Development theory is a collection of theories about how desirable change in society is best achieved. Such theories draw on a variety of social science disciplines and approaches. In this article, multiple theories are discussed, as are recent developments with regard to these theories. Depending on which theory that is being looked at, there are different explanations to the process of development and their inequalities.

Modernization theory

Modernization theory is used to analyze the processes in which modernization in societies take place. The theory looks at which aspects of countries are beneficial and which constitute obstacles for

economic development In economics, economic development (or economic and social development) is the process by which the economic well-being and quality of life of a nation, region, local community, or an individual are improved according to targeted goals and object ...

. The idea is that development assistance targeted at those particular aspects can lead to modernization of 'traditional' or 'backward' societies. Scientists from various research disciplines have contributed to modernization theory.

Sociological and anthropological modernization theory

The earliest principles of modernization theory can be derived from the idea of

progress Progress is movement towards a perceived refined, improved, or otherwise desired state. It is central to the philosophy of progressivism, which interprets progress as the set of advancements in technology, science, and social organization effic ...

, which stated that people can develop and change their society themselves.

Marquis de Condorcet Marie Jean Antoine Nicolas de Caritat, Marquis of Condorcet (; ; 17 September 1743 – 29 March 1794), known as Nicolas de Condorcet, was a French Philosophy, philosopher, Political economy, political economist, Politics, politician, and m ...

was involved in the origins of this theory. This theory also states that technological advancements and economic changes can lead to changes in moral and cultural values. The French sociologist

Émile Durkheim David Émile Durkheim (; or ; 15 April 1858 – 15 November 1917) was a French Sociology, sociologist. Durkheim formally established the academic discipline of sociology and is commonly cited as one of the principal architects of modern soci ...

stressed the interdependence of institutions in a society and the way in which they interact with cultural and social unity. His work '' The Division of Labor in Society'' was very influential. It described how social order is maintained in society and ways in which primitive societies can make the transition to more advanced societies. Other scientists who have contributed to the development of modernization theory are: David Apter, who did research on the political system and history of democracy; Seymour Martin Lipset, who argued that economic development leads to social changes which tend to lead to democracy; David McClelland, who approached modernization from the psychological side with his motivations theory; and

Talcott Parsons Talcott Parsons (December 13, 1902 – May 8, 1979) was an American sociologist of the classical tradition, best known for his social action theory and structural functionalism. Parsons is considered one of the most influential figures in soci ...

who used his pattern variables to compare backwardness to modernity.

Linear stages of growth model

The linear stages of growth model is an economic model which is heavily inspired by the Marshall Plan which was used to revitalize Europe's economy after

World War II World War II or the Second World War (1 September 1939 – 2 September 1945) was a World war, global conflict between two coalitions: the Allies of World War II, Allies and the Axis powers. World War II by country, Nearly all of the wo ...

. It assumes that

economic growth In economics, economic growth is an increase in the quantity and quality of the economic goods and Service (economics), services that a society Production (economics), produces. It can be measured as the increase in the inflation-adjusted Outp ...

can only be achieved by

industrialization Industrialisation (British English, UK) American and British English spelling differences, or industrialization (American English, US) is the period of social and economic change that transforms a human group from an agrarian society into an i ...

. Growth can be restricted by local institutions and social attitudes, especially if these aspects influence the savings rate and investments. The constraints impeding economic growth are thus considered by this model to be internal to society. According to the linear stages of growth model, a correctly designed massive injection of capital coupled with intervention by the

public sector The public sector, also called the state sector, is the part of the economy composed of both public services and public enterprises. Public sectors include the public goods and governmental services such as the military, law enforcement, pu ...

would ultimately lead to industrialization and

of a

developing nation A developing country is a sovereign state with a less-developed industrial base and a lower Human Development Index (HDI) relative to developed countries. However, this definition is not universally agreed upon. There is also no clear agreeme ...

