The State and the Market

Author(s): Pulin B. Nayak

Source: Economic and Political Weekly, Vol. 31, No. 4 (Jan. 27, 1996), pp. PE18-PE22
Published by: Economic and Political Weekly
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 The State and the Market
Pulin B Nayak

The real issue is not whether to have the market or the state. This is an empty dichotomy and no serious school
of political economy would today credibly argue for only one or the other. The question is one of striking the right
balance. What one has also to guard against is a new mode of thinking that the market may be entrusted to sort
out all the basic problems confronting an economy, even with its manifest incapacity to deal with issues pertaining
to income distribution and deprivation.

power amongst agents, the operation of government intervention. This is thought to

Introduction market forces may bring about an be necessary not only in developing countries
accentuation of iniquity. but also in the context of industrial countries.
IN much of mainstream neoclassical If it were the case that the only difficulty, The principal reason for the market failure
microeconomics the market looms large and though this is a serious one, with the market arises from the fact that the assumption of
the presence of any state goes almost system is its insensitivity to income perfect information does not hold, and that
unnoticed. A market may be thought to be distributional issues, but that on the other markets, left to their own devices do not
an institution where agents get together to hand it invariably ensures efficiency, then function efficiently. Now, informationdiffers
buy and sell goods and services and more the latter would be a major point in its from conventional commodities in that it is,
generally, to negotiate courses of action. In favour. However, as it turns out, and as is in a fundamental sense, a public good, in
the perfectly competitive version of it, there well known, the market system's efficiency that it is non-rival in consumption and
are atomistic economic agents who, as property breaks down in the presence of exclusion is. very costly. It is well known
consumers, maximise their utilities, while monopoly elemenrs, incomplete or that competitive market economies provide
producers, acting as price takers, are engaged asymmetric information, externalities and an insufficient supply of public goods. In
in maximising profits. It is well known that public goods, or when we are confronted order to restore efficiency government may
under certain conditions governing with decreasing cost industries. Given the intervene by creating and regulating financial
preferences and technology of production, pervasiveness of the above features, surely market institutions and intervening directly
a competitive equilibrium of the system the incidence of market failure and in the capital market.
exists, which means that there exists a consequent breakdown of efficiency must One is thus led to the inescapable
balancing price vector at which the demand be equally pervasive. How then can one be conclusion that a laissez-faire market system
and the supply of each commodity is matched.sanguine about the overall benign and must be controlled and regulated by govern-
Any exogenous change from this position beneficial effects of the market system? ment intervention. There is however nothing
of equilibrium brings about the needed It turns out that one cannot be. In the new about this conclusion. This has for long
comparative static changes all of which presence of public goods or externalities it been conceded even in the core quarters of
operate through the market system. If, for is clear that it would be necessary to have neoclassical economics where the market
example, there is an excess demand for some governmental intervention in order to ensure system virtually plays an omniscient role.
commodity at a given price then its price efficiency of resource use. In the case of The crucial feature of this system however
moves up, or if there is an excess supply of pollution, for example, the intervention may is that the ownership of the means of
loanable funds at a particular rate of interest take the form of imposition of Pigouvian production is necessarily in private hands.
then the interest rate falls. Both these operate taxes levied on the polluters, or it may take What are the consequences of the means
as part of the inexorable laws that govern the form of the government trying to establishof production being socially owned'? It has
the market system. It is also known that a markets for named goods in the manner been demonstrated quite conclusively that
perfectly competitive market system ensures suggested by Arrow (1970). there can in fact be rational allocation of
efficiency in the sense of Pareto. It also In this context it is of course well known, resources under socialism, so that at least
answers the questions as to what ought to and as is argued by Coase (1960), that if on theoretical grounds there could be no
be produced in how much quantity and in there are no transaction costs amongst doubt regarding the efficiency property of
what manner and for whom. economic agents in arriving at bargains then a socialist system. However the difficulty
While there is a well developed body of no government intervention is called for and with the socialist economy has been at the
literature on market socialism in the Lange- that self interested rational agents will arrive practical level. The system is perceived.to
Lerner tradition, it would not be incorrect at solutions that are consistent with efficiency have failed because it does not provide the
to say that the overwhelming bulk of the in resource use. Coase goes on to argue that necessary incentives to economic agents.
