All of postwar development economics in one exchange?

by on March 12, 2012 at 4:41 am in Books, Economics, History | Permalink

Check out the book Economic Development for Latin America, edited by Howard S. Ellis and Henry C. Wallich, circa 1961 and read Paul Rosenstein-Rodan’s classic essay “Notes on the Theory of the “Big Push””.

In ten pages you get the essence of increasing returns arguments, though do see Paul Krugman’s cautionary notes about this era and its lack of formal modeling.

After those ten pages, there is then Celso Furtado, that underrated and perhaps someday forgotten Brazilian economist, who in five pages tries to take PRR apart.  The big push didn’t work in Bolivia, and in conclusion

“The point is not, therefore, to show that there are indivisibilities in the production function.  The main interest lies in demonstrating how processes can be modified so as to elude the effects of those indivisibilities.”

The reader is then treated to three and a half pages of Ragnar Nurske, who shores up PRR.

There is then transcribed discussion, including remarks from Theodore Schulz (he rejects big push as an analytical tool), Albert Hirschman, Howard Ellis, Henry Wallich, more from Nurske, and Haberler, who wrote:

“…the lumpy factor could often be stretched to accommodate a varying amount of the co-operating factors.   The big push was no substitute for normal piecemeal progress.”

That was a popular point in those days.  Hirschman also…

“doubted that as a general rule overhead facilities would create a demand for their services.  This depended on the kind of entrepreneurship available.  Certainly there was no fixed short-run relation between investment in overhead and other investment, since overhead could be stretched.”

Nurske then fought back.  Whew!

Reading those twenty pages exhausted me, and transported me to another and earlier era.  It was like watching one of those taped 1980s NBA games, as they show them in Taiwan and some other countries, without the timeouts and breaks and besides they weren’t playing much defense anyway.

Overall it raised my estimation of those economists.

Nathan Tankus March 12, 2012 at 4:52 am

Ragnar Nurske is a fantastic economist. two of his books, one of them is a league of nations (!!!) report sits in my room as we speak.

Heterodox economists have been reprinting his work lately.
http://www.amazon.com/Ragnar-Nurkse-Trade-Development-Anthem/dp/1843317877

Nathan Tankus March 12, 2012 at 4:59 am

*as I type. i need sleep

david March 12, 2012 at 8:02 am

Economics seems better off for having purged this manner of imprecise argument from its discourse. Although of course the interim loss of insights is unfortunate.

Wonks Anonymous March 12, 2012 at 12:10 pm

I remember reading that Krugman essay a while back, though the only bit I remember was the pan of water. Interesting that more recently he has been arguing in favor of pragmatism (IS-LM) over more “rigorous” models.

Ricardo March 13, 2012 at 2:17 am

I see Krugman making a push for both. Rigorous modeling imposes a certain kind of discipline and helps prevent fuzzy thinking. On the other hand, people sometimes apply models without taking into account the fact that their underlying assumptions may be completely unrealistic and inapplicable to the situation you are seeking to analyze. Ad hoc approaches have the advantage that it is easier to check the model against intuition and look for obviously unrealistic assumptions. Both are helpful in a system of intellectual checks and balances and I think that is close to the point Krugman has been making.

In any case, even “rigorous” economics is ad hoc when you drill down far enough into the models. Utility functions are an ad hoc assumption that makes general equilibrium economics tractable — I don’t think any psychologist or neuroscientist would want to go on record as saying that utility provides a scientifically accurate description of how people make decisions. Supply and demand curves are even more ad hoc which is why they are rarely used in academic papers or graduate school level coursework. Yet they are still a useful way to wrap your head around certain economic principles and questions.

Jüri Saar March 12, 2012 at 12:35 pm

One tiny correction – it’s Ragnar NurKSe not NurSKe ;)

william mcgreevey March 12, 2012 at 5:27 pm

I was a first-year MIT grad student in 1960-61 taking Rosenstein-Rodan’s development course. He distributed copies of “Notes on the Theory of the Big Push” to class members (at least I so remember it). He was then advisor to World Bank prez and had been, I think, chief economist, we all listened with a certain awe to a real Austrian economist (though not the kind you may be thinking). The next year ‘Rosie’ became one of the Nueve Sabios of the OAS Latin America development effort. I remember Raul Prebisch visiting their offices in the summer of 1962. As with the case of Celso Furtado you cite, LAC region economists were not much given to listening to specialists from the north. . .or even from eastern and central Europe.

Peter B. March 12, 2012 at 6:38 pm

Here’s some recent evidence from Jeremy Magruder:
http://are.berkeley.edu/~jmagruder/BigPush_MinWage.pdf

jenny65 March 13, 2012 at 3:30 am

wowzers,

paul56 March 13, 2012 at 4:22 pm

oh boy,

GVV March 14, 2012 at 2:53 pm

All these were integral part of the development economics syllabus from early 1950s to the present day in almost all Indian universities providing a plurality approach to students.An economics student therefore in India is more familiar with the Nurksian quote “a country is poor because it is poor” than the famous passages of Smith.

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