. The Rostow's stages of growth model is the most well-known example of the linear stages of growth model. Walt W. Rostow identified five stages through which developing countries had to pass to reach an advanced economy status: (1) Traditional society, (2) Preconditions for take-off, (3) Take-off, (4) Drive to maturity, (5) Age of high mass consumption. He argued that economic development could be led by certain strong sectors; this is in contrast to for instance

Marxism Marxism is a political philosophy and method of socioeconomic analysis. It uses a dialectical and materialist interpretation of historical development, better known as historical materialism, to analyse class relations, social conflict, ...

which states that sectors should develop equally. According to Rostow's model, a country needed to follow some rules of development to reach the take-off: (1) The investment rate of a country needs to be increased to at least 10% of its GDP, (2) One or two

manufacturing Manufacturing is the creation or production of goods with the help of equipment, labor, machines, tools, and chemical or biological processing or formulation. It is the essence of the secondary sector of the economy. The term may refer ...

sectors with a high rate of growth need to be established, (3) An institutional, political and social framework has to exist or be created in order to promote the expansion of those sectors. The Rostow model has serious flaws, of which the most serious are: (1) The model assumes that development can be achieved through a basic sequence of stages which are the same for all countries, a doubtful assumption; (2) The model measures development solely by means of the increase of GDP per capita; (3) The model focuses on characteristics of development, but does not identify the causal factors which lead development to occur. As such, it neglects the social structures that have to be present to foster development. Economic modernization theories such as Rostow's stages model have been heavily inspired by the Harrod-Domar model which explains in a mathematical way the growth rate of a country in terms of the savings rate and the productivity of capital. Heavy state involvement has often been considered necessary for successful development in economic modernization theory; Paul Rosenstein-Rodan, Ragnar Nurkse and Kurt Mandelbaum argued that a big push model in infrastructure investment and planning was necessary for the stimulation of industrialization, and that the

private sector The private sector is the part of the economy which is owned by private groups, usually as a means of establishment for profit or non profit, rather than being owned by the government. Employment The private sector employs most of the workfo ...

would not be able to provide the resources for this on its own. Another influential theory of modernization is the dual-sector model by Arthur Lewis. In this model Lewis explained how the traditional stagnant rural sector is gradually replaced by a growing modern and dynamic manufacturing and service economy. Because of the focus on the need for investments in capital, the Linear Stages of Growth Models are sometimes referred to as suffering from ‘capital fundamentalism’.

Critics of modernization theory

Modernization theory Modernization theory or modernisation theory holds that as societies become more economically modernized, wealthier and more educated, their political institutions become increasingly liberal democratic and rationalist. The "classical" theories ...

observes traditions and pre-existing institutions of so-called "primitive" societies as obstacles to modern economic growth. Modernization which is forced from outside upon a society might induce violent and radical change, but according to modernization theorists it is generally worth this side effect. Critics point to traditional societies as being destroyed and slipping away to a modern form of poverty without ever gaining the promised advantages of modernization.

Structuralism

Structuralism is a development theory which focuses on structural aspects which impede the economic growth of developing countries. The unit of analysis is the transformation of a country's economy from, mainly, a

subsistence agriculture Subsistence agriculture occurs when farmers grow crops on smallholdings to meet the needs of themselves and their families. Subsistence agriculturalists target farm output for survival and for mostly local requirements. Planting decisions occu ...

to a modern, urbanized manufacturing and service economy. Policy prescriptions resulting from structuralist thinking include major

government intervention A market intervention is a policy or measure that modifies or interferes with a market, typically done in the form of state action, but also by philanthropic and political-action groups. Market interventions can be done for a number of reas ...

in the economy to fuel the

industrial sector In macroeconomics, the secondary sector of the economy is an economic sector in the three-sector theory that describes the role of manufacturing. It encompasses industries that produce a finished, usable product or are involved in construc ...

, known as

import substitution industrialization Import substitution industrialization (ISI) is a protectionist trade and economics, economic policy that advocates replacing foreign imports with domestic production. It is based on the premise that a country should attempt to reduce its foreign ...

(ISI). This structural transformation of the developing country is pursued in order to create an economy which in the end enjoys self-sustaining growth. This can only be reached by ending the reliance of the underdeveloped country on exports of primary goods (agricultural and mining products), and pursuing inward-oriented development by shielding the domestic economy from that of the developed economies. Trade with advanced economies is minimized through the erection of all kinds of trade barriers and an overvaluation of the domestic exchange rate; in this way the production of domestic substitutes of formerly imported industrial products is encouraged. The logic of the strategy rests on the infant industry argument, which states that young industries initially do not have the

economies of scale In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of Productivity, output produced per unit of cost (production cost). A decrease in ...

and experience to be able to compete with foreign competitors and thus need to be protected until they are able to compete in the free market. The Prebisch–Singer hypothesis states that over time the terms of trade for

commodities In economics, a commodity is an economic good, usually a resource, that specifically has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. Th ...

deteriorate compared to those for

manufactured goods Manufacturing is the creation or production of goods with the help of equipment, labor, machines, tools, and chemical or biological processing or formulation. It is the essence of the secondary sector of the economy. The term may refer ...

