LECO 2501 F17: New Development Economics and Capability Approach to Economics

New Development Economics and Capability Approach to Economics
New development economics approach refers to the economic aspects of growth that found in the development process. The approach focuses on the methods of promoting economic development, economic growth and also structural changes. The approach also goes a step further to demonstrate how improving health, education and working conditions can lead to the development of a country. Capability approach is used to measure development regarding its choice to focus upon the moral significance of the capability of an individual in achieving the kinds of lives that they have a reason to value. The approach disagrees with other approaches that use primary goods as a way of measuring development.
Sen who proposed the approach states that the reason why he disagrees with the use of primary goods as a means of measuring development is that primary goods are used as the only means of achieving well-being, and they do not lead to the end that we are seeking. Besides, human beings can be able to achieve different levels of well-being when they are given the same level of primary goods. One of the differences that come out from the above is that in each of them there are different economics measures of development of a country. They can be primary factors such as the level of education, health services, and infrastructure while on the other hand capability approach argues that development assessment should not be based on primary goods bit rather it should be assessed regarding functioning or what a human being is or does.
Comparative advantage in Neoclassical Trade
The neoclassical model suggests that when the countries specialize and develop a comparative advantage at producing one good or another, opportunity costs will increase and decrease at the exponential rate. In this view, the concept of comparative advantage appears to belong to the field of normative economics which speculates that a country will get more benefits if they specialize in the production of goods that will produce a manufacture that is intensive in its abundant resources. As such, the theory can be applied in the developing countries where there is a large reserve labor due to high cases of employment. The best results can then be achieved by specializing in the production of labor-intensive goods. One of the ways through which the theory has been challenged is that it puts emphasis on the unrealistic assumption of labor cost.
When using the approach, it takes into account the labor costs only and ignores the non-labor costs that are used in the production of the various commodities. The above sounds unrealistic given the fact that it is the money costs and not the labor costs that are supposed to be the basis of the national and international transaction of goods. Another challenge against the theory is that it has a weak assumption that an increase in the output is followed by constant costs. Reduction in the costs of large-scale production will increase the comparative advantage. Increase in output is due to increase in the cost of production, and the comparative advantage will be reduced or disappear in some cases.
Definition of Poverty
The World Bank group defines poverty as the deprivation of we...