Development Economics

Its Position in the Present State of Knowledge

John Knapp, Kurt Martin

• Publisher: Routledge
• Year: 2018
• Print ISBN:
  9781138522275
• eBook ISBN:
  9781351522427
• Topic: Economics
• Subtopic: Business General
• Index: Economics

Interest in the problems of underdeveloped economies has increased since the early 1950s, and is now a primary topic in university courses. When this book was originally published, it reflected a sense among some economists that current, orthodox economic theory is inadequate in this field.The volume includes leading American and non-American economists. The discussion of the content of courses was, in the nature of things, an extension of the discussion on the state of knowledge and reflects the period immediately prior to initial publication. Some of the issues continue to be debated, including the balance of instruction between macro- and micro-economics, the place of mathematics and econometrics, the question of the desirability of linking the study of economics with studies in administration, languages, political science, sociology or even engineering.Development economics is now an established subject in the teaching curricula of most universities. The attention of the volume is focused on the problems of creating courses of study in subjects relevant to development within some framework specially designed for the purpose. The problems of organizing such courses concerned the length of courses, the type of students to which they would cater, the qualifications and standards required for admission and successful completion of courses, and so on.The balance of instruction between macro- and micro-economics, the place of mathematics and econometrics, the question of the desirability of linking the study of economics with studies in administration, languages (in connection with area studies), political science, sociology or even engineering, the merits of methods like case studies, workshops and training in field work, are all discussed.

Part I Papers submitted to the Conference

Kurt Martin and John Knapp

Part A. The State of Knowledge

John Knapp

Twenty Leading Questions on the Teaching of Economics

Dudley Seers

A. The task facing the profession in the 1960s

1. Has the demand for economic development brought about a significant change in the work of economists ?
2. How much does the question of development affect the work of specialized economists (for example, trade theorists)?
3. How much will students in the future be concerned, in one way or another, with the problems of world income distribution?
4. How much should the balance of professional research be changed in this direction?

B. The record of economists in development work

5. Do economists from industrial countries who work abroad contribute much to development policy ?

6. Are they helping local universities align their teaching to local needs ?

7. Are they using what they learn from each country’s experience to adapt the general body of doctrine so as to make this more realistic ?

C. The adequacy of the present body of doctrine

8. By what channels is the experience of Africa, Asia, Eastern Europe and Latin America being absorbed in the universities of the Northern Hemisphere ?

9. How much has the body of economic doctrine responded to the acceleration in the last fifteen years in the growth of world population—and to the rising demand for civilized living standards ?

10. Is Keynesian economics now an obstacle in the subject’s development (because of its highly “global” approach, its emphasis on the demand side and the failure to specify the basic assumptions or to assess their relevance) ?

11. Have we developed a coherent strategy for development comparable to classical liberalism or Marxism—or is this impossible in the second half of the twentieth century?

12. Do the significance and meaning of the concepts in use (e.g. “national income⁹’, “capital”, “employment”) need modification when one considers their general applicability in the world, i.e. in non-industrial economies ?

13. What is the most productive way forward—to try to generalize economics, or to develop doctrines appropriate for different types of economy ?

14. How much of “pure” theory will be left when the subject is generalized? (i.e., how much does “pure” theory in fact incorporate assumptions specific to the local circumstances of a few developed countries ?)

D. The relevance of the syllabus

15. From what countries is drawn the material presented to students ?

16. What attempts are made to show the geographical limitations of textbook presentations, and to assess their assumptions ?

17. How much does the undergraduate learn today of the working of the world economy? Of the types of national economy? Of the main mechanisms of development? Of patterns of structural change? Of the role of social factors in development?

18. How much training is provided in handling statistical material (as distinct from “statistical methods”)?

19. How much do the more advanced courses prepare students for work on the main economic problems of the world?

20. Can those who are receiving the bulk of their education in conventional economics understand a seminar in development? (And what difficulty does a member of a graduate school find with realistic courses in development economics after a conventional undergraduate course?)

Economic Theory and the Underdeveloped Countries

H. Myint

Oxford University

How far is the economic theory of the industrially advanced countries applicable to the underdeveloped countries ? This question has been raised, at one time or other by a variety of people. Some of the sociological writers have questioned the applicability of the concept of the “economic man” to the underdeveloped countries where traditional values and attitudes still prevail. The Historical and Institutional economists have argued that the generalizations of economic theory are based on the particular circumstances of the advanced countries and are therefore not “universally valid”. Finally, there has been a long line of critics from the underdeveloped countries. In the nineteenth century, Hamilton, Carey and List questioned the applicability of the English classical free trade theory to the underdeveloped countries of that period, viz. the United States and Germany. They have been followed, amongst others, by Manoilesco from South-east Europe and Prebisch from Latin America. With the emergence of the underdeveloped countries of Asia and Africa, the questioning of the usefulness of the “Western” economic theory to these countries has become widespread. Now, many Western economists, not normally regarded as Historical or Institutional economists, have joined the ranks of the critics.

There are two main lines of criticism currently adopted against economic theory. The first is to elaborate the older line of criticism, stressing the differences in the social and institutional settings and stages of development between the advanced and the underdeveloped countries. This may be described as attacking the “realism” of economic theory. The second and newer line of attack is to question the “relevance” of economic theory to the underdeveloped countries. It is argued that “Western” economic theory is geared to the preoccupations of the advanced countries which, having already achieved sustained economic growth, are concerned with other problems, such as the optimum allocation of resources, the maintenance of Ml employment and perhaps the prevention of “secular stagnation”. Thus the conventional economic theory is likely to be out of focus, if not largely irrelevant, for the central problem of the underdeveloped countries which is to initiate and accelerate the “take-off” into sustained growth.

