Economic development is the increase in the standard of living of a population. Economic development includes economic growth among the main criteria. Economic growth is a sustained growth from a simple economy to a modern one. The study of economic development includes theories of the causes, the process, and the policies by which a nation improves the economic, political, and social well-being of its people. Economic development theories relate to the causes of industrial-economic modernization, the phases of economic development, and the organizational related aspects of enterprise development; it requires sociological, economic, and cultural researches on the evolution of markets and industrial organizations within modern societies. From other perspectives, economic development of embrace improvements in a variety of indicators such as literacy rates, life expectancy, poverty rates, health, and education. In fact, these indicators are more related to economic growth so that development goes often with growth.
Scientists often argue that poor countries and mainly “third-world countries” have experienced very fast economic growth with barely little economic development and especially during the periods where they served as resource providers for industrialized countries. Other economists claim that economic growth causes or contributes to economic development, because according to this perspective, because at least some of the increasing income is spend on human sustainable development such as education and health; this is actually the most reasonable approach regarding this link that joins growth to development.
As economic development relates directly to human development, we can understand this relationship with so many different explanations. For instance, an increase in disposable incomes often leads to improvement in health and nutrition among others. Other people may define economic improvement of social outcomes related to different so called basic necessities such as clean water supply, education, social safety and so on. The main point here is that, regardless of the approach used to connect economic development to human development, the outcome is always the same: economic development aims to improve the well-being of citizens based on different scales of priorities depending on the level of economic enhancement of societies; enhanced economies go over the basic necessities to provide a higher quality of life.
Technically, we mean by economic development the increase in per capita income or the increase in national gross product (GNP); it deals with macroeconomic causes of long term economic growth, and microeconomic issues such as the incentives of households and firms. This involves mathematical methods like differential equations and optimization. Scientists define three building blocks of most economic development models: the production function to explain the relationship between development and the level of output, the saving function to relate development to investments, and the labor supply function to join development to private incomes.