NSE: The Third Generation of Development Economics

Development economics is a new sub-discipline in modern economics. The first generation of development economics is structuralism, focusing on market failures in developing countries and advising their governments to adopt import-substitution strategy for developing modern advanced industries. The second generation of development economics is neoliberalism, focusing on government failures in developing countries and advising their governments to implement Washington Consensus reform with a shock therapy. Most developing countries followed the above two generations of development economics and failed to achieve industrialization and modernization. This article introduces the third generation of development economics, called new structural economics, which advise governments in developing countries to play a facilitating role in development of industries in a market economy according to the country's comparative advantages. The paper also discusses how the government may use industrial policies to play this facilitating role.

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