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Neoclassical development theory became influential towards the end of the 1970s, fired by the election of Margaret Thatcher in the UK and Ronald Reagan in the USA. Also, the World Bank 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.
The classical economists took the theory of the determinants of the level and growth of population as part of Political Economy. Since then, the theory of population has been seen as part of Demography. In contrast to the Classical theory, the following determinants of the neoclassical theory value are seen as exogenous to neoclassical economics:
Rostow's model is descendent from the liberal school of economics, emphasizing the efficacy of modern concepts of free trade and the ideas of Adam Smith.It also denies Friedrich List’s argument that countries reliant on exporting raw materials may get “locked in”, and be unable to diversify, in that Rostow's model states that countries may need to depend on a few raw material exports to ...
The theory of Michael Commons' model of hierarchical complexity is also relevant. The description of stages in these theories is more elaborate and focuses on underlying mechanisms of information processing rather than on reasoning as such. In fact, development in information processing capacity is invoked to explain the development of reasoning.
The theory also focuses on positive externalities and spillover effects of a knowledge-based economy which will lead to economic development. The endogenous growth theory primarily holds that the long run growth rate of an economy depends on policy measures.
While EDP theory generally aligns with that of mainstream EP, it is distinguished by a conscious effort to reconcile theories of both evolution and development. [5] EDP theory diverges from mainstream evolutionary psychology in both the degree of importance placed on the environment in influencing behavior, and in how evolution has shaped the ...
The theory is based on the assumption that not only are there similar stages to development for all countries but also that there is a linear movement from one stage to another that goes from traditional or primitive to modern or industrialized. [3]
The basic properties of Kaldor's growth model are as follows: Short period supply of aggregate goods and services in a growing economy is inelastic and not affected by any increase in effective monetary demand. As it is based on the Keynesian assumption of “full employment”. The technical progress depends on the rate of capital accumulation.