market system paradigm is anchored in the imposition of Pigouvian taxes may in fact There is little doubt that if the reward system
private ownership economy. In such an lead to suboptimal outcomes. However the in any economic organisation is unresponsive
economy the initial distribution of resources critical assumption here is that transaction to economic effort then the system is bound
is treated as given and is virtually regarded costs are zero which is invariably untenable. to face internal contradictions sooner than
as sacrosanct. Any tampering with the initial Consider the case of financial markets, later.
distribution of resources is looked upon as which are regarded as being the 'brain' of One ought to draw a distinction between
a violation of a certain basic right, viz, the an economic system [Stiglitz 1993]. It is social ownership of the means of production
right to private property. Now, if the initial well rec6gnised that the history of modern and the role of the state. Indeed in the Marxian
distribu,ion of resources is iniquitous, in capitalism has been marked by the linked blueprint of transition from capitalism to
terms of certain ethical criteria, there is no phenomena of financial crises and economic socialism, the role of the state in fact is not
presumption that the operation of the market recessions. Now, in the sphere of financial large. The ownership of the means of
system, left to itself, may bring about equity. markets there are several strong reasons for production does in fact get transferred from
Indeed, in a system with unequal bargaining market failure that provide a rationale for private to social hands but this does not

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necessarily entail a large state. In fact Marx entrepreneur to those endeavours where merriment and diversion, but the
had envisaged that in the final stage of profits are largest while labour seeks those conversation ends in a conspiracy against
socialist transition the state would wither jobs that offer the highest wages. Self interest the public, or in some contrivance to raise
away. In Marx's schemata social ownership is held in check by competition, which urges prices." Thus it is far from the case that
of the means of production was consistent other entrepreneurs to imitate the efforts of Smith was an unalloyed champion of the
with decentralised, co-operative collective the most profitable firms, thereby reducing market system.
action rather than a monolithic and to 'normal' proportions the short-term profits The background in which Adam Smith
omniscient state. of entrepreneurs and the high wages of skilled wrote was one of the primacy of mercantilism
This may appear somewhat paradoxical, labourers. which held that the state should be powerful
but the conception of the state in the writings The authorof the Wealth ofNations (1776), at home and abroad and the supersession of
of the proponents of the free market, for for whom self interest was the driving force national royal power over local power was
example, in the writings of Nozick (1974), of all economic activity was also the author regarded as obviously desirable. Any policy
is one of a minimal state where the state is of The Theory of Moral Sentiments (1759) that contributed to an enhancement of the
expected to maintain law and order and to which stressed sympathy rather than power of the state was thought to be worth
ensure that contracts are carried out. Thus individual gain or utility as the basis of pursuing. This was reflected in the approach
the role of the state in both the right wing morals. According to Smith, human conduct to impose minute and intricate domestic
libertarian writings of von Hayek and Nozick was actuated by six motives: self love, regulation of manufacturing and commerce.
as well as the Marxian socialist formulations sympathy, the desire to be free, a sense of A flourishing domestic economy was
is small. propriety, a habit of labour, and the propensityregarded as desirable since this would
In which context then is the role of the to truck, barter and exchange one thing for contribute to overall national strength. Even
state large or substantial? It was large another. Left to himself, a moral man would though Adam Smith wrote extensively
precisely in economies oftheerstwhile Soviet not only attain his own best advantage, but condemning the restrictive and imprisoning
and East European type, with a large measure he would also further the 'common good'. effects of mercantilism and championed
of monolithic top heavy centralised planning. Smith argued that since self love was laissez-faire, he was sufficiently careful to
And the state is also large in the wide range accompanied by other motives, particularly emphasise the importance of sympathy as
of mixed economies, spanning the ones like, sympathy, the actions resulting from it could an essential part of moral conduct, and did
India which are poor developing economies not but involve the advantage of others while envisage a role for the, state in areas where
subscribing to development planning, to onesbringing about one's own gain. It was this privateentrepreneurs would have insufficient
in the developed world which represent fundamental belief in the natural balance of commercial incentive to have a presence.
