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Equity and Efficiency in Economic Development

Equity and Efficiency in Economic Development: Essays in Honour of Benjamin Higgins

Copyright Date: 1992
Pages: 448
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    Equity and Efficiency in Economic Development
    Book Description:

    The ideological foundations of the contributors range from personalized neo-Marxism, through "extreme centre" neo-Keynesianism, to hard-line neoclassical mathematical economics. Despite this diversity there is a surprising degree of consensus. No contributor advocates centralized planning and none expects a free market to cure all economic ills. Opinions vary as to how well the market actually works, but all agree that equity and efficiency are essential goals which most consider to be complementary rather than mutually exclusive. In the concluding chapter it is suggested that current economic problems are caused not so much by government intervention as by the nature of that intervention. The authors believe that the recent ideological convergence may lead to a new paradigm, a theory of the optimal blend of market and management that will be flexible enough to deal with the varying conditions of diverse societies, thus simplifying the task of creating a smooth-running global economy.

    eISBN: 978-0-7735-6299-8
    Subjects: Business
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Table of Contents

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  1. Front Matter (pp. i-iv)
  2. Table of Contents (pp. v-vi)
  3. Tables and Figures (pp. vii-viii)
  4. Preface (pp. ix-2)
    Donald J. Savoie
  5. Introduction (pp. 3-18)

    Economists have often lamented that they are unable to conduct controlled experiments in the way that natural scientists do. Yet the twentieth century will surely go down in economic annals as a century of unprecedented economic and social experimentation. Today, economists can look back at a series of extraordinary experiments that, if not exactly controlled, are nonetheless highly revealing. The first half of the century saw the launching of the Soviet experiment with communism, the brief and disastrous experiment with fascism and the corporate state in Italy and Germany, and the wellintentioned but ill-fated experiment with the League of Nations....

    • 1 Equity and Efficiency in Development: Basic Concepts (pp. 21-50)

      This symposium is concerned with three basic concepts and their interactions: equity, efficiency, and development. In this chapter, I would like to suggest working definitions of the three concepts and then to express briefly my own views on the manner in which they interact. I shall deal with the concepts in the reverse order of the sequence in the title. Within the framework of my own analysis, at any rate, logic requires a clear definition of “development” before “efficiency” can be sensibly discussed; and one must know what is meant by “efficiency” before one can say anything meaningful about equity....

    • 2 Development, Equity, and Liberation (pp. 51-64)

      Will the state of the world be better or worse next year, or by the year 2000, or 2050? This is the sort of question that cannot elicit an exact answer, but it is still a very important one. It is a matter of human valuation, and the valuations of different people will differ. Nevertheless, there is more consensus in human valuations than is often recognized. Nearly everyone will agree that if we have a major nuclear war at some time in the future, the world will be very much worse off. If the health of the human race declines...

    • 3 Development, Efficiency, and Equity in Historical Perspective (pp. 67-98)
      W.W. ROSTOW

      In responding to my assigned task, captured in the title, I shall proceed in five steps as follows:

      by defining the eighteenth-century roots of development and welfare policy;

      by tracing schematically the evolution of thought and policy from 1776, when Hume died andThe Wealth of Nationswas published, to the marginalist revolution round about 1870;

      by tracing similarly the rise of welfare economics and the welfare state over the subsequent century;

      by commenting on the debate about development, efficiency, and equity in post-1945 development theory and practice; and

      by making a few final observations on future tasks.

      Modern political...

    • 4 Equity and Efficiency in the “Mature” Socialist Society, the USSR (pp. 99-120)

      The oldest, the strongest, and industrially the most advanced socialist society, the USSR, collapsed in 1991. How did that society handle the key issues of equity and efficiency? To what extent and in which ways were these issues interrelated with the collapse of the entire Soviet system? Certainly questions concerning the “socialjustice” of institutions and policies involve complex and intertwined economic, social, and political issues. Even in a narrow economic sense, the problems raised are numerous and intricate. Equity considerations may arise in the following areas: (a) apportionment of incomes among factors of production,(b)allocation of income across individuals,...

    • 5 What Is the Evidence on Income Inequality and Development? (pp. 121-146)

      The long-term relationship between income distribution and development has been one of the most closely investigated issues in development economics. In his path-breaking article “Economic Growth and Income Inequality,” Kuznets’ formulated the hypothesis that early economic growth increases inequality, while later economic development narrows it. He based this hypothesis on an analytic model, on data for developed countries since the 1930s that showed a narrowing of inequality, and on cross-country comparisons between inequality in developed countries and inequality in two developing countries, comparisons that showed considerably greater inequality in the latter. This paper formulated the U-hypothesis and posed the research...

    • 6 Fiscal Equity and Economic Development (pp. 149-160)

      I have been given the assignment of examining the role of fiscal equity in the context of economic development. This is an appropriate theme for me. As I have seen the fiscal problem over the years, the equity dimension plays a central role; and as I have seen that of development, fiscal policies are again of key importance. But the equity-development axis is troublesome, as it has a circular logic: equity in fiscal affairs is more important the lower the level of economic development, but so is the need to avoid the deterring effects of equity-based policies on economic growth....

    • 7 The Status and Efficiency of Regional Development Policies (pp. 161-172)

      I am neither a development economist nor a student of regional economics. But I have, over the years, maintained an abiding interest in regional economic developmentpolicies.What has fascinated me most is how these policies could be justified within a conventional economic framework in which persons and families are not denied a geographical habitat, but in which priority is explictly given to the individual and only derivative value accorded to particular locations. Is it possible, I kept asking myself, that regional development policies, which are part and parcel of the policy portfolio of virtually every government in the world,...

