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FALLACY #2: A SINGLE CRITERION SUFFICES TOEVALUATEDEVELOPMENT PERFORMANCEThe deficiencies of per capita GNP as aperformance criterion have been extensivelyanalysed (see, e.g. Sen 1988). Suffice it to saythat the growth of GNP is indicataive only of theextent of national potential for improving thewelfare of the majority of the population-- not theextent to which the society delivers on thispotential
FALLACY #3: DEVELOPMENT IS A (LOG) LINEARPROCESSFollowing Solow (1957), a single production function is assumed tocharacterize all countries. This unique production function is presumed tobe a function of the supply of inputs, capital, labor and natural resources.Country deviations from this production function are taken to representproductivity differences, whose source is left undefined.Accordingly, the rate of growth of total output becomes a function of therate of change of the physical inputs; that of per capita output (=income)becomes a function of the rate of change of the capital labor ratio, the rateof change of the per capita endowment of natural resources (usuallyassumed to be zero) and the rate of change of the residual.The unique production function approach leads to severalerroneous implications. It suggests that:(1) initial conditions do not matter;(2) levels do not matter;(3) there is no path-dependence; and hence that(4) universal policy prescriptions apply to all countries at all points intime, regardless of their current state of socio-institutional andeconomic development, political structure and policy objectives.
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