welfare states like Sweden and Denmark. It human motives that led Adam Smith to Perhaps the strongest argument for a large
is also well known that in the economic argue that in pursuing one's own advantage role of the state has been made in the writings
development of countries like Japan, South
each individual is "led by an invisible hand of the German economist Freidrich List
Korea, Taiwan and Singapore, the state has to promote an end which was not part of his (1789-1849). List favoured a strong
intervened in strategic areas like credit intention". Smith was firmly of the view that interventionist government and high tariffs
availability and provision of industrial and the common good was paradoxically best to protect infant industries from British
export infrastructure to boost the growth served when a person pursues his self interest. competition. He denied the existence of
rates of those economies. In fact he was suspicious of those who were natural harmony of laissez-faire capitalism
From the example of the fast growing in the business to exclusively serve the public and rejected the automatic adjustments in
economies-of South-East Asia one may draw good, and thought that there is never much the capitalistic model. He emphasised
an important conclusion. It is that the good d6ne by such people. Thus the very nationalism as the driving force to mobilise
overwhelming reliance on the market essence of his ideology was that motives do human endeavour in underdeveloped
mechanism to maximise economic not have to be intentional and that overall countries. List suggested a five-stage theory
efficiency, with corrective intervention by harmony arises out of the spontaneous of economic development and growth where
the government in the event of public goods functioning of human personality. the final stage was one of world commerce,
and externalities, etc, is based on static In the Smithian scheme government which combined international trade with
notions of resource allocation. The case of manufacturing
interference waV the greatest barrier to this and large-scale commercial
the South-East Asian tigers demonstrates spontaneity. Smith held that wherever agriculture. In his scheme, the task of
that in a dynamic context the state can play government had intervened, the outcome government was to create through proper
a substantially important role. It does so by was less effective than if it had ramained legislation the enivironment that would enable
creating the infrastructure, by making aloof. Yet there were certain areas where a country to reach the final stage as quickly
available credit at the appropriate time, by Adam Smith was clear about the necessity as possible. List argued that rather than
effecting technology transfer and by helping
of state intervention.-The first two were harmony of interest it was conflict and
in marketing the products. defence and justice, which were obvious antagonism that was the source of economic
prerequisites of sovereign power. The third as well as political activity.
II was somewhat more ambiguous. This A fundamental assumption Qf the economic
State and Market in concerned the erection and maintenance of system outlined by Adam Smith was that
Economic Thought those public works and institutions which laissez-faire and minimal governmental
are useful but not capable qf bringing in a control would automatically lead to natural.
Perhaps a useful reference point of allprofit to individuals. These included, for order and the-best possible outcome for all.
thinking on the state and the market could example, bridges and educational That there was an inherent tendency in a free
be the substantial body of work of Adam institutions. Thus even though Adam Smith enterprise system of effective demand falling
Smith (1 937, 1804). In the Smithian system
has been associated with the doctrine of short of the full output potential of the'
the market automatically decides through laissez-faire. he in fact tread finely over economy
the was something that was never
the price mechanism the basic question of considered in the Smith-Say construct. This
relative spheres for the state and the market.
what, how and for whom to produce. The As regards businessmen, Smith in fact had was first outlined by Malthus in his theory
market system operates through the 'invisible the most caustic comment: "People of the of gluts when he challenged the automaticity
hand' of self interest, which leads the same tradle seldom meet together, even for of full employment that characterised Say's

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,aW and the classical system [see, for
example, Roll 19531. The classical system
presumed that general overproduction was
impossible. In discussing the possibility of
underconsumption and unemployment
Malthus was a true intellectual precursor
to the writings of John Maynard Keynes in
the 1930s in the backdrop of the great
depression. A low level of effective demand
meant unemployment, which assumed
alarming proportions in the depression of
the 1930s. The way out of this was to have
strong intervention by the state, in the form
of substantially higher government
expenditure.
Thus the case for government intervention
may come from two major considerations,
viz, tllose of resource allocation and
stabilisation. The allocation arguments, based
on externalities, public goods and the like
centre on the issue of static efficiency.
Government intervention is required either
in the form of tax subsidy schemes or in the
form of direct intervention to facilitate setting onto the full employment path. in the case
up of markets that would not otherwise be
established of their own accord. In the areas
of infrastructure and the social sectors like
education, health and social security, the
government may well have to intervene as
an active participant in provisioning these
goods and services.