, because the income elasticity of demand of manufactured goods is greater than that of primary products. If true, this would also support the ISI strategy. Structuralists argue that the only way

Third World The term Third World arose during the Cold War to define countries that remained non-aligned with either NATO or the Warsaw Pact. The United States, Canada, Taiwan, Japan, South Korea, the Southern Cone, NATO, Western European countries and oth ...

countries can develop is through action by the state. Third world countries have to push industrialization and have to reduce their dependency on trade with the

First World The concept of the First World was originally one of the " Three Worlds" formed by the global political landscape of the Cold War, as it grouped together those countries that were aligned with the Western Bloc of the United States. This groupin ...

, and trade among themselves. The roots of structuralism lie in

South America South America is a continent entirely in the Western Hemisphere and mostly in the Southern Hemisphere, with a considerably smaller portion in the Northern Hemisphere. It can also be described as the southern Subregion#Americas, subregion o ...

, and particularly

Chile Chile, officially the Republic of Chile, is a country in western South America. It is the southernmost country in the world and the closest to Antarctica, stretching along a narrow strip of land between the Andes, Andes Mountains and the Paci ...

. In 1950, Raul Prebisch went to Chile to become the first director of the Economic Commission for Latin America. In Chile, he cooperated with Celso Furtado, Aníbal Pinto, Osvaldo Sunkel, and Dudley Seers, who all became influential structuralists.

Dependency theory

Dependency theory is essentially a follow-up to structuralist thinking, and shares many of its core ideas. Whereas structuralists did not consider that development would be possible at all unless a strategy of delinking and rigorous ISI was pursued, dependency thinking could allow development with external links with the developed parts of the globe. However, this kind of development is considered to be "dependent development", i.e., it does not have an internal domestic dynamic in the developing country and thus remains highly vulnerable to the economic vagaries of the world market. Dependency thinking starts from the notion that resources flow from the ‘ periphery’ of poor and underdeveloped states to a ‘ core’ of wealthy countries, which leads to accumulation of wealth in the rich states at the expense of the poor states. Contrary to

modernization theory Modernization theory or modernisation theory holds that as societies become more economically modernized, wealthier and more educated, their political institutions become increasingly liberal democratic and rationalist. The "classical" theories ...

, dependency theory states that not all societies progress through similar stages of development. Periphery states have unique features, structures and institutions of their own and are considered weaker with regards to the world

market economy A market economy is an economic system in which the decisions regarding investment, production, and distribution to the consumers are guided by the price signals created by the forces of supply and demand. The major characteristic of a mark ...

, while the developed nations have never been in this colonized position in the past. Dependency theorists argue that underdeveloped countries remain economically vulnerable unless they reduce their connections to the world market. Dependency theory states that poor nations provide natural resources and cheap labor for

developed nations A developed country, or advanced country, is a sovereign state that has a high quality of life, developed economy, and advanced technological infrastructure relative to other less industrialized nations. Most commonly, the criteria for evalu ...

, without which the developed nations could not have the

standard of living Standard of living is the level of income, comforts and services available to an individual, community or society. A contributing factor to an individual's quality of life, standard of living is generally concerned with objective metrics outsid ...

which they enjoy. When underdeveloped countries try to remove the Core's influence, the developed countries hinder their attempts to keep control. This means that

poverty Poverty is a state or condition in which an individual lacks the financial resources and essentials for a basic standard of living. Poverty can have diverse Biophysical environmen ...

of developing nations is not the result of the disintegration of these countries in the world system, but because of the way in which they are integrated into this system. In addition to its structuralist roots, dependency theory has much overlap with Neo-Marxism and

World Systems Theory World-systems theory (also known as world-systems analysis or the world-systems perspective)Immanuel Wallerstein, (2004), "World-systems Analysis." In ''World System History'', ed. George Modelski, in ''Encyclopedia of Life Support Systems'' (E ...

, which is also reflected in the work of Immanuel Wallerstein, a famous dependency theorist. Wallerstein rejects the notion of a Third World, claiming that there is only one world which is connected by economic relations (

). He argues that this system inherently leads to a division of the world in core, semi-periphery and periphery. One of the results of expansion of the world-system is the commodification of things, like natural resources, labor and human relationships.

