The debate during the past decade on globalization and the emerging economies has renewed interest in the study of development and underdevelopment. Oddly enough, this renewal has only rarely looked back at the work of the founding thinkers of development theory and to what we refer as development economics. Development economics has its roots in a series of seminal contributions. Although hard to classify as a school of economic thought, they are nevertheless identifiable for their pioneering effort to define an approach to the study of underdeveloped economies. Despite the differences, development economists first defined the new field of investigation shaping the conception of the development problem. This is very important considering that this approach is largely forgotten today. We need to recall the historical phase in which the sub-discipline of development economics arose. In the literature there are different, and to some extent complementary, explanations for this rise. According to Hirschman development economics originated from the orthodoxy of Anglo-Saxon economics as a consequence of the ‘Keynesian Revolution’. Keynes had demonstrated that traditional economics was applicable only in the context of full employment of resources, while his approach was apt to respond to the difficulties faced by industrialized countries during 1930s. The newly born discipline had the task to formulate new approaches and categories to cope with the problems of underdevelopment left untouched by the traditional approach. In Myrdal explanation historical circumstances are the main reason for the intellectual formation of development economics. He argues that after World War II, the convergence of three historical and political events led social scientists to intensify their scientific efforts towards underdeveloped countries. These events were first of all decolonization, secondly the demand for development programs expressed by the newly independent countries, and finally the cold war. Hirschman argues there were the attacks to the legitimacy of development economics, coming from both mainstream Neoclassical and Marxist theory. The Neoclassical economists claimed that development economics had rejected the validity of the principle of efficient allocation of resources. The Marxists emphasized the fact that development economics was ineffective because was not as radical as required in underdeveloped countries. Caught between these two fires development economics declined as a respected field of theoretical investigation. The decline was further fueled by the un-effectiveness of the policies implemented in the 1950s and 1960s based on the ideas of development theorists. Krugman’s assessment of the decline of development economics is instead noticeable because it is all ‘internal’ to the theory. He argues that ‘development theorists were unable to formulate their ideas with the precision required by an increasingly model-oriented economic mainstream and were thus left behind. Although I believe this to be the main explanation of what went wrong, it is also true that the practical failures and empirical evidence had something to do with the decline of development economics’. In his reply Stiglitz observed that the lack of formal models cannot tell the story of fall of development economics. Increasing returns, imperfect competition, and technological change, were studied, for instance by Kaldor and Arrow. Many formal models were constructed and published. That applies to the modeling of externalities also. Thus: ‘The lack of such models simply cannot account for the temporary demise of high development theory- if that had happened. Conversely, had Rosenstein-Rodan (1943) succeeded in formalizing his ideas, I doubt that those ideas would have been any more palatable’. There was no decline in the ‘supply’ of theoretical analysis but rather a weakening of the ‘demand’ for ideas. It was then the change in intellectual and political context the crucial point. The change of intellectual and political context pointed out by Stiglitz as the fundamental reason for the decline of development economics is in fact argued in more depth by other scholars.

Introduction: The rise and decline of development economics in the history of economic thought

GUALERZI, DAVIDE
2016

Abstract

The debate during the past decade on globalization and the emerging economies has renewed interest in the study of development and underdevelopment. Oddly enough, this renewal has only rarely looked back at the work of the founding thinkers of development theory and to what we refer as development economics. Development economics has its roots in a series of seminal contributions. Although hard to classify as a school of economic thought, they are nevertheless identifiable for their pioneering effort to define an approach to the study of underdeveloped economies. Despite the differences, development economists first defined the new field of investigation shaping the conception of the development problem. This is very important considering that this approach is largely forgotten today. We need to recall the historical phase in which the sub-discipline of development economics arose. In the literature there are different, and to some extent complementary, explanations for this rise. According to Hirschman development economics originated from the orthodoxy of Anglo-Saxon economics as a consequence of the ‘Keynesian Revolution’. Keynes had demonstrated that traditional economics was applicable only in the context of full employment of resources, while his approach was apt to respond to the difficulties faced by industrialized countries during 1930s. The newly born discipline had the task to formulate new approaches and categories to cope with the problems of underdevelopment left untouched by the traditional approach. In Myrdal explanation historical circumstances are the main reason for the intellectual formation of development economics. He argues that after World War II, the convergence of three historical and political events led social scientists to intensify their scientific efforts towards underdeveloped countries. These events were first of all decolonization, secondly the demand for development programs expressed by the newly independent countries, and finally the cold war. Hirschman argues there were the attacks to the legitimacy of development economics, coming from both mainstream Neoclassical and Marxist theory. The Neoclassical economists claimed that development economics had rejected the validity of the principle of efficient allocation of resources. The Marxists emphasized the fact that development economics was ineffective because was not as radical as required in underdeveloped countries. Caught between these two fires development economics declined as a respected field of theoretical investigation. The decline was further fueled by the un-effectiveness of the policies implemented in the 1950s and 1960s based on the ideas of development theorists. Krugman’s assessment of the decline of development economics is instead noticeable because it is all ‘internal’ to the theory. He argues that ‘development theorists were unable to formulate their ideas with the precision required by an increasingly model-oriented economic mainstream and were thus left behind. Although I believe this to be the main explanation of what went wrong, it is also true that the practical failures and empirical evidence had something to do with the decline of development economics’. In his reply Stiglitz observed that the lack of formal models cannot tell the story of fall of development economics. Increasing returns, imperfect competition, and technological change, were studied, for instance by Kaldor and Arrow. Many formal models were constructed and published. That applies to the modeling of externalities also. Thus: ‘The lack of such models simply cannot account for the temporary demise of high development theory- if that had happened. Conversely, had Rosenstein-Rodan (1943) succeeded in formalizing his ideas, I doubt that those ideas would have been any more palatable’. There was no decline in the ‘supply’ of theoretical analysis but rather a weakening of the ‘demand’ for ideas. It was then the change in intellectual and political context the crucial point. The change of intellectual and political context pointed out by Stiglitz as the fundamental reason for the decline of development economics is in fact argued in more depth by other scholars.
2016
Development Economics in the Twenty-Firts century
978-1-84893-538-9
File in questo prodotto:
File Dimensione Formato  
INTRO GD.pdf

accesso aperto

Tipologia: Preprint (submitted version)
Licenza: Creative commons
Dimensione 368.08 kB
Formato Adobe PDF
368.08 kB Adobe PDF Visualizza/Apri
Pubblicazioni consigliate

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11577/3185813
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 1
  • ???jsp.display-item.citation.isi??? ND
social impact