The arguments for a significant and
strategic role for the government from the
stabilisation angle, especially after the
Keynesian revolution, is today regarded as
standard received doctrine. The essential
basis of this is the recognition that different
economic agents are responsible for savings
and investment, as a consequence of which
there invariably would arise a mismatch
between these two variables. If investment
falls short of savings it would lead to a
contraction of national income and therefore
employment. The situation can however be
corrected only via corrective. government
interventlon. Thus the Keynesian construct
explicitly recognised the possibility of crises
in the capitalist system, and this was
something that was virtually ignored by the
classical authors in the Smith-Say-Ricardo
tradition.
Even though Keynes was essentially a
votary of individual initiative operating
within the market system, he believed that
the state will nevertheless have to exercise
a guiding influence. He thought that in
particular the state would need to influence
the propensity to consume "partly through, expansion policy by the government can
its scheme of taxation, partly by fixing the
rate of interest and partly, perhaps, in other
ways". He goes on to add that a "somewhat
comprehensive socialisation of investment
will prove the only means of securing an
approximation to full employment" [Keynes A very important question pertains to the
1936:378]. In Keynes' scheme this of course nature of the state in the context of a
did not preclude co-operation between public
authority and private initiative. He was
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emphatic that state socialism ought not to a recent review see Byres 1994]. One of the
embrace most of the economic life of the approaches is to adopt a functional view of
community and he was equally emphatic the state where the state is regarded as a
that the state ought not to assume the neutral, technocratic and developmentalist
ownership of the means of production. state. A second approach is to regard the
Both Keynes and Marx had concluded state as an instrument of class rule, where
that the free market capitalist system the state acts at the behest of 'the dominant
contained within itself the seeds of instability
or ruling class' [Miliband 1973]. A third
approach, following Kalecki (1976) and Raj
and crisis. For Keynes the root of the problem
(1973) is to regard the Indian state as an
resided in a lack of effective demand, whereas
in Marx the explanation lay in the fact that intermediate regime. A fourth view of the
while the process of accumulation led to a state, following Gramsci, seeks to explore
falling tendency of the rate of profit, the the maintenance of class domination through
consuming power of society gets limited by a variable combination of coercion and
the urge for accumulation. This leads to a consent. These do nrot exhaust the various
progressive intensification of the conflict approaches availal6le in the literature.
between production and consumption, It is in fact a truism to assert that the state
between the creation of surplus value and acts on behalf of the dominant and ruling
its . realisation. As regards the suggested classes. The point however is that even
remedy, however, whereas Keynes thought though the state has invariably been used
in terms of boosting aggregate demand via as a tool to further the interests of the
a programme of active government dominant classes, it continues to be a
expenditure, so as to put the economy back repository of hope for the oppressed classes.
This is especially facilitated by widespread
of Marx the solution was sought in terms political democracy in the form of adult
of overthrowing the entire capitalist order franchise in the developing countries. Thus
by the working class and the proletariat. for the poor and the exploited, the state
Thus Keynes essentially thought in terms of represents the forces of modernisation and
using the state apparatus to preserve and progress, and offers possibilities for
protect the capitalist order but in the case improving the living standards of the
of Marx, the entire capitalist system had to population at large.
be violently abandoned in favour of a As mentioned earlier, Marx' s thoughts on
classless socialist society. the nature of the state were never explicitly
It is somewhat ironic that while Keynes stated. As Poulantzas (1975) has remarked,
was suspicious of a large role of the state, "in Marx himself this neglect, more apparent
Keynesianism, which virtually came around than real, is above all due to the fact that
to be the creed in the years following the his principal theoretical object was the
second world war in large parts of the globe, capitalist mode of production. within whiclh
brought in substantially expanded roles for the economy not only holds the role of
the state. This was as much true of western determinant in the last instance, but also the
capitalist democracies which modelled dominant role". Marx thus concentrated on
themselves as welfare states as it was true the economic logic of the capitalist mode
of the newly independent developing of production and he did not specifically
countries of Asia, Africa and Latin America. deal with the other levels such as the state.