    • 8 Regional Policies for Equity: Can They Be Justified? (pp. 173-184)

      Economists, andparticularly those of neoclassical persuasion, typically maintain that regional policies to promote the development of lagging regions - thereby reducing interregional economic disparities - distort efficient resource allocation and impede national economic development. Regional policies clearly could have this effect. However, in a broadly socio-politicaleconomic context, regional policies, whether or not they are strictly economically efficient from a national perspective, may lead to greater national coherence and solidarity, and such policies may be voluntarily supported by the economic “losers” in more-developed regions out of a sense of fairness.

      This first part of this chapter considers the issue of fairness...

    • 9 Equity, Efficiency, and the Managerial Paradigm (pp. 185-211)

      It comes as a surprise to neuro-scientists to discover that many psychologists, linguists in particular, have very little or no interest in the actual brain, or at least what goes on inside it. The brain, they feel, is far too complicated to understand. Far better to produce simple models which can do the job in an intelligible manner. That such models may have little resemblance to the way the brain actually behaves is not seen as a serious criticism. If it describes, in a succinct way, the psychological data, what can be wrong with that? Notice, however, that by using...

    • 10 Hunger (pp. 212-231)

      If we want to achieve equity, efficiency, and economic development, all people should at least have enough to eat. It is the fact that hunger today is unnecessary that makes its continued existence so shocking. The productive capacity of the world is now capable of feeding all the mouths in existence, yet it fails to do so.

      The need for food is perhaps the most basic of all human needs. People must eat, even if they drink unsafe water, are illiterate, and are not inoculated or vaccinated against diseases. Not only does lack of adequate food make people hungry and...

    • 11 The Overexpansion of Higher Education in the Third World (pp. 232-244)

      The late 1950s witnessed the so-called human investment revolution in economic thought: the old view that education is a type of consumption, a way of spending income for the sake of current enjoyment, gave way to the new doctrine that education is a type of investment, more analogous to a capital good than a consumer good. Ever since, economists have been busy measuring the rate of return of education as a form of investment both for individuals and for society as a whole. In addition, an endless series of studies have correlated every conceivable measure of educational attainment with every...

    • 12 New Directions in Canada’s Foreign Aid? The Winegard Report and Beyond (pp. 247-288)

      Perhaps no aspect of international development policy has generated more controversy than foreign aid. Development assistance is typically a very small percentage of national income for donor and recipient countries alike; yet there have been voluminous debates about its impact on both. Some have argued that aid retards the development of the recipient, others have insisted that aid accelerates donors’ growth, and still others have maintained that aid is good for both or bad for both. A basic premise underpinning this essay is that there is now a preponderance of empirical evidence pointing to significant net economic gains for many...

    • 13 The Static Welfare Economics of Foreign Aid: A Consolidation (pp. 289-314)

      In the 1950s, when the profession of development economics was in its infancy, it was widely believed that chronically poor countries could be set on the path of self-sustaining growth only by means of an initial “big push,” with substantial technical and financial support from abroad. Today’s practitioners have greater confidence in the efficacy of small stimuli; for them, “haste makes waste.” However, most ofthem would accord to foreign aid an important facilitating role in the growth process. They also emphasize its role in achieving more equitable intranational and international distributions of income. This being so, it is remarkable that...

    • 14 Trade Restrictions versus Foreign Aid As a Means of Improving a Country’s Welfare (pp. 315-340)

      One of the recurring themes in the literature on international trade and economic development is the contention that while free-trade policies will lead to efficient world allocation of resources and a Pareto-optimal distribution of goods and services among countries, they tend to have deleterious effects on the globaldistributionof welfare; rich countries get richer and poor countries poorer. This view has been expressed in various forms by Kindleberger,¹ Balogh,² Robinson³ Prebisch,⁴ Singer,⁵ Williams,⁶ Hicks,⁷ Robertson,⁸ Lewis,⁹ Myrdal,¹⁰ Emmanuel,¹¹ Amin,¹² and others. The doctrine is usually expressed in the context of technological change and economic growth; it is maintained that...

    • 15 The Underdevelopment of Development (pp. 341-393)

      Economics and development economics thinking have often been roughly divided into (right) neoclassical, (centre) Keynesian, and (left) Marxist. More colloquially and usefully, we may distinguish conservative, reformist, and radical variants, as in the recentEconomic Development: The History of an Ideaby H.W. Arndt.¹ Most authors in the present volume (as elsewhere) probably regard themselves as too heterodox to be classified in any of these orthodox categories. Or they regard themselves as technician-scientists, with no political colour. If obliged to choose, however, they probably would feel themselves least uncomfortable, like President Eisenhower, in the extreme middle of the road.


    • 16 Towards a New Paradigm? Two Views (pp. 394-420)

      At the end of the introductory chapter of this volume, the editors suggested that the current mood of economists to question the validity of their own analyses as a basis for policy, as well as those of their colleagues, may presage a breakthrough to a new paradigm. In this final chapter, Donald Savoie and Benjamin Higgins speculate on what the new paradigm might look like. As a political scientist, Savoie addresses this issue in terms of the “government managementversusthe market” debate, using regional development as a test case. He argues that the Canadian experience with regional development does...

  10. Selected Works of Benjamin Higgins (pp. 421-426)
  11. Contributors (pp. 427-427)