This course deals with selected topics in economic development covering both macro and micro aspects. There are eight major topics of
(1) The Standard Growth Theory (Solow Model)
(2) Macro Stabilization Program – Balance of Payment Crisis and Need for Exceptional Financing
(3) Population Growth and Economic Development
(4) Institutional Economics
(5) Producer’s Behavior – Perfect and Monopolistic Competition
(6) Tenant/Landowner relations
(7) Local Credit Markets
(8) History, Expectation, and Development (Economies of Scale and Scope).
This list is also notable for what are left on. Absent, for instance, is the implication of international trade, a topic to be covered in detailed in DIPL6155 (Advanced Economic Aspects of International Relations) by Prof. Omer Gokcekus. He also teaches DIPL6170 (Topics in Economic Development), which is designed to be a good complement of this course. Moreover, while I am planning to touch up on stabilization program briefly in this course, currency crisis is discussed more comprehensively in DIPL6156 (Advanced Financial Aspects of International Relations). Given the importance of those topics for understanding development, I encourage you to take all of those courses, if you are interested in international economics and development.
“Political Economy” is not a unified discipline, and there are studies using the term that have radically different perspectives. Therefore it may be the case that some of you feel that why we study those topics in this course and where we are heading. So here is my big picture.
Traditional economics, which is sometimes referred to as neoclassical economics, hinge on certain assumptions. The growth models are not the exceptions (particularly the Solow model is naturally classified as neoclassical model) and they are based on many implicit and explicit assumptions. In a context of development, under ideal circumstances, as the Solow model predicts, people save and invest, and thus capital stock is accumulated which leads to economic growth at least to some extent. However, unfortunately, the process is not automatic at all in practice. We need macroeconomic stabilization in order for the sizable investment realized. Nevertheless, stabilization is not the sufficient condition for development–we also need lots and lots more preconditions. The world and society are more complicated and countries and regions are more varied than the traditional economics assumes, and thus considering the role of government, legal framework, and market structures are important. Fortunately, there has been a rapid advancement in economics in last several decades and many useful frameworks, with which we can approach to more realistic structures, have been provided (i.e. more rich frameworks explaining why and how countries and regions differ). I would like to pick up several of those frameworks which are important and relevant to “development” in the second half. This is what I consider “political economy of development”. Of course, I am not discounting the topics we covered in the first half–we should regard the newer frameworks as complements rather than substitutes to the neoclassical models. The Solow model, indeed, is quite useful and practical as a first approximation.
Course materials are designed to develop analytical skills and you should be equipped with economic mind after the semester. The emphasis of this course is on analytical thinking and the goal is that you get a hands-on taste of how economists approach problems of development. Rather than just being informed of factual knowledge, I expect that you acquire ability and skill to understand backgrounds of certain phenomena and analyze how we might bring about improvements. To this end, the bulk of the course will be devoted to in-depth analysis of fundamental economic questions and I will introduce theoretical models in each topic. A model is a simplified and abstract representation of reality, in the sense that it isolates and focuses on the most important elements of a situation and neglects the others. If and when you confront real world problems, you will find it necessary to adapt these principles to all the details and nuances of reality. Unfortunately we will stick to most basic models in this course due to time and technical constraints, however, they will enable you to pursue their refinements in future