It is quite well known that about the same Schumpeter (I1954) had observed that Marx's
time as Keynes was arguing for a policy of sociological theory of the state may be
counter cyclical government intervention to summed up in the pithy statement from the
ensure stability in output and employment, Communist Manifesto that a government is
Michal Kalecki too had independently a committee for the management of the
arrived at the same answer. Like Keynes, bourgeoisie. There is therefore no such thing
Kalecki too dismissed the orthodox idea that as a socialist state since the state as suchi dies
a market economy is automatically led in the transition to socialism. This is in sharp
contrast to the commanding role that the
towards full employment. The task of Keynes
and Kalecki was to demonstrate that the state played in the Soviet system.
With the ownersllip ot the means of
capitalist system is essentially demand driven.
They demonstrated quite conclusively that production having changed from private to
in recessionary conditions an active demand state hands, there now had to be a
commanding presence of the state in the
management of productioni and distribution
raise output and employment without causing
serious inflation. of all manner of goods and services in the
Soviet system. But this entailed a huge degree
NATURE OF THE STATE of centralisation, far too unwieldy for quick
and efficient decision-making whlich keeps
the wheels of the economy runni ng smoothly.
Shortage and surpluses were bound to occur
developing country like India. This issue has and even though the system somehow
been much discussed in the literature [for delivered over the years, it was never geared
All use subject to http://about.jstor.org/terms
to efficiency in the way a system run on primary health. By the same token the motive it would invest in areas where returns
the capitalist profit principle could be. Side paternal role of the state may be extended come in early and at high rates. This is not
by side there was the military compulsion to encompass strict legislation and likely to be the case in the above-mentioned
of superpower politics during a regime of enforcement against drugs and liquor. The areas of infrastracture and the social sector.
cold war when substantial funds were state may also intervene to protect the Quite clearly the government has to step in
diverted to maintain a high level of military interests of the future generations in terms these areas, but the question, as always, is
preparedness. This took more than its toll of issues like environmental degradation to what extent and in what precise manner.
on the viability of the Soviet economic system
and global warming, a concern that is There is an influential view that by making
and the system was getting weighed down simply unlikely to be addressed by the a prior claim on scarce investible resources
by its own contradictions. market [see Stern 1990, for a discussion]. and pushing up rates of interest public
The world is at present witnessing a There is however an influential body of investment in these areas tends to crowd out
decline of the nation-state when a new phase opinion that emphasises 'government failure' private investment [see, for example,
of global corporate capitalism is being rather than 'market failure'. This view is Sundarrajan and Thakur 1980]. Whether or
championed in several quarters [Kothari held on the ground that most government not there is in fact crowding out in the
19951. This is attributable to a general activities that have to do with regulatory, context of specific economies is an issue of
ascendancy of conservative, free market- legislative or administrative functions end substantial debate and the matter is far from
oriented, thinking and the assault is being up with 'rent seeking' behaviour on the part settled. There is however considerable
spearheaded by multinational conglo- of government functionaries. Such behaviour evidence that because public investment is
merates, principally based in the advanced reduces the impact of the intended policy geared towards infrastructure and the core
capitalist countries of Western Europe, North intervention and sometimes may even sectors, it in fact acts as a facilitator and
America or Japan. The onslaught is eliminate it altogether. The evidence of rent presents an enabling environment for the
worldwide in its sweep and is undermining seeking behaviour is fairly widespread and private sector to flourish.
of political units and their autonomy it can be nobody's case that it can possibly If the ultimate objective of development
especially in developing but also in have any beneficial impact. is toenhance the well-beingof human beings,
transitional economies. An important feature The real question therefore is one of finding
judged in terms of indicators related to life
of this new trend is the relegation to the the right balance in trying to avoid the twin expectancy, adult literacy and universal
background of issues like poverty and income evils of market failure and government health care, the role of the public sector in
inequality even as great importance is being failure. There are several instances of countries as diversely placed as China, Costa
attached to the expansion and globalisation economies where government action has not
Rica, Cuba, Jamaica, Chile and Sri Lanka
of markets. been beneficial but by the same token there has been absolutely pre-eminent [Sen 1990].
