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This chapter showcases an essay written in honor of William Arthur Lewis, whose ideas on economics were in counterpoint to Hirschman's. Lewis was a champion of more balanced growth; Hirschman favored disequilibrium. Lewis' winning the Nobel Prize for economics, among other things, had only exacerbated Hirschman's concerns that the field was growing stale. Thus, this chapter takes stock of the field of development economics and advocates an approach premised on the idea that peoples of the Third World can chart their own futures, and did, despite the long-standing convictions of development economics that only outside forces and expertise could shake them from their lot.

This essay attempts to break the divide between growth and development economics. Using the example of India over the past decades, it argues that innovation and/or productivity growth have been main engines of poverty reduction in that country. It also argues that new growth theories can shed light on this process and explain why growth and poverty reduction have not occurred in Latin America. The remainder of this essay is organized as follows. The second section summarizes what is currently known about the evolution of growth and poverty indicators in India since the 1960s. The third section provides a very brief presentation of new growth theory and of some of its main predictions. The fourth section uses the description of new growth theory to analyze the reform process in India. The fifth section shows that the 1991 reforms had unequalizing effects on productivity and profitability across industries and states. Finally, it reflects upon the contrasting experiences of Asia and Latin America with regard to productivity growth and poverty alleviation.

A growing number of researchers are studying how to integrate psychological insights into economic reasoning. In this perspective, people sometimes make bad choices, ones that they themselves would like to improve on. This perspective is opening up new ideas, such as how good institutions might help people improve their decisions. This essay discusses these insights using a few choice examples. The goal is to provide a glimpse of how radically different policy suggestions might be in 10 or 20 years as the integration of psychology and economics deepens.

This chapter examines the evolution since the Bretton Woods conference of the IMF's approach to problems of low income countries. In particular, it seeks to locate that approach within the debate among economists about whether there is a special ‘development economics’. In that context, it examines the IMF's approaches to inflation, the ‘twin gaps’, fiscal issues, external debt issues, and exchange rate policy choice.

One of the contributions of this book is to use and develop the principles of modern public finance for the analysis of LDCs (less developed countries). This is done by borrowing from two intellectual traditions: that relating to public finance, and that relating to development economics. This chapter briefly reviews the four major strands in public finance literature that form the background to the study. These are: general-equilibrium analysis; Pigouvian welfare economics and optimal taxation; the New Welfare Economics (which says that interpersonal utility comparisons are not meaningful, so the utilitarian approach to adding up utilities is nonsense, and one allocation can only be said to be better than another when the first was a Pareto-improvement over the second); and the New New Welfare Economics, which borrows from the previous three strands, and seeks to analyse the scope of available tax instruments, and to take into account and explain market imperfections. This last approach is the one mainly used in the book to approach applied welfare economics for LDCs; various aspects of the approach are discussed.

Despite its ubiquitous use in the international legal discourse, the precise meaning of “development” is elusive and has evolved over time. The purpose of this brief theoretical survey is to understand the influences that have driven normative, regulatory and institutional evolutions in the trade and development relationship. At one end of the spectrum, development has been largely equated with GDP growth; this macro-economic perspective has fuelled much of the Washington Consensus and the international organizations associated with it. At the other end of the spectrum, development is seen primarily as a human rights issue. In practice, the evolving blend of development economics and rights-based approaches has changed what we understand to be the substance of development in international and trade law.

Chapter 5 examines how Samuel P. Hayes, Jr., an early Point Four official who later helped design the Peace Corps, tried to “use” the University of Michigan to establish a program of multidisciplinary organized research on economic development, the Center for Research on Economic Development (CRED). The resistance he encountered from university administrators and economics department colleagues suggests that traditional academic norms did not always yield completely to interdisciplinary organized research. Yet the establishment of CRED, which had parallels at the University of Chicago, Vanderbilt, and Yale, suggests the importance of economic development as a focus for organized research in the instrumental university. This chapter also provides an account of the new subfield of development economics and of the relationship between the economics discipline and the behavioral science paradigm.

The chapter aims to contribute to the cross-fertilization of the fields of competition economics and development economics. Our narrative focuses on the opposition between the dominant intellectual tradition in development economics (which emphasizes the role of state intervention through the establishment of protectionist barriers and monopolies at the expense of markets and free competition) and the competition economics tradition (which rests on the belief in the superior efficiency of free competition). The chapter explains why the recent evolution of both traditions toward the analysis of the micro-foundations of growth, the focus on institutions, and the emphasis on empirical methods might lead to a new synthesis, favoring a useful cross-fertilization between competition economics and development economics.

The concept of global public goods can help us understand and respond to the new global policy challenges likely to face nations in the twenty‐first century. Tackling this growing agenda of common concerns will require fresh thinking, intense research efforts, new political instruments, and innovative policy responses. Up to now, global public goods consisted primarily of “traffic rules” between countries and such at‐the‐border issues as tariffs. But increasingly, the initiatives for international cooperation reach behind national borders. Global concerns are penetrating national agendas, and national concerns are becoming the subject of international debate and of policy coordination and harmonization. Today, concrete outcomes and targets – such as disease control, pollution reduction, crisis prevention, and harmonized norms and standards – matter. The reasons for these new exigencies: enhanced openness, growing systemic risks, and the policy demands of the growing number of transnational actors in both business and civil society. Nation states will witness continuing erosion of their capacities to implement national policy objectives unless they take further steps to cooperate in addressing international spillovers and systemic risks. But that cooperation must be of a new type. Not just cooperation that keeps global public bads at bay (until they reach crisis proportions) but cooperation that centers on creating global public goods and internalizing externalities. And not just cooperation that mistakenly assumes that the sphere of “public” ends at national borders, but cooperation that recognizes that an efficient system of global public policy is a necessary ingredient of an efficient global economy. To make cooperation work along these lines, its current structure must be reengineered to create: (1) clear jurisdictional loop, reaching from the national to the international (regional and global) level and back to the national; (2) participation loop, bringing into the process all actors – governments, civil society and business; all population groups, including all generations; and all groups of countries; (3) an incentive loop to ensure that cooperation yields fair and clear results for all.