Abstract
Planning in a variety of forms is frequently advocated as an alternative to the market mechanism, and the use of market prices, for the allocation of resources in less developed countries. Reliance on the market mechanism and market prices for resource allocation is attacked for several reasons. Firstly, given the natural preference of people for present rather than future satisfaction, resources in a free market will tend to be allocated for the production of goods for immediate consumption rather than for building up the means of production, i.e. for the production of capital goods. Left to itself, the operation of the market is likely to lead to a much slower pace of development and a much lower level of future welfare than if resources, via some form of interference with the market mechanism, can be diverted to the production of capital goods. Secondly, as we have already seen, market prices may provide a very imperfect guide to the social optimum allocation of resources because they do not reflect the opportunity cost or value to society of the use of factors of production or the production of certain commodities. A perpetual shortage of capital and foreign exchange, and a surplus of labour, at existing market prices is prima facie evidence of structural disequilibrium and a very imperfect market system which may not operate to the benefit of society at large.
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Referencs
More complicated, real-life, situations require a greater knowledge of matrix algebra than can be given here, but good introductions can be found in W. Miernyk, The Elements of Input-Output Analysis (New York: Random House, 1965);
M. H. Peston, Elementary Matrices for Economics (London: Routledge & Kegan Paul, 1969); and
G. Mills, Introduction to Linear Algebra (London: Allen & Unwin, 1969).
For Zambia, for example, Seers has used the inter-industry matrix in a social accounting framework for the wider purpose of balance in sectors of the economy other than the production sector. See D. Seers, ‘The Use of a Modified Input-Output System for an Economic Program in Zambia’, in I. Adelman and E. Thorbecke (eds), The Theory and Design of Economic Development (Baltimore: Johns Hopkins Press, 1966).
H. Chenery, ‘Comparative Advantage and Development Policy’, American Economic Review (Mar 1961).
A. K. Sen, Choice of Techniques, 1st ed. (Oxford: Basil Blackwell, 1960).
I. M. D. Little and J. Mirrlees, Manual of Industrial Project Analysis in Developing Countries, vol. ii: Social Cost-Benefit Analysis (Paris: O.E.C.D., 1969).
G. Meier, ‘Development without Employment’, Banca Nazionale del Lavoro Quarterly Review (Sep 1969).
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© 1972 A. P. Thirlwall
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Thirlwall, A.P. (1972). Planning Economic Development. In: Growth and Development. Palgrave, London. https://doi.org/10.1007/978-1-349-15472-2_7
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DOI: https://doi.org/10.1007/978-1-349-15472-2_7
Publisher Name: Palgrave, London
Print ISBN: 978-0-333-12207-5
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