Critics vary considerably in the emphasis they attach to these two different lines of attack.¹ But they share a common viewpoint on other issues. First, their attack on the applicability of economic theory to the underdeveloped countries is closely linked up with their attack on the applicability of free trade and laissez-faire policies to these countries. Thus, their sharpest attack on “Western” economic theory is reserved for the “orthodox” classical and neo-classical theory associated with the laissez-faire approach. The “modern” Keynesian and post-Keynesian economics is accepted less critically and is frequently used in support of deficit financing for economic development or as a basis for overall economic planning in terms of aggregate capital requirements to achieve a target rate of increase in national income, assuming a fixed capital output-ratio. Other modern developments of the neo-classical General Equilibrium theory, such as welfare economics, input-output analysis, linear programming, etc., are also acceptable provided they are used not as techniques for studying the performance of the market economy but as techniques of planning.

Further, all the critics share a common suspicion of the dispassionate “positivist” approach advocated by some of the orthodox economists.² The critics feel strongly that something should be done very urgently to relieve the poverty in the underdeveloped countries. They are also sceptical of the possibility of maintaining strict ethical neutrality in economics, and regard “positivism” merely as a cloak for inertia and an underdeveloped social conscience. Thus they feel that economists should give up the pretence of traditional academic detachment and become the champions and spokesmen for the underdeveloped countries. Some of them have come to look upon the economics of the underdeveloped countries not as a subject of impartial study but as an exercise in making out a persuasive case for increasing international economic aid to these countries.

The aim of this paper is to clarify and appraise some of the issues which have arisen at the present stage of the discussion on the question of the applicability, particularly the “relevance” of economic theory to the underdeveloped countries. Since this is closely bound up with the further question of the applicability of the laissez-faire policy to these countries, we shall make use of the arguments directed against the market mechanism to illustrate the arguments directed against economic theory. To clear the air, the underlying standpoint adopted in this paper towards planning and private enterprise in the underdeveloped countries may be stated as follows. There is no reason to suppose that economic policies considered appropriate for the advanced countries will prove to be equally appropriate to the underdeveloped countries. But this “realistic” objection to generalizations should apply not only to the laissez-faire but also to the planning policies in the underdeveloped countries. Further, given the wide differences which exist among the underdeveloped countries themselves with respect, say, to the degree of population pressure, the overall size of the economy, the general level of administrative efficiency and the coherence of the institutional framework, etc., it is highly unlikely that any single standard model of development planning will be appropriate for all of them.¹

The plan of the paper is as follows. In section I we shall examine the various arguments directed against the market mechanism in the underdeveloped countries and use them to illustrate and clarify the various arguments directed against the applicability of economic theory to these countries. In section II we shall argue that while the need for a greater “realism” is fully conceded, the arguments directed against the “relevance” of the “Western” economic theory to the underdeveloped countries are more debatable. In particular, we shall argue that the orthodox static theory of the optimum allocation of resources is as relevant as any other part of the existing economic theory. In section III we shall argue that a realistic approach to the underdeveloped countries has been hindered not only by the tendency to generalize from the “special case” of the advanced countries (as some critics have maintained), but also from the tendency to generalize from the “special case” of a particular underdeveloped country, such as India; and that this has been aggravated by the popularity of the “take-off” theory and by the tendency of some of the modern writers to treat the subject not as an academic discipline but as an adjunct to making out a persuasive general case for increasing international economic aid to the underdeveloped countries.

I

When the sociological writers questioned the applicability of economics to the underdeveloped countries on the ground that people there do not behave like the “economic man”, they were questioning the “realism” of economic theory. It is not difficult to meet this type of criticism by showing that, with suitable adaptations to take into account local circumstances, the demand and supply analysis can be made to explain the behaviour of individuals in the market and the prices and quantities bought and sold, etc., in the underdeveloped countries as well as in the advanced countries. For instance, the much cited case of the “backward-bending” supply curve of labour in the underdeveloped countries (even if it really exists) can be explained in terms of the demand and supply apparatus, not to speak of refinements such as the “Income Effect” and the “Substitution Effect”. Similarly, even the reaction of the “subsistence sector” to the impact of the exchange economy can be dealt with by extending the concept of “retained” demand and supply and the factor-proportions analysis of the international trade theory.¹ But this type of defence does not impress some of the modern critics who are questioning the “relevance” of economic theory to underdeveloped countries. They are not really concerned with the question of whether the basic tools of economic theory, such as the demand and supply analysis, can explain economic behaviour in a wide range of underdeveloped countries. What they are concerned with is whether it is important for the underdeveloped countries to give a central place to the study of the market mechanism and how far the theory of the optimum allocation of resources which goes with this approach is relevant for countries seeking rapid economic development.

Now, the discussion would have been much simpler if the critics had simply concentrated on this suggestive line of atta...

Table of contents

• Cover Page
• Title Page
• Copyright
• Acknowledgments
• Introduction
• The Limitations of the Special Case
• Part I Papers submitted to the Conference
• Part A. The State of Knowledge
• Twenty Leading Questions on the Teaching of Economics
• Economic Theory and the Underdeveloped Countries
• What we do not know about the Economics of Development in Low Income Societies
• The Use and Abuse of Models in Development Planning
• The Economics of Educational Planning: Sense and Nonsense
• Part B. Teaching Economic Development
• Teaching Economic Development in the U.K.: Some Analytical Aspects
• Teaching Economic Planning at the Institute of Social Studies, The Hague
• Teaching Economic Development at Manchester
• Part II Oral discussion
• Part A. The State of Knowledge
• Opening Remarks
• Part B. Teaching Economic Development