption patterns, dress, etc.
Dependence
Economic growth generated by factors within the production process (e.g., economies of scale, increasing returns, induced technological change) as opposed to outside (exogenous) factors such as increases in population.
Endogenous growth theory
An economy in which there are no foreign trade transactions or any other form of economic contacts with the rest of the world.
Closed economy
A ratio that shows the units of capital required to produce a unit of output over a given period of time.
Capital-output ratio
In international affairs, a situation in
which the developed countries have much greater power than the less developed countries in decisions
affecting important international economic issues, such as the prices of agricultural commodities and raw materials in world markets.
Dominance
The system whereby prices of commodities or services freely rise or fall when the buyer’s demand for them rises or falls or the seller’s supply of them decreases or increases.
Free Market/Market Mechanism
The coexistence in one place of two
situations or phenomena (one desirable and the other one not) that are mutually exclusive to different groups of society - for example, extreme poverty and affluence, modern and traditional economic sectors, growth and stagnation, university education among a few and mass illiteracy
Dualism
A condition that must be present, although it need not be in itself sufficient, for an event to occur. For example, capital formation is a necessary condition for sustained economic growth (before growth in output can occur, there must be tools to produce it). But for this growth to continue, social, institutional, and attitudinal changes may have to occur.
Necessary condition
A model whose main proposition is that underdevelopment exists in developing countries because of continuing exploitative economic, political, and cultural policies of former colonial rulers toward less developed countries.
Neocolonial dependence model
A phenomenon that results from the
existence of market imperfections
(e.g., monopoly power, lack of factor
mobility, significant externalities, lack of knowledge) that weaken the functioning of a free-market economy - it fails to realize its theoretical beneficial results. Market failure often provides the justification for government interference with the working of the free market.
Market failure
Theoretical model of an economy as a component of that economy using price
system and market mechanism.
Free-market Analysis
The 1980s resurgence of neoclassical free-market orientation toward development problems and policies; counter to the interventionist dependence revolution of the 1970s.
Neoclassical counterrevolution
Savings expressed as a proportion
of disposable income over some period of time. It shows the fraction of national income saved over any period. Savings ratio is sometimes used synonymously
with average propensity to save
Savings ratio
Theory that self-interest guides all individual behavior and that governments are inefficient and corrupt because people use government to pursue their own agendas. Free markets are perceived as more efficient and more just.
New political economy approach/public-choice theory
An economy that encourages foreign
trade and has extensive financial and non-financial contacts with the rest of the world in areas such as education, culture, and technology.
Open economy
The hypothesis that underdevelopment is due to underutilization of resources arising from structural or institutional
factors that have their origins in both domestic and international dualistic
situations. Development therefore requires more than just accelerated capital formation as espoused in the stages-of-growth and false-paradigm models of development.
Patterns-of-development analysis and Structural-change theory
In dependence theory, the developing
countries
Periphery
