Contextual Development Economics (eBook)

Acknowledgements 8
Contents 12
List of Figures 18
List of Tables 20
Chapter 1: Introduction 22
1.1 The Need for a Contextual Approach to Development Economics 23
1.2 Premises of Research 26
1.3 Structure and Method of the Study 27
Part I Economic Characteristics of Low-Income Countries 30
Chapter 2: Poverty 34
2.1 The Multiple Dimensions of Poverty 37
2.1.1 Income and Consumption Pattern 37
2.1.2 Health and Education 41
2.1.3 Social Exclusion 42
2.1.4 Insecurity 43
2.2 The Problem of Measuring Poverty 44
Chapter 3: Transaction Costs 49
3.1 Transaction Costs and the Organisation of Economic Activity 50
3.2 Transaction Costs and the Institutional Environment 51
3.3 Definition and Measurement of Transaction Costs 54
3.3.1 The Cost of Regulation 56
3.3.2 Infrastructure Costs 58
3.3.3 Informal Institutional Determinants of Transaction Costs 60
3.3.4 Historical Determinants of Transaction Costs 60
Chapter 4: Private Governance 62
4.1 Foundations of Private Economic Governance 65
4.1.1 Morality 66
4.1.2 Personal Trust 68
4.1.3 Reputation 69
4.2 Alternative Institutions for Contract Enforcement 71
4.2.1 Group Structure 71
4.2.2 Contractual Structure 75
4.2.3 Coordinated Arrangements and Private Third Parties 77
4.3 Alternative Institutions for Property Rights Protection 81
4.3.1 The Definition of Property Rights 81
4.3.2 Sources of Property Rights Violations 82
4.3.3 Private Protection of Property Rights 84
4.4 The Scope and Limits of Informal Enforcement Institutions 85
4.4.1 The Relationship Between Informal Enforcement and the Scope of Exchange 85
4.4.2 Natural Limits of Private Governance Mechanisms 87
4.4.3 Natural Advantages of Private Governance Mechanisms 88
Chapter 5: Informal Economic Activity 91
5.1 Defining and Measuring the Informal Economy 92
5.1.1 The Size and Growth of the Informal Economy and How It Can Be Estimated 95
5.2 Private Support Institutions for Informal Firms 101
5.3 The Role and Implications of Informality for Economic Development 104
5.3.1 Different Interpretations of Informal Economic Activity and the Merits of Formalisation 105
Part II: Development Economics: The Past 70 Years 109
Chapter 6: The First Generation of Development Economists 111
6.1 Modernisation Theories 113
6.1.1 Paul Rosenstein–Rodan: Industrialisation and the “Big Push” 113
6.1.2 Arthur Lewis: The Dual Sector Model 114
6.1.3 Ragnar Nurkse: Balanced Growth, Capital Formation and the Primacy of Domestic Action 115
6.1.4 The Analysis of Typical Growth Paths by Clark, Kuznets, Rostow and Gerschenkron 118
6.2 Structuralist Approaches to Development Economics 119
6.2.1 Albert O. Hirschman: The Strategy of Unbalanced Growth 120
6.2.2 Gunnar Myrdal: Development as a Cumulative Process of Circular Causation 122
6.2.3 Hans W. Singer: The International Distribution of Gains from Trade and Investment 123
6.2.4 Raú Prebisch: Import Substitution as Strategy for Development 126
6.2.5 Excursus: Friedrich List and the German Zollverein 130
6.2.6 Peter T. Bauer: A Class of His Own 132
Chapter 7: The Second Generation: Return to the Mainstream 135
7.1 Neoclassical Development Economics 135
7.2 Methodological Considerations 139
7.3 Neoclassical Welfare Economics and Methods of Project Appraisal 143
7.3.1 Social Cost: Benefit Analysis 143
7.3.2 Shadow Pricing 144
7.3.3 Time Discounting 145
7.3.4 Choice of the Time Horizon 146
7.3.5 Implications of Neoclassical Welfare Economics 147
7.4 Development Policies and the “Washington Consensus” 150
Box 7.1 Welfare criteria from Ordinal Utility Theory 148
Chapter 8: The Third Generation: Institutional Turn and the “New Development Economics” 152
8.1 Imperfect Information and the “New Development Economics” 153
8.2 The New Institutional Economics and Development 155
8.2.1 The Concept of Transaction Costs in Institutional Theory 156
8.2.2 The Process of Institutional Change 157
8.2.3 Institution-Building and Policy Reform 158
8.3 Empirical Literature on Institutions and Growth 160
8.4 The Good Governance Agenda 163
Chapter 9: Conclusions from the Past and the Agenda for a New Generation of Development Economics 166
9.1 The Challenge of Igniting Growth in Low-Income Countries 166
9.2 Why Context Matters 168
9.2.1 Operational Guidance to Policymakers: An Often Neglected Objective of Development Research 171
9.2.2 The Balance and Sequence of Empirical and Theoretical Analysis in Development Economics 175
9.3 The Danger of Bureaucratic Failure in the Administration of Development Assistance 180
9.3.1 Problems of Accountability and Feedback 182
9.3.2 Adverse Behaviour of Aid Bureaucrats 183
9.3.3 Informational and Motivational Problems Associated with the Provision of Aid 185
9.4 Summary of Conclusions from the Review of Development Economics 188
Part III: In Search of an Analytical Framework for the Study of Low-Income Countries: The Style-Economic Approach 191
Chapter 10: Emerging New Directions in Development Economics 193
10.1 Confessions of Humility and Ignorance 194
10.2 Planners vs. Searchers 196
10.3 Behavioural Development Economics 200
10.4 Trends at the Level of Research Methods and Analytical Techniques 203
10.4.1 Analytic Narratives 204
10.4.2 Growth Diagnostics 206
10.4.3 Experimental Methods 208
Chapter 11: German Historical Economics as Development Economics 211
11.1 Scope and Scientific Method of the German Historical School 212
Chapter 12: From Stage Theories to the Concept of Economic Styles 218
12.1 Stage Theories and the Idea of Economic Systems 218
12.1.1 Historical Stage Theories 218
12.1.2 Werner Sombart and the Concept of Economic Systems 220
12.2 Spiethoff’s Concept of the Economic Style 221
12.2.1 Methodological and Theoretical Foundations of Spiethoff’s Economic Styles 225
12.2.1.1 Pure Theory vs. Economic Gestalt Theory 226
12.2.1.2 “Real Type” and “Ideal Type” Models 228
12.2.1.3 Historical vs. Nonhistorical Theory 229
12.3 The Concept of Economic Styles in the Literature Since Spiethoff 231
12.3.1 Evaluation and Critique by Eucken 231
12.3.2 The Concept of Economic Styles in the Contemporary Literature 235
12.4 Parallel Contributions of the “Old” Institutional School of Economics 237
Chapter 13: The Relevance of the Historical School for the Study of Low-Income Countries 240
13.1 Methodological Contributions 242
13.1.1 Inductive and Deductive Reasoning 243
13.1.2 Positive and Normative Research 243
13.1.3 Nature and Scope of Research 244
13.1.4 Models of Man and Behavioural Assumptions 245
13.2 The Style-Based Approach to the Understanding of Economic Activity in Low-Income Countries 248
13.2.1 Culture and Style in Economic Analysis 250
13.2.2 Economic Style and Institutional Diversity 257
13.2.3 Some Applications and Fields for Further Research 260
Chapter 14: Conclusions 263
Bibliography 268
Author Index 287
Subject Index 292