G3-4: Classic Theories of Development

a set of ideas that explained how the right quantity and mixture of savings, investment, and foreign aid were all necessary to enable developing nations to proceed along an economic growth path that the more developed countries had historically followed

(a)  

What are the four Classic Theories of Economic Development?

(a)  

According to theories of Rostow, Harrod and Domar, among many others, savings are a sufficient foundation for development and growth. In other words, an economy that saves will grow, and if it grows, it must develop. National income is a major factor in determining aggregate savings, therefore low income will prevent savings from expanding.

• LINEAR-STAGES-OF-GROWTH THEORY

• THEORIES AND PATTERNS OF

  STRUCTURAL CHANGE

• THE INTERNATIONALDEPENDENCE

  REVOLUTION

• NEOCLASSICAL, FREE-MARKET

  COUNTER-REVOLUTION

Focuses on the mechanism by which underdeveloped economies transform their domestic economic structures from a heavy emphasis on traditional subsistence agriculture to a more modern, more urbanized, and more industrially diverse manufacturing and service economy.

• LINEAR-STAGES-OF-GROWTH THEORY

• THEORIES AND PATTERNS OF

  STRUCTURAL CHANGE/STRUCTURAL CHANGE THEORY

• THE INTERNATIONALDEPENDENCE

  REVOLUTION

• NEOCLASSICAL, FREE-MARKET

  COUNTER-REVOLUTION

Two models of Linear-stages-of-growth theory

(a)  

passed the stage of "takeoff into self-sustaining growth"

• Advanced countries

• Underdeveloped countries

possibly in either the "traditional society" or "pre-condition stage", only follow a certain set of rules of development.

• Advanced countries

• Underdeveloped countries

List the stages (in order) of Rostow's Stages of Growth

(a)  

a functional economic relationship in which economic growth (GDP) of a country depends directly on the level of savings (National Net Savings Rate) and inversely on the country's capital efficacy (National Capital Output Ratio)

(a)  

What are the three major criticisms in the Harrod-Domar growth model/

(a)