The collapse of the Soviet Union has are several cases where the reverse is the In a number of countries where a growth-
especially contributed to the growing erosion case. It needs no belabouring that China and oriented strategy has been adopted, e g,
and marginalisation of the state. Yet while Korea have performed well with a great deal Hong Kong, Korea, Kuwait and Singapore,
there is increasing scepticism and renewed of government intervention [see Chenery, the results in terms of the above indicators
doubts about the efficacy of the state, there Robinson and Syrquin 1986, for example] have been remarkable primarily because
is still a substantial degree of confidence while Hong Kong is an example of a country substantial resources were channelised to
amongst the common masses and especially flourishing with a minimum of government the public sector for education, health and
the poor about the inherent indispensability interference. Thus it would be wrong to social security. In the realm of famine relief
of the state apparatus which may still be think in terms of applying the same policy it has been seen repeatedly [see Dreze and
expected to deliver the goods. package to all countries. The appropriate Sen 1989] that the public sector, through
prescription undoubtedly has to be based on programmes such as cash for work can
III the history, institutions and ideology recreate entitlements lost as a result of disaster
State and Market: prevalent in a country. and thereby generate income. This can of
A Reconsideration Even so there is a broad measure of course be effectively combined with the use
consenus that there are certain well defined of private food trade in the affected region.
As has been mentioned before, in standard areas where the role of the state is vital, This combination of public sector based
welfare economics the case for government particularly in a developing country. This income generation and private sector based
action emerges in the event of externalities is especially true of infrastructure, food trade can be very effective. In fact it
and public goods, missing markets, imperfect characterised by lumpiness and natural has been seen in several contexts that famine
intormation, existence of entry barriers and monopoly, and the social sector such as relief work left purely to the public or the
increasing returns, among others. The above education and health. A major difficulty private sector is invariably an unmitigated
encompasses a rather large typology of cases with the social sector is that it tends not tofailure.
and the real world is likely to contain one be self-financing, with limited access to The effectiveness of public policy to
or more of the above pathologies rather than borrowed funds from the market because of combat famine is intimately related to the
conform to the ideal version of perfect the low commercial profitability in these issue of political democracy. As Sen has
competition with full information and no lines. It is therefore invariably in need of observed, major famines have taken place
externalities. Thus the case for governmentbudgetary support from the state. Owing in market economies and non-market socialist
action may be regarded as the rule rather to their large commitments in education, economies, but not in any country with a
than an exception. health, housing, social security and welfare democratic system, with opposition parties
In addition to the above, the case for the share of government expenditure in and with a relatively free press. During the
state action may be called for to deal with GNP is as high as 46 per cent in Denmark major Chinese6 famine in 1958-61- when
poverty and deprivation. This is an issue and 54 per cent in both the Netherlands and
nearly 23-30 million people died Chinese
of central concern to a developing country Sweden (World Development Report, newspapers were silent about the disaster.
like India. Further the state may be looked 1995). Quite clearly public pressure and the free
upon as an agency that acts paternalistically A key question pertains to the role of the press have a major role toplay in activating
to ensure certain basic rights to its citizens state in investment activity. Since the private the state to intervene purposively in crisis
such as the right to basic education and sector is guided principally by the profit situations.

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 It is beyond any doubt that the guiding Miliband, Ralph (1973): 'Poulantzas and the Smnith, Adam (1937): The Wealth (?f Natlons.
Capitalist State', New Left Review, 82. Random Houise, New York.
and facilitating role of the state has been
Nozick, R (1974): Anarchy, State anid Utolpia, -(1804): The Theor-y oef Mor-al Seciainiteis. Cadell
central to the development experience of the
Basil Blackwell, Oxford. and Davies, London.
late industrialisers well as the market
Poulantzas, N (1975): 'The Problem of the Stern, N (1990): 'Developmenit Str-ategies: The
economies of east Asia. These states have Roles of the State and the Private Sector',
Capitalist State' in R Blackburn (ed), Ideology
actively pursued the policy of protecting in Social Science, Fontana, Glasgow. The World Bank Econ omnic Review,
domestic capitalists from foreign Raj, K N (1973): 'The Politics and Economnics Supplement.
competition, and they have typically pursued
of "Intermnediate Regimes" ', Ecoonomic and Stiglitz, J (1993): 'The Role of the State in
both import substitution as well as export Political Weeklv. Financial Markets', The WorldBaltk Econontic
promotion. Much more than the invisible RoIl, Eric ( 1953):A History oJf Ecotnomici Tlhoughlt, Review, Supplement.
