Economic Development and Efficiency Criteria in the Satisfaction of Basic Needs

Abstract

This paper aims to give a possible mathematical formalization of economic efficiency in an economy concerned with attaining acceptable levels of per capita consumption of basic goods, subject to economic and social welfare constraints. This model was constructed as an underlying mathematical economic structure of Latin American world model of Fundacion Bariloche. It has been used in a modified form, as a feasibility study of possible growth paths id such underdeveloped economies. The model has a methodological intersection with the theory of optimal economic growth, and that the efficient growth paths are solutions of a constrained optimization problem: they optimize a social welfare criterion satisfying constraints given by a set of differential equations with initial values. In the usual optimal growth models these differential equations represent production-investment-consumption relations through time, formalizing a trade-off between present and future consumption (more present consumption implies less present investment). Here in addition, the admissible paths also satisfy a differential equation which relates the rate of population growth to the level of consumption of basic goods (a proxy standard of living) which introduces further relationships between present and future consumption. The admissible paths are assumed to satisfy additional requirements per capita consumption of all basic goods must be non-decreasing throughout time. This is a welfare consideration for countries with low levels of consumption. A brief description of the dynamics of the model in sequential form can be given as follows. Initial values of production, consumption, and investment in three basic sectors are given (nutrition, housing, health and education), and in a fourth sector of services and consumption foods complementary to the production and consumption of the three basic goods.