Lindenberg college elaborations

Session VI: Guest Lecture Lindenberg (1)
About economic development and theories concerning economic development


Starts with explaining the OMOP model:
1. Market
2. State
3. World of organizations
4. Primary social order (world of the informal interactions


First theory that has been relevant for explaining economic development touches upon all
four  Theory of value change
- There is a change in value from particularism to universalism  meaning that values
we have as a group have developed in such a way that they have become more
universal (e.g. freedom; freedom of speech; freedom of movement, etc.)
- Another change in values is from the traditional family values to the values of modern
core family
o Traditionally, you have an extended family with several duties and an implied
hierarchy, etc.
o Modern core families focus on the core (mother father and kids, i.e. not the
uncle) and are driven by affection
o Change in values from ‘ascribed values’ to ‘achieved values’. Instead of being
determined what you are, you can now achieve what you are (or want to be)
- More traditionalist values restrain economic development, modern values achieve
economic development


Hence, this theory of value change is not very influential anymore to explain economic
development; however it explains the different values we have and how this influences
development.


Adam Smith (lived in the 18th century)
- Book: The Wealth of Nations (1776) and Theory of Moral Sentiments
- Developed a theory of development in four stages:
o Hunters and gatherers
 More experienced gain status (i.e. the older ones). Society is here
hierarchical and relatively flat (you can not be born into a rich family;
you have to hunt and gather; no accumulation of wealth).
 The possibility for growth is determined (or limited) by day to day life

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, o Nomads (herding)
 Wealth can now be accumulated
 You can be born into a family that already has a lot
 For Smith, this marked the beginning of a state  beginning of the
accumulation of land (wealth) and thereby also protection of property
 Very unequal society  people can not use their wealth for anything
else then for power over people, i.e. you can hire anyone to work for
you/to do anything you want
o Agriculture
 Another human invention; next to domestication of animals, humans
start to domesticate plants
 Again, great inequality of wealth  in that society there will be more
institutions involving to deal with these inequalities
 However, it also gives room to focus on other things and develop
different skills
 Economic development is still restrained by the fact that production is
focused on satisfying ones one needs
o Commerce (the market)
 Main idea: you produce for exchange; not just for your own needs 
this changes the whole game
 If there is a voluntary exchange; there is only a win-win situation
 People should be able to enter the market freely
 Prices should be informative  prices should be such that if the price
goes up, I should produce more (and vise versa); for consumers, if the
prices go up, they will buy less (and vise versa)
 The larger the market, the more win-win transactions we have and the
more wealth accumulation
 However, we also need to look how the goods are being produced
 The more efficiently they are produced, the cheaper they are
produced, the more people can buy the product
 Via division of labor, you will produce more efficiently and have
a greater productivity


Modern economics have a now more explicit theory how people function in markets:
1. People are sensitive to relative prices; they are quite keen to get more for the same
price; people prefer more for less



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