Faber and Faber, London. Sundarrajan, V and S Thakur (1980): 'Public
hand of, the market, it is the pervasive
Schumpeter, J A (1954): History (f Economic Investments, Crowding Out and Growth: A
interventionist role of the state that has put
Analysis, Oxford University Press, New York. Dynamic Model Applied to India and Korea'
economies like that of Korea on a high
Sen, A (1990): 'Development Strategies: The IMF Staff Palpers.
growth path. Roles of the State and the Private Sector', World
Thle Bank (I1995): Wor-ld Developmient Rep)ort,
The problem in the context of a developing World Batnk Economic Review, Supplement. Oxford University Press, Delhi.
country like India is substantially more
critical, in that there are vast tracts of poverty,
low level literacy, poor health care systems
and poor infrastructure. The real issue is not INDIAN SCHOOL OF POLITICAL ECONOMY,
whether to have the market or the state. This
PUNE
is an empty dichotomy and no serious school
of political economy would today credibly
argue for only one or the other. The question The objects of the School are (i) to undertake research in Social,
however is one of striking the right balance.
Political and Economic problems of India, (ii) to educate and inform
And one also has to guard against a new
mode of thinking that suggests that the workers in various fields in those problems, and (iii) to prepare and
market
may be entrusted to sort out all the basic publish relevant literature.
problems confronting an economy, even with
its manifest incapacity to deal with issues
The School at present runs a quarterly Journal with emphasis
pertaining to income distribution and
deprivation. While the profit motive may on reviewing developments in Indian Economy, Polity and Society
work well in the sphere of commodity since independence. The Journal is now in its seventh year of
production, in the production of shoes, say, publication. It is also proposed to publish periodically booklets on
it is fraught with serious problems in the
subjects of current interest with a view to creating an informed public
areas of health, education, poverty alleviation
and famine relief. There is no alternative opinion on various economic, political and social issues.
?ther than to have substantial state action
in each of these areas. We are looking for a Director, and an Associate Professor
[This was presented as a theme paper at the
Annual Conference of the Indian Economic
The Director will be a Professor of the School. He will be expected
Association held at Chandigarh in December
1995.] to promote the objects of the School with initiative, a long-term vision

References
and a sense of dedication to the task, besides his duties as the
academic and administrative head of the School. The Associate
Arrow, K J (1970): 'The Organisation of Econoinic
Activity: Issues Pertinent to. the Choice of
Professor will assist the Director in the School programme besides
Market versus Non-Market Allocation' in undertaking research work in the fields of interest to the School.
Public Exp)enditure and Policy Analysis,
They will be placed according to their seniority in the UGC scale
R H Haveman and J Margolis (eds),
Markhamn, Chicago. for Professor and Reader respectivelywith accompanying allowances
Byres, T (1994): 'State, Class and Development and benefits of provident fund and gratuity. A Two Bedroom Staff
Planning in India' in T Byres (ed), The State
Apartment could be made available to the Director on normal terms.
and Developlnent Planning in India, Oxford
University Press, Delhi. Age for Professor-Director not more than 50 years, and for Associate
Chenery, H, S Robinson and M Syrquin (1986):
Professor not more than 40 years, relaxable in both cases.
industrialisation and Growth: A Companrative
Study, Oxford University Press, New York.
Coase, R (1960): 'The Problein of Social Cost', Write within six weeks of appearance of this
Jourtnal of Law and Economics.
advertisement, in strict confidence, giving
Dreze, J and A Sen (1989): Hunger and Public
Action, Clarendon Press, Oxford. complete C.V. and the names and addresses of two referees to
Kalecki, M ( 1976): Essays on Develolping
Econtonmies, Harvester Press, Sussex.
Prof. S.V. Kogekar, President,
Keynes, J M (1936): The General Theory of
Emp loyment, Initerestatnd Money, Macmiillan, Indian School of Political Economy,
London. "Arthabodh" 968/21-22 Senapati Bapat Road,
Kothari, R (1995): 'Globalisation and 'New
Pune 411 053.
World Order': What Future for the United
Nations?', Economic atnd Political Weekly.

PE-22 Economic and Political Weekly January 27, 1996

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