Solution to the problem of development

Theories on Institutions and the Economic Development

What Is the Best Solution to the Current Problem of Development

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College Composition

23 May 2007

Introduction

Mustapha Nabli and Jeffrey Nugent (1989 ) has stated in their article entitled `The New Institutional Economics and Its Applicability to Development ' that the word `institution ' can be defined in two distinct ways : first , from the original definition given by Uphoff (1986 institutions are complexes of norms of behavior that persist over time , by serving collectively valued

purposes (Nabli and Nugent 1334 second , they can also be defined according to the definition given by Ruttan and Hayami (1984 , that they are the rules of a society or of organizations that facilitate coordination among people by helping them form expectations which each person can reasonably hold in dealing with others (Nabli and Nugent 1334 . From these two points , it is evident that institutions are fundamental in a country or a society 's quest for development , as certain norms or rules are organized to create `valued purposes , which lead to coordination and repeated interaction among people in any given society . When successfully driven , this leads to economic development , which is the development of economic wealth of countries or regions for the well-being of their inhabitants (InvestorDictionary .com 2006

However , since the time of Marx , Weber , Darwin , and Kant in the 18th and 19th century , societies have asked incessantly about the right type of institution that would lead to highest profits and advantages , which would provide economic development given a certain type of institutional , political and social environment . For the underdeveloped countries of today , it is obvious that the previous theories of institutions of the social theorists in the 19th century created a pattern that did not improve the state of being of the economically underprivileged . From the Walrasian economic literature , indigenous theories led to the statements given by Coase , Alchian , Demsetz Williamson , and North among others (Bardhan 1389 . Another school of thought sprouted through Akerlof , Stiglitz , and Spence since the 1970s As theorists argued for the best model of development , what is the solution to the current problem of economic development ? This we tackle in the pages ahead

Main Body

The Classical and Neoclassical Thought

The classical and neoclassical theorists of the 18th and 19th century can be called `institutional economists (Myrdal 771 . This is because they did not take into account factors that are outside the realm of economy but which affects development within a given society . From Adam Smith to Alfred Marshall , they claimed that there is separability between `equity ' and `efficiency (Bardhan 1389 , and that each of these two entities do not affect , control or confirm one another , since they are two separate entities that do not relate or correlate with one another . Scholars like Karl Marx and Friedrich List also believed on that account (Myrdal 771

However , when the World War II occurred , there was the occurrence of price hike and inflation that became almost persistent , especially after the...