THE DESIRABILITY OF

ECONOMIC
DEVELOPMENT
Lord Robbins
The Desirability of Economic
Development
Source: The Theory of
Economic Development in the
History of Economic Thought
- Lord Robbins (1966)
The Desirability of Economic
Development
Granted that development is
possible…
Political Economy Questions:
1.  Is it worthwhile?
2.  How is it to be valued in
comparison with other ends?
The Meaning of Economic
Development
Chosen definition (Lord
Robbins):
§ Increasing real per capita
income;
§ Increasing potential to produce
such income
Some difficulties of the
definition
§ Real income is physically
heterogeneous – a flow of the
availability of different goods and
services
§ Even for two households of the
same income, if some goods
become more available but others
become more scarce, do they
become better of in the same way?
Some difficulties of the
definition
§ If two households' income are
growing at the same rate over
long periods of time, are they
becoming better of in the same
way?
§ If the basket of goods (quantity)
are the same but the quality is
improving, how should growth of
real income be measured?
Possible Generalizations
§ About the direction of
movement rather than its
exact pace or magnitude
§ Adoption of a framework to be
able to state that the 20th
Century citizens are better-off
than their 19th Century
predecessors
Historical Approach: Economic
Thought
1.  Greek Philosophers (3rd Century,
B.C.E.)
2.  Primitive Christianity (1st Century,
C.E.)
3.  Mercantilism (16th-18th)
4.  David Hume and Adam Smith (18th)
5.  19th Century Classicism (J.S. Mill)
6.  The Marginal Revolution (Marshall,
Walras, etc.) (19th)
The Greek Philosophers
(300 B.C.)
Plato, Aristotle
Greek Philosophers
Context:
§  Strains in the developing
Athenian economy
§  Disorder and changing
values of the open society;
expanding organization of
the Hellenistic world
Greek Philosophers
General Attitude:
§  Against change
§  Against trade beyond primitive
exchange for the needs of
households
§  Against intrusion by foreigners
(excepts as slaves or artisans)
§  An affluent society will also breed
unjust individuals
Greek Philosophers
Vision / Dream:
§  To reimpose habits and the
hierarchical structure appropriate
to unchanging conditions;
§  Recover the Past
Ideal:
§  autarchic (self-sufficient) small
communities (city states)
§  easily manageable for virtue and
justice to flourish
Primitive Christianity
The New Testament
Primitive Christianity
Political economy context:
§  Roman domination in public policy
with no connection to individual duty
and preference
§  Conviction that the "End of the
World" or the "Last Judgment" was
imminent
Basic Attitude:
§  Negative toward the pursuit of the
accumulation of material wealth
§  What is the sense?
Primitive Christianity
Basic Attitude:
§  A negative attitude toward the
pursuit of the accumulation of
material wealth
§  "One cannot serve both God and
money."
§  "Why worry about tomorrow?
Tomorrow will take care of itself."
Primitive Christianity
§  "Look at the birds of the air;
they do not sow nor reap; they
do not have barns, yet your
Father in Heaven feeds them."
§  "Do not store up treasures in
this world where the moths eat
them; store up your treasures
in heaven."
Primitive Christianity
The Gospel Values: The Beatitudes
§  "Blessed are you who are poor, for
yours is the kingdom of God."
§  "Woe to you who are rich now, for
you have already received your
comfort."
§  "Blessed are you who hunger now,
for you will be satisfied."
§  "Woe to you who are well fed now,
for you will go hungry."
Medieval Christianity: The
"Dark Ages"
§  The Church as an institution
became more worldly
§  Popes appropriated temporal
powers also, with considerable
'treasures on earth."
§  With adverse consequences on the
marginalized in the society
§  But also with immeasurable benefit
to the advancement of art and
learning, both then and thereafter.
 Mercantilism
Political and Economic Power
Mercantilism
Context:
§  The emergence of the nation state
§  Perpetuation of international
anarchy (wars)
Implication:
§  State action (reaction) could have a
powerful effect on the activities of
the citizens, positively or negatively
§  Became part and parcel of the tenor of
political and economic discussion
Mercantilism
The ultimate aims of policy?
§  Power
§  Plenty
New desirable objective:
§  The development of economic
potential
§  The necessity of developing the
powers of production to facilitate
the aims of power (political and
military strength) and plenty.
Mercantilism
Character:
§  The desirability of development
was for a part of the population –
the ruling classes and merchants
§  Any rise in wages beyond
subsistence was viewed with
apprehension
§  Education for the masses was
deplored as it might make unskilled
labor scarce
Mercantilism
Development:
§  A conception brought about by policy
§  Exports favored but imports discouraged
in order to promote the prosperity
induced by an inflow of precious metals
§  Foreign goods were excluded to foster
the rise of basic industries
§  Power and Plenty
§  Unquestioned values (on whether it is
desirable development or not)
Hume and Smith
18th Century Social
Philosophers
David Hume, Adam Smith
1.  Recognized the essential
functions of a coercive
government and benefits of
positive State Action:
§  Postulated a framework of law and
order
§  Sovereign duty of erecting and
maintaining certain public works
and certain public institutions, not
for the interest of any individual, or
a small group of individuals
David Hume, Adam Smith
2.  Main Interest: The spontaneous
elements in economic society,
without any act of conscious
collective choice
§  On the way in which private interests
of individuals or small groups of
individuals, guided by the impersonal
mechanisms of the market, achieved
§  a more or less orderly system of social
co-operation and
§  some of the prerequisites of economic
growth
Hume and Smith
The "Invisible Hand"
§  The markets and the organization
of production as the main
influences which bring about
economic development
§  Without central state initiative
§  To analyze these processes and
investigate the modes in which
they operated
Hume and Smith
Question: Was economic
development worthwhile or
not?
