political economy of development Flashcards
what is political economy?
the study of the relationship between politics and economy.
what is economic development?
sustained increase in the standard of living of a country’s population , resulting from changes and improvements in wealth, infrastructure, education and technology.
what is free market principle?
economic system in which private individuals and firms have the right to make decisions about buying or selling the property of a good.
what is interventionist state?
central government allocates resources, sets prices , makes investments and owns many of the country’s productive industries and resources.
what is economic market?
individuals and firms choose how to produce goods that consumers seek to purchase.
market function as self sufficient and decentralized mechanism of coordination supply and demand
markets operated in tension with states which exert centralized sovereign authority over a territory and its population.
what are the different sources of market failures?
- public good
- private goods
- increasing returns to scale - when a firm produces something, the average cost per unit decreases as the firm produces more and more.
- monopoly - when a single firm controls the production. distribution and sale of a product, forcing all other business and prevents new competition entering the market
- externality - action that affects the welfare of others whether on purpose or not.
democracy or non democracy?
Most wealthy countries are democracies, and most poor countries are not
This is no evidence that democracy causes better economic growth
The causal connection may run in the opposite direction: perhaps economic growth causes democracy
There is no convincing evidence that either democracy or non‐democracy is superior to the other in terms of promoting economic growth
free market vs command economies
free market:
economic liberalism prefers less government involvement on the economy for better growth
supports laissez faire polices like minimum regulation, low taxes, gov spending.
command economies: highly controlled by the government
social democracies and state led development
social democracy : tries to balance capitalist markets and private property with a greater degree of state intervention in the economy that liberalism recommends.
state led development: government coordinates private sector investments and encourages individuals to save rather than spend their income and give treatment to industries regarded as essential to national economic development.
what are colonial legacies?
conditioned the possibilities for economic development of different countries.
what is colonization and long term path of development?
Settlement Colonies: were established primarily as a place for people from Europe to settle
Extraction Colonies: established primarily to extract abundant natural resources
Extraction colonies were more likely to be impoverished and weakened than settlement colonies
what is the post colonial status and economic development?
The political institutions European colonizers established and then left behind perpetuated certain economic and social conditions
The most important institutional inheritance includes the security of property rights, incentives for or against corruption, structures of the financial sector, and the capacity for investment in public infrastructure
