Economics is a social science.

It is concerned with human beings and the

socialsystems by which they organize their activities to satisfy basic material needs
(e.g., food, shelter, clothing) and nonmaterial wants (e.g., education, knowledge,
spiritual fulfillment).

Resolving problems to achieve development is a complicated task. Increasing

national production, raising levels of living, and promoting widespread employment
opportunities are all as much a function of the local history, expectations, values,
incentives, attitudes and beliefs, and institutional and power structure of both the
domestic and the global society as they are the direct outcomes of the manipulation
of strategic economic variables such as savings, investment, product and factor
prices, and foreign-exchange rates.

In strictly economic terms, development has traditionally meant achieving sustained

rates of growth of income per capita to enable a nation to expand its output at a
rate faster than the growth rate of its population.

Economic development in the past has also been typically seen in terms of the
planned alteration of the structure of production and employment so that
agricultures share of both declines and that of the manufacturing and service
industries increases. Development strategies have therefore usually focused on
rapid industrialization, often at the expense of agriculture and rural development.

Development must therefore be conceived of as a multidimensional process

involving major changes in social structures, popular attitudes, and national
institutions, as well as the acceleration of economic growth, the reduction of
inequality, and the eradication of poverty. Development, in its essence, must
represent the whole gamut of change by which an entire social system, tuned to the
diverse basic needs and evolving aspirations of individuals and social groups within
that system, moves away from a condition of life widely perceived as unsatisfactory
toward a situation or condition of life regarded as materially and spiritually better.

Amartya Sens Capability Approach

Development has to be more concerned with enhancing the lives we lead and the
freedoms we enjoy.

What matters for well-being is not just the characteristics of commodities

consumed, as in the utility approach, but what use the consumer can and does
make of commodities.

As Sen stresses, a persons own valuation of what kind of life would be worthwhile is
not necessarily the same as what gives pleasure to that person.

Sen then defines capabilities as the freedom that a person has in terms of the
choice of functionings, given his personal features (conversion of characteristics
into functionings) and his command over commodities.

Real income is essential, but to convert the characteristics of commodities into

functionings, in most important cases, surely requires health and education as well
as income. The role of health and education ranges from something so basic as the
nutritional advantages and greater personal energy that are possible when one lives
free of certain parasites to the expanded ability to appreciate the richness of human
life that comes with a broad and deep education.

For Sen, human well-being means being well, in the basic sense of being healthy,
well nourished, well clothed, literate, and long-lived and more broadly, being able to
take part in the life of the community, being mobile, and having freedom of choice
in what one can become and can do.

Clearly, happiness is part of human well-being, and greater happiness may in itself
expand an individuals capability to function. As Amartya Sen argued, Utility in the
sense of happiness may well be included in the list of some important functionings
relevant to a persons well-being.

One of the findings is that the average level of happiness or satisfaction increases
with a countrys average income.

But they also reaffirm the importance of economic development in the developing
world, whether the objective is solely happiness or, more inclusively and
persuasively, expanded human capabilities.

Not surprisingly, studies show that financial security is only one factor affecting
happiness. Richard Layard identifies seven factors that surveys show affect average

national happiness: family relationships, financial situation, work, community and

friends, health, personal freedom, and personal values. In particular, aside from not
being poor, the evidence says people are happier when they are not unemployed,
not divorced or separated, and have high trust of others in society, as well as enjoy
high government quality with democratic freedoms and have religious faith.

As a social science, economics is concerned with people and how best to provide
them with the material means to help them realize their full human potential.

In this section, we examine basic indicators of three facets of development: real

income per capita adjusted for purchasing power; health as measured by life
expectancy, undernourishment, and child mortality; and educational attainments as
measured by literacy and schooling.