Development Economics

Debraj Ray

Princeton University Press 1998
A book review by Danny Yee © 2008
Debraj Ray has produced a lucid textbook covering the many ways in which economic theory has been applied to topics in development. Development Economics is clearly explained and laid out, and uses case studies to give a feel for real-world complexities. It also does a reasonable job of explaining the limitations of economic models and the context for their appropriate application.

The chapters are largely independent. After a general introduction and survey, two chapters address theories of growth, covering both standard and "new" models and concepts of convergence, human capital, technological progress and factor productivity. A chapter treats historical effects such as coordination and returns to scale. Turning to inequality, Ray covers problems of measurement and metrics, and the relationships between inequality and development. There are also chapters on undernutrition and on population growth and demographics.

Chapters on rural/urban interactions and migration, agriculture, land, and labour have a more microeconomic focus. Ray covers markets for land, labor and capital, rental contracts, forms of ownership, models for labor, links between nutrition and labour, and permanent labor markets. Chapters on credit and insurance highlight the significance of imperfect markets and informal sectors.

The three final chapters cover international trade. The first covers world trade patterns and comparative advantage and its sources. The second considers national trade policies, looking at the persistence (in the face of theory) of controls on trade — import substitution, export promotion, and the effects of the 1980s crisis and structural adjustment. And the third considers multilateral trade policies and the working of trade blocks with varying north/south compositions.

As is common with economists, Ray sometimes applies models inappropriately. So "informal structures" are repeatedly described and analysed as "responses to market failure", even though they often preceded markets historically. At one point "inefficient" traditional practices in rice-growing are analysed as an example of "coordination failure" in overcoming outdated religious and social norms. (A parallel would be an analysis of "non-productive" church-going in the United States as a coordination failure in achieving atheism!)

A broader concern with Development Economics is that it has no unity. It is a collection of treatments of those aspects of development which happen to lend themselves to analysis using the traditional tools of economics. As such, it is effectively a demonstration that "development economics" is not a coherent discipline.

With its use of standard models as a starting point, its varied and involving case studies, and a set of exercises accompanying each chapter, Development Economics is not a bad way to learn something about economics and its methods. Its use in undergraduate courses, however, is likely to give economics students a very lopsided understanding of development.

In contrast, I highly recommend Development Economics to those coming from other disciplines. Readers will want at least a basic grasp of economics, but Ray explains the necessary macroeconomics, microeconomics, trade theory, and so forth as he goes (and appendices explain basic game theory and regression). The result could be used as an introduction to economics for those anthropologists, sociologists, geographers, development workers, and so forth who too often neglect or even reject the quantitative methods of economics.

November 2008

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%T Development Economics
%A Ray, Debraj
%I Princeton University Press
%D 1998
%O hardcover, bibliography, index
%G ISBN 0691017069
%P 848pp