1925. Half a Century of Development Economics: A Review Based on the Handbook of Development Economics

Jean Waelbroeck
(May 1998)

How development economics has changed since Nehru and Gandhi debated what type of program would best serve an independent India.

Development economics has made remarkable progress in 50 years, says Waelbroeck, summarizing changes in the field since Nehru’s first proposals for an independent India. Synthesizing insights about changes in the field from the many contributors to the Handbook of Development Economics, Waelbroeck observes (among other things):

• Different schools of thought may dominate, but the range of research has broadened. Economics has "hardened" as its practitioners have learned to use data more carefully and to reason more rigorously.
  
  
• The policy message has been turned upside down. Gone is the idea that development is industrialization and that the main policy problem is to manage the interface between country and city. Today urbanization and industrialization are viewed as mere components of an integrated transformation, in which the expansion of foreign trade is central. Traditional institutions are viewed with far more understanding, because overhasty modernization has often proved counterproductive.
  
  
• More than ever, development is seen as a “whole replacement” process, the key to which is mastery of Northern technology — now understood to be both simpler and more complex than previously thought. Simpler, because much technology is uncomplicated, and complex because even simple technology requires ingenuity and a costly investment in adaptations.
  
  
• There has been a radical change in economists’ view of market agents and policymakers. Gone are the days when economists thought their advice should be aimed mainly at planners. Policymakers are utility maximizers, too. Employees of state enterprises coalesce into powerful interest groups that block efforts to raise productivity. The new thinking is sometimes modified by evoking the vague concept of “governance,” under which the economist’s task is to help design a system of interacting state and private institutions that, led by the state, cooperate in achieving social goals. Whether something useful will come from this line of thinking remains to be seen.

Waelbroeck detects major gaps in economists’ understanding of development, suggesting a particular need for further study of collective action (a far more pervasive component of human action than is realized) and the selection of roles by individuals and the costly investment this entails (a concept that may shed light on Schumpeter’s well-known but little-studied entrepreneur).

This paper is a product of the Research Advisory Staff. Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact WBER, room MC4-392, tel. 202-473-1056, fax 202-522-0304. May 1998. (49 pages)

The full report is available in PDF format.