Basic needs

The basic needs model was introduced by the

International Labour Organization The International Labour Organization (ILO) is a United Nations agency whose mandate is to advance social and economic justice by setting international labour standards. Founded in October 1919 under the League of Nations, it is one of the firs ...

in 1976, mainly in reaction to prevalent modernization- and structuralism-inspired development approaches, which were not achieving satisfactory results in terms of poverty alleviation and combating inequality in developing countries. It tried to define an absolute minimum of resources necessary for long-term physical

well-being Well-being is what is Intrinsic value (ethics), ultimately good for a person. Also called "welfare" and "quality of life", it is a measure of how well life is going for someone. It is a central goal of many individual and societal endeavors. ...

. The

poverty line The poverty threshold, poverty limit, poverty line, or breadline is the minimum level of income deemed adequate in a particular country. The poverty line is usually calculated by estimating the total cost of one year's worth of necessities for ...

which follows from this, is the amount of income needed to satisfy those basic needs. The approach has been applied in the sphere of development assistance, to determine what a society needs for subsistence, and for poor population groups to rise above the poverty line. Basic needs theory does not focus on investing in economically productive activities. Basic needs can be used as an indicator of the absolute minimum an individual needs to survive. Proponents of basic needs have argued that elimination of

absolute poverty Extreme poverty is the most severe type of poverty, defined by the United Nations (UN) as "a condition characterized by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, ...

is a good way to make people active in society so that they can provide labor more easily and act as consumers and savers. There have been also many critics of the basic needs approach. It would lack theoretical rigour, practical precision, be in conflict with growth promotion policies, and run the risk of leaving developing countries in permanent turmoil.

Neoclassical theory

Neoclassical development theory has it origins in its predecessor:

classical economics Classical economics, also known as the classical school of economics, or classical political economy, is a school of thought in political economy that flourished, primarily in Britain, in the late 18th and early-to-mid 19th century. It includ ...

. Classical economics was developed in the 18th and 19th centuries and dealt with the value of products and on which production factors it depends. Early contributors to this theory are

Adam Smith Adam Smith (baptised 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the field of political economy and key figure during the Scottish Enlightenment. Seen by some as the "father of economics"——— or ...

and

David Ricardo David Ricardo (18 April 1772 – 11 September 1823) was a British political economist, politician, and member of Parliament. He is recognized as one of the most influential classical economists, alongside figures such as Thomas Malthus, Ada ...

. Classical economists argued – as do the neoclassical ones – in favor of the

free market In economics, a free market is an economic market (economics), system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of ...

, and against

in those markets. The ' invisible hand' of Adam Smith makes sure that

free trade Free trade is a trade policy that does not restrict imports or exports. In government, free trade is predominantly advocated by political parties that hold Economic liberalism, economically liberal positions, while economic nationalist politica ...

will ultimately benefit all of society.

John Maynard Keynes John Maynard Keynes, 1st Baron Keynes ( ; 5 June 1883 – 21 April 1946), was an English economist and philosopher whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originall ...

was a very influential classical economist as well, having written his '' General Theory of Employment, Interest, and Money'' in 1936. Neoclassical development theory became influential towards the end of the 1970s, fired by the election of

Margaret Thatcher Margaret Hilda Thatcher, Baroness Thatcher (; 13 October 19258 April 2013), was a British stateswoman who served as Prime Minister of the United Kingdom from 1979 to 1990 and Leader of the Conservative Party (UK), Leader of th ...

in the UK and

Ronald Reagan Ronald Wilson Reagan (February 6, 1911 – June 5, 2004) was an American politician and actor who served as the 40th president of the United States from 1981 to 1989. He was a member of the Republican Party (United States), Republican Party a ...

in the USA. Also, the

World Bank The World Bank is an international financial institution that provides loans and Grant (money), grants to the governments of Least developed countries, low- and Developing country, middle-income countries for the purposes of economic development ...

shifted from its Basic Needs approach to a neoclassical approach in 1980. From the beginning of the 1980s, neoclassical development theory really began to roll out.

Structural adjustment

One of the implications of the neoclassical development theory for developing countries were the Structural Adjustment Programmes (SAPs) which the World Bank and the

International Monetary Fund The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution funded by 191 member countries, with headquarters in Washington, D.C. It is regarded as the global lender of las ...

wanted them to adopt. Important aspects of those SAPs include: * Fiscal austerity (reduction in

government spending Government spending or expenditure includes all government consumption, investment, and transfer payments. In national income accounting, the acquisition by governments of goods and services for current use, to directly satisfy the individual or ...

) *

Privatization Privatization (rendered privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation w ...