§  Explicitly faced
§  Conscious attempt to evaluate
the results of the operations of
the market and the
alternatives
David Hume
Question: Was economic
development worthwhile or not?
§  "Which of the modes of living,
the simple or the refined, is the
most advantageous to the
state or public? I should,
without much scruple prefer
the latter, in a view to politics at
least."
David Hume
§  "… the arts of agriculture
employ at first the most
numerous parts of the society
§  But these arts have so much
improved that the land may easily
maintain a greater number of
men than those it immediately
employs…
David Hume
(Cont.)
§  And if these superfluous hands
apply themselves to the finer
arts, the arts of luxury, they add
to the happiness of the state:
§  since they afford to many the
opportunity of receiving
enjoyments with which they,
otherwise, would be
unacquainted."
David Hume
Essay: Of Refinement in the
Arts
§  "In times when industry and
the arts flourish, men are kept
in perpetual occupation, and
enjoy, as their reward, the
occupation itself, as well as
those pleasures which are the
fruit of their labor."
David Hume
Essay: Of Refinement in the Arts
§  "The mind acquires new vigour:
enlarges its powers and faculties;
and by an assiduity in honest
industry, both satisfies it natural
appetites and prevents the
growth of unnatural ones, which
commonly spring up when
nourished by ease and idleness."
David Hume
Essay: Of Refinement in the Arts
§  "Laws, order, police, discipline:
these can never be carried out to
any degree of perfection, before
human reason has refined itself
by exercise, and by an
application to the more vulgar
arts, at least of commerce and
manufacture."
Adam Smith: The Wealth of
Nations
The Objects of Political Economy:
1.  To provide a plentiful revenue or
subsistence for the people, or
more properly to enable them to
provide such revenue or
subsistence for themselves;
2.  To supply the state with a
revenue sufficient for the public
services
Adam Smith: The Wealth of
Nations
The Advantages of Division of
Labour:
§  "The condition of the greatest
improvement in the
productive powers of labour,
and the greater part of the
skill, dexterity and judgment
with which it is everywhere
directed or applied…"
Adam Smith: Education and
the Growth of Knowledge
The Dangers of Extreme
Industrial Specialization
§  The narrowing effect upon
character
§  Called for correction by state-
aided education
19th Century Classicism
D. Ricardo, J.S. Mill
19 th Century Classicism
Position: Development is desirable
§  Distinction: Positive vs. Normative
Economics
D. Ricardo:
§  "It is not the province of the political
economist to advise – he is to tell
you how to become rich, but he is
not to tell you to prefer riches to
indolence, or indolence to riches."
19 th Century Classicism
D. Ricardo:
§  When accumulation was still
positive, it was possible that
wages would be above
subsistence level, so there was
at least a chance that during that
period, the labouring classes
would learn the habits of
prudence as regards to
multiplication which would keep
them at that level.
19 th Century Classicism
J.S. Mill:
§  "The best state for human
nature is that in which, while
no one is poor, no one desires
to be richer, nor has any
reason to fear being thrust
back, by the efforts of others
to push themselves forward."
19 th Century Classicism
J.S. Mill:
§  "I know not why it should be a
matter of congratulation that
persons who are already richer
than anyone need be, should
have doubled their means of
consuming things which give little
or no pleasure, except as
representative of wealth..."
19 th Century Classicism
J.S. Mill:
§  "… or that number of
individuals should pass over
every year, from the middle
classes into a richer class, or
from the class of the occupied
rich to that of the unoccupied."
19 th Century Classicism
J.S. Mill:
§  "In the most advanced countries,
what is economically needed is a
better distribution, of which one
indispensable means is a stricter
restraint on population"
§  Concern on limits to growth in
capital and income per-capita
§  Concern on non-pecuniary
amenities of the countryside
19 th Century Classicism
Basic Positions:
§  Not economic growth at all
costs
§  Not economic growth at the
expense of intelligence or
health
§  Not economic growth at the
expense of freedom
The Marginal Revolution:
Neo-Classical School
Marshall, Jevons, Menger,
Walras
The Marginal Revolution
Rational Valuation:
§  Relates to units of a given
supply and not directly to the
total supply itself.
§  Resolution to the 'water-
diamond paradox'
§  Relative valuation of
alternative social ends
The Marginal Revolution
Social Choice:
§  Not an 'all-or-nothing'
§  Not a preference for either
growth or its absence
§  A question of choice at the margin
§  Increments to growth in terms of
postponement of present real
income or consumption (trade off)
Anti-Growth Attitudes
Anti-Growth Attitudes
Framework:
§  Economic development relative to
other social values
Crude Indices:
§  Output of cars
§  Output of steel
§  Number of 5-star hotels
§  Share of manufacturing to total GDP
§  Etc….
Anti-Growth Attitudes
E.J. Mishan: "The Costs of
Economic Growth" (1967)
§  Framework: External
Diseconomies
§  Miseries of road congestion
§  'Rape' of the countryside
§  Destruction of peace and quiet by
aircraft
§  Uncontrolled migration into blighted
urban centers
Lord Robbins
§  Recognition of external
diseconomies of laissez-faire
growth amid population
pressure is imperative
§  Odious shambles
§  Spiritual desert
§  They can, and should be
addressed properly by
economic policy
Lord Robbins
§  Economic development is
not inherently bad
§  Growth of productive power
per head is a crude measure
§  But such improvements can be
used to emancipate the poor
from the beastliness and
squalor of primitive conditions
Lord Robbins
§  Economic development can
be used to advantage for
further progress, not merely
in the material, but also in
the spiritual sphere.