This article records tradition as it has been passed down and reported. Its sources are not yet part of the atlas's verified catalogue.
Standard mid-twentieth-century economic theory, general equilibrium models, marginal analysis, comparative advantage, had been built almost entirely by observing and modeling already-industrialized economies with functioning capital markets, mobile labor and established institutions. When economists after 1945 turned that same toolkit toward newly independent, largely agrarian nations, the models kept predicting outcomes that did not happen: markets that should have cleared did not, capital that should have flowed to its most productive use stayed put, and growth that should have been automatic once obstacles were removed simply failed to arrive. Ragnar Nurkse's poverty trap was one answer to why, dual economies with a modern and a traditional sector operating side by side, missing markets for credit and insurance, and coordination failures where an investment only pays off if several other investments happen at the same time, none of which general equilibrium theory, built for economies where those problems were mostly already solved, had reason to model. The result was development economics as a distinct field, with its own theoretical apparatus and its own policy toolkit, built specifically to explain and address the structural condition of a low-income economy rather than treating it as simply a smaller, poorer version of an industrialized one.