(which should both raise money for governments and improve efficiency and financial performance of the firms involved) *

Trade liberalization Free trade is a trade policy that does not restrict imports or exports. In government, free trade is predominantly advocated by political parties that hold economically liberal positions, while economic nationalist political parties generall ...

, currency devaluation and the abolition of

marketing board A marketing board is an organization created by many producers to try to market their product and increase consumption and thus prices. It can also be defined as an organization set up by a government to regulate the buying and selling of a certai ...

s (to maximize the static

comparative advantage Comparative advantage in an economic model is the advantage over others in producing a particular Goods (economics), good. A good can be produced at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior t ...

the developing country has on the global market) * Retrenchment of the government and deregulation (in order to stimulate the free market) These measures are more or less reflected by the themes which were identified by the Institute of International Economics which were believed to be necessary for the recovery of

Latin America Latin America is the cultural region of the Americas where Romance languages are predominantly spoken, primarily Spanish language, Spanish and Portuguese language, Portuguese. Latin America is defined according to cultural identity, not geogr ...

from the economic and financial crises of the 1980s. These themes are known as the

Washington consensus The Washington Consensus is a set of ten economic policy prescriptions considered in the 1980s and 1990s to constitute the "standard" reform package promoted for Economic crisis, crisis-wracked developing country, developing countries by the Was ...

, a termed coined in 1989 by the economist John Williamson.

Recent trends

Post-development theory

Postdevelopment theory is a

school of thought A school of thought, or intellectual tradition, is the perspective of a group of people who share common characteristics of opinion or outlook of a philosophy, discipline, belief, social movement, economics, cultural movement, or art movement. ...

which questions the idea of national

altogether. According to postdevelopment scholars, the goal of improving

living standards Standard of living is the level of income, comforts and services available to an individual, community or society. A contributing factor to an individual's quality of life, standard of living is generally concerned with objective metrics outside ...

leans on arbitrary claims as to the desirability and possibility of that goal. Postdevelopment theory arose in the 1980s and 1990s. According to postdevelopment theorists, the idea of development is just a 'mental structure' ( Wolfgang Sachs) which has resulted in a

hierarchy A hierarchy (from Ancient Greek, Greek: , from , 'president of sacred rites') is an arrangement of items (objects, names, values, categories, etc.) that are represented as being "above", "below", or "at the same level as" one another. Hierarchy ...

of developed and underdeveloped nations, of which the underdeveloped nations desire to be like

. Development thinking has been dominated by the West and is very ethnocentric, according to Sachs. The Western lifestyle may neither be a realistic nor a desirable goal for the world's population, postdevelopment theorists argue. Development is being seen as a loss of a country's own culture, people's perception of themselves and modes of life. According to Majid Rahnema, another leading postdevelopment scholar, things like notions of poverty are very culturally embedded and can differ a lot among cultures. The institutes which voice the concern over underdevelopment are very Western-oriented, and postdevelopment calls for a broader cultural involvement in development thinking. Postdevelopment proposes a vision of

society A society () is a group of individuals involved in persistent social interaction or a large social group sharing the same spatial or social territory, typically subject to the same political authority and dominant cultural expectations. ...

which removes itself from the ideas which currently dominate it. According to Arturo Escobar, postdevelopment is interested instead in local culture and knowledge, a critical view against established sciences and the promotion of local

grassroots A grassroots movement is one that uses the people in a given district, region or community as the basis for a political or continent movement. Grassroots movements and organizations use collective action from volunteers at the local level to imp ...

movements. Also, postdevelopment argues for structural change in order to reach

solidarity Solidarity or solidarism is an awareness of shared interests, objectives, standards, and sympathies creating a psychological sense of unity of groups or classes. True solidarity means moving beyond individual identities and single issue politics ...

, reciprocity, and a larger involvement of traditional knowledge.

Sustainable development

Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. (

Brundtland Commission The Brundtland Commission, formerly the World Commission on Environment and Development, was a sub-organization of the United Nations (UN) that aimed to unite countries in pursuit of sustainable development. It was founded in 1983 when Javier Pér ...

) There exist more definitions of sustainable development, but they all have to do with the carrying capacity of the earth and its natural systems and the challenges faced by humanity. Sustainable development can be broken up into

environmental sustainability Sustainability is a social goal for people to co-exist on Earth over a long period of time. Definitions of this term are disputed and have varied with literature, context, and time. Sustainability usually has three dimensions (or pillars): env ...

