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5 - Theories of Economic Development  pp. 123-164

Theories of Economic Development

By E. Wayne Nafziger

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To many people, a theory is a contention that is impractical or has no factual support. Someone who says that free migration to the United States may be all right in theory but not in practice implies that, despite the merit of the idea, it would be impractical. Likewise, the statement that the idea of lower wealth taxes in India stimulating economic growth is just a theory indicates an unverified hypothesis.

For the economist, however, a theory is a systematic explanation of interrelationships among economic variables, and its purpose is to explain causal relationships among these variables. Usually a theory is used not only to understand the world better but also to provide a basis for policy. In any event, theorists cannot consider all the factors influencing economic growth in a single theory. They must determine which variables are crucial and which are irrelevant. However, reality is so complicated that a simple model may omit critical variables in the real world (Kindleberger and Herrick 1977:40). And although complex mathematical models can handle a large number of variables, they have not been very successful in explaining economic development, especially in the third world.

Scope of the Chapter

This chapter discusses a few of the major theories of economic development, reserving for subsequent chapters less comprehensive theories dealing with specific economic questions. As they did in the 1950s and 1960s, economists recently have stressed all-encompassing theories of development, including neoclassicism and rival theories.

5

Reference Title: Bibliography

Reference Type: bibliography

Reference Title: Articles, Books, and Monographs

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