Economics and development choices

By Sumita Kale “It is true that the economic man is dead, but his funeral rites still remain to be properly celebrated by his legitimate heir, the behaviouristic man, who has emerged from the laboratories of the psychologist but has not yet taken his rightful position in the centre of economics.” No, this is not a quote from a modern behavioural economist, it was written eighty years ago, in 1925. 

This post is a tribute to a man who got the essence of economics right – Prof. Radhakamal Mukherjee, considered a leading sociologist and environmentalist but forgotten by economists. Reading Mukherjee is baffling, one wonders why the simple propositions were not taken seriously and were actually discarded, leaving economics to be a truly dismal discipline, bound in narrow confines by its graphs and equations. Thankfully some of his books are available online – Borderlands of Economics, Principles of Comparative Economics, Foundations of Indian Economics etc. 

Mukerjee’s take on economics is quite different from the way it is taught today- he blended it with geography, sociology and psychology, he brought in elements of biology and philosophy. This is an economics that makes a lot of sense. For instance, he divides the economic environment into three parts 1) Ecologic - comprising the climate and topography, land resources, mineral and water resources, plants, animals and man’s inter-relationships with the physical environment as indirectly affecting economic life 

2) Mechanical or technic - tools, weapons, capital and technology, systems of production, mechanisms of exchange, banking, instruments of credit etc. and 

3) Institutional - State, social groups, law, tradition, standards of social values and ideologies, private property, custom or competition etc. Economics should concern itself with all three, and not merely the second i.e. the price-cost economics. 

He went on to distinguish between laws, norms and ideals. The ecological environment is governed by laws, which have the same certainty as the laws in physical sciences. The mechanical or price and cost economics yields the norms of consistent action, an abstraction which can be justified only on the basis of statistical generalisations of past experiences or of a necessary law in ecological economics which produces it. The third gives rise to the ideals and policies of what men ought to do in concrete economic situations. 

He also brought in the aspect of time as being crucial since ‘laws, ‘norms’ and ‘ideals’ of economic activities are reached by a process extended over time. Without a clear understanding of these three categories, he said, economic analysis and prescription would be confused and divorced from reality. 

And this is actually what has happened, economics today is open to the charge of being an autistic discipline (check out the Post-Autistic Economics Network). It was in the divide between the village and the city that Mukherjee lost the debate on the path to follow for development – most modern planners wanted India to grow through cities, the Western model, while he saw this model as one that would lead to a breakdown in social stability. He decried the idea that villages are the source of energy and labour and the cities, the hub of growth. Rather than let villages be subservient to cities, he wanted them to live a life of their own, be vibrant with skills and knowledge, he wanted to bring industry to villages, to let villages grow into cities. For him the solution lay in setting up cooperatives, not just for providing credit, as is popular, but also to give the necessary support for farm inputs, marketing the produce etc. Revitalising agriculture was one step, the next was to enable diversification of economic activity in the village, away from agriculture – this was the opposite of the migration model that pushed people to the cities. 

Some of Mukherjee’s prescriptions were anathema to modern thinking – he saw the caste system as a source of social cohesion in India society, for instance. But what we have seen now is that somewhere in the quest for industrialisation and growth, the balance has been lost. The rural-urban divide continues to grow, a direct fallout of an imperfect understanding of the socio-economic reality. In 1916 Mukherjee wrote, “ How to bring life and progress to our villages is one of the most serious economic problems of the day.” Unfortunately, this remains a grave problem in the world today. 

Last year marked the milestone where the world became more urban than rural, but this is not quite an occasion to celebrate. To quote Prof.Wimberly, “So far, cities are getting whatever resource needs that can be had from rural areas. But given global rural impoverishment, the rural-urban question for the future is not just what rural people and places can do for the world’s new urban majority. Rather, what can the urban majority do for poor rural people and the resources upon which cities depend for existence? The sustainable future of the new urban world may well depend upon the answer.” 

 One can argue that a large part of the world’s current concerns on poverty, environment etc. could have been avoided if a more holistic view on development had been taken by economists and policy makers. Of course there will always be opponents to this view, but for them the counter argument would be : ‘unless you think outside your box, how would you know you are in the right box?”