, economic sustainability and

sociopolitical Political sociology is an interdisciplinary field of study concerned with exploring how governance and society interact and influence one another at the micro to macro levels of analysis. Interested in the social causes and consequences of how p ...

sustainability. The book '' Limits to Growth'', commissioned by the Club of Rome, gave huge momentum to the thinking about sustainability.

Global warming Present-day climate change includes both global warming—the ongoing increase in global average temperature—and its wider effects on Earth's climate system. Climate change in a broader sense also includes previous long-term changes ...

issues are also problems which are emphasized by the sustainable development movement. This led to the 1997 Kyoto Accord, with the plan to cap

greenhouse-gas emissions Greenhouse gas (GHG) emissions from human activities intensify the greenhouse effect. This contributes to climate change. Carbon dioxide (), from burning fossil fuels such as coal, oil, and natural gas, is the main cause of climate change. The ...

. Opponents of the implications of sustainable development often point to the environmental Kuznets curve. The idea behind this curve is that, as an economy grows, it shifts towards more capital and knowledge-intensive production. This means that as an economy grows, its pollution output increases, but only until it reaches a particular threshold where production becomes less resource-intensive and more sustainable. This means that a pro-growth, not an anti-growth policy is needed to solve the environmental problem. But the evidence for the environmental Kuznets curve is quite weak. Also, empirically spoken, people tend to consume more products when their income increases. Maybe those products have been produced in a more environmentally friendly way, but on the whole the higher consumption negates this effect. There are people like Julian Simon however who argue that future technological developments will resolve future problems.

Human development theory

Human development theory is a theory which uses ideas from different origins, such as

ecology Ecology () is the natural science of the relationships among living organisms and their Natural environment, environment. Ecology considers organisms at the individual, population, community (ecology), community, ecosystem, and biosphere lev ...

sustainable development Sustainable development is an approach to growth and Human development (economics), human development that aims to meet the needs of the present without compromising the ability of future generations to meet their own needs.United Nations General ...

feminism Feminism is a range of socio-political movements and ideology, ideologies that aim to define and establish the political, economic, personal, and social gender equality, equality of the sexes. Feminism holds the position that modern soci ...

and

welfare economics Welfare economics is a field of economics that applies microeconomic techniques to evaluate the overall well-being (welfare) of a society. The principles of welfare economics are often used to inform public economics, which focuses on the ...

. It wants to avoid normative politics and is focused on how

social capital Social capital is a concept used in sociology and economics to define networks of relationships which are productive towards advancing the goals of individuals and groups. It involves the effective functioning of social groups through interper ...

and instructional capital can be deployed to optimize the overall value of

human capital Human capital or human assets is a concept used by economists to designate personal attributes considered useful in the production process. It encompasses employee knowledge, skills, know-how, good health, and education. Human capital has a subs ...

in an economy.

Amartya Sen Amartya Kumar Sen (; born 3 November 1933) is an Indian economist and philosopher. Sen has taught and worked in England and the United States since 1972. In 1998, Sen received the Nobel Memorial Prize in Economic Sciences for his contributions ...

and Mahbub ul Haq are the most well-known human development theorists. The work of Sen is focused on capabilities: what people can do and be. It is these capabilities, rather than the income or goods that they receive (as in the Basic Needs approach), that determine their well-being. This core idea also underlies the construction of the

Human Development Index The Human Development Index (HDI) is a statistical composite index of life expectancy, Education Index, education (mean years of schooling completed and expected years of schooling upon entering the education system), and per capita income i ...

, a human-focused measure of development pioneered by the

UNDP The United Nations Development Programme (UNDP) is a United Nations agency tasked with helping countries eliminate poverty and achieve sustainable economic growth and human development. The UNDP emphasizes on developing local capacity towar ...

in its Human Development Reports; this approach has become popular the world over, with indexes and reports published by individual counties, including the American Human Development Index and Report in the United States. The economic side of Sen's work can best be categorized under

, which evaluates the effects of economic policies on the

of peoples. Sen wrote the influential book ''

Development as Freedom ''Development as Freedom'' is a 1999 book about international development by Indian economist and philosopher Amartya Sen. The American edition of the book was published by Alfred A. Knopf. Summary Amartya Sen was the winner of the 1998 Nobel ...

'' which added an important

ethical Ethics is the philosophical study of moral phenomena. Also called moral philosophy, it investigates normative questions about what people ought to do or which behavior is morally right. Its main branches include normative ethics, applied e ...

side to development economics.