Name: Deepak Jes

Class: Economics 360 - Economics of Low-Income Countries

Professor: William Sander

There are various different approaches to economic development throughout history. In this
paper, we will base ours on Theodore Schultz idea on approaching economic development. According to
Schultz, the decisive factors of production in improving the welfare of poor people are not space, energy,
and cropland, the decisive factors are the improvement in population quality and advances in knowledge.
History agrees with this statement, by looking at economic development at various countries such as
Kenya, Ghana, and India you can see that improvement in population quality and advances in knowledge
does indeed contribute a lot to economic development.
We begin our analysis by looking at how advances in knowledge can help bring out the best in
agricultural sector. Looking at developing countries, you see that theyre economy is dependent on the
primary sector. A good example of how advances in knowledge help increase farm productivity can be
illustrated below:

The Millennium Village project sought to help improve farmers education and above is a chart
which shows how much the yields changed from pre-intervention to year three. As you can see in most
cases, yields more than doubled especially when you take into example the village of Mwandama located
in Malawi.
What this shows us is that what matters most in the case of farmland are the incentives and
associated opportunities farm people have to augment the effective supply of land by investments that
include the contributions of agricultural research and the improvement of human skills.
Another factor that is important in addition to advances of knowledge, is the quality of
population. An improved human capital contributes to labor productivity and to entrepreneurial ability in
a farm and nonfarm production. Theodore Schultz believes that when the returns exceed cost, population
quality will be enhanced.
One way to enhance population quality is to increase investment in health. Health is not only the
absence of illness; it is also the ability of people to develop to their potential during their entire lives.
Health impacts economic growth in a number of ways for example, it reduced production losses due to
worker illness, it increases the productivity of adult as a result of better nutrition, and it lowers
absenteeism rates and improves learning among school children.
An evidence of improved health can be revealed by longer life spans of people in developing
country and also by reducing death & infant mortality rate. Since 1950, life expectancy has increased more
than 40% in most developing countries. An example would be the study done in India. The results show
that between 1951 and 1971, life expectancy at birth of males increased by 43% and for females by 41%.
Longer lifespans, provide additional opportunities for people to acquire more education which in turn
further improves population quality. Another well-known example is how effective the malaria program
has been in improving the labor productivity - especially in Africa. By improving healthcare in regards to
malaria, the labor productivity in Africa has improved.
Another important factor of improvement in population quality can be attributed to investment in
education. First, education can increase the human capital inherent in the labor force, which increases
labor productivity and thus leads to more output. Secondly, education can increase the innovative
capacity of the economy, and thereby promoting new technology, products etc., this is evidenced by

Kenya. Thirdly, education can facilitate the diffusion and transmission of knowledge needed to
understand and implement new technologies developed by others. Throughout history you can see a
positive correlation between literacy rates and economic growth.
Overall, there is much debate in approaching economic development. But history has shown us
that a good number of low income countries have had economic development through improving
population quality and in acquiring useful knowledge. These investments imply favorable economic
prospects. As Alfred Marshall wrote, Knowledge is the most powerful engine of production; it enables us
to subdue nature and satisfy our wants.

References

Lustig, Nora. "Investing in Health for Economic Development." World Health Organization.

Universidad De Las Amricas, Puebla, 2004. Web.

Hanushek, Eric. "Education and Economic Growth." Stanford University. Elsevier, 1 Jan. 2010.

Web.
"Health and Economic Development." New York Academy of Medicine. New York Academy of

Medicine, 1 Aug. 2011. Web.

MARQUEZ, PATRICIO. "Can Improved Health Conditions Contribute to Long-term Economic

Growth?" World Bank. 14 Nov. 2012. Web.

"Farmer Education & Agricultural Extension." MIT. MIT. Web.