Notesale: Turn your study into money

Document Preview

Extracts from the notes are below, to see the PDF you'll receive please use the links above

---

Why study History of Economic Thought?
There are two main opinions on the importance of the study of the economic thought
...
According to them the
economic ideas of the past are nothing more than ‘wrong opinions of dead men’ and there is also a
danger of repeating errors of the past writers by studying them
...
According
to Schumpeter there are mainly three gains one gets out of the study of the history of any science
...


Pedagogical advantage: any recent scientific discussion which does not co9ntain historical
background of the subject concerned lacks direction and meaning
...


New Ideas: We can derive new inspiration and thus widen our intellectual horizons from
the study of the history of science
...


iii
...
The study of the history of economic thought, for example,
provides an insight into how men were able to analyse the economic problems over time
...

i
...
Economic ideas of a particular age are not the product of that very age but their roots
are found in the literature of earlier times
...


Understanding the Nature and Origin of Economics: the study of the history of economics
helps us to understand the origin of economics, its nature and scope and its relation with
other sciences
...
It was
merely a hand maid of politics and ethics
...


The relativist attitude: the study of the history of economics brings about a change in the
attitude of man
...
On the contrary, he adopts a realistic attitude that economic
ideas are to be examined in the light of the times and conditions in which they originate
...


Broad Basis for comparison

v
...
He begins to realise that economics and economists are two
altogether different things
...


GREEK ECONOMIC THOUGHT
I
...
He was a disciple of Socrates
...
His views are expressed in the form of dialogues
...

1
...
He based his theory on the simple
logic that man has wants and he cannot satisfy all his wants by himself and therefore he produces one
thing and exchanges it for another
...
Division of Labour
The concept of division of labour was first introduced by Plato
...

3
...
The main
objective underlying his communism was to create conditions in which citizens of the ideal state would
be bound by common interests
...
The Ideal State
Plato’s ideal state is a city state
...
In his ideal state there
are two classes: the rulers and the ruled
...
The members of the ruling class will
be set apart from early childhood
...
Plato believed in
rule by elite
...
The upper classes
from whom leaders are trained must lead a Spartan life
...

5
...
As regards population, Plato was very much concerned about its careful
regulation
...


6
...
Instead of using gold and silver he
suggested the use of domestic coins for payment of wages and other transactions
...


II
...
Aristotle was a student of Plato
...
The main economic ideas are found in the Politics and the Ethics
...
Origin of the State
The origin of the state is to be explained not in terms of economic needs and their satisfaction
...

Man is a social animal and the state is a creation of nature
...


People organised themselves in a household

ii
...


Finally the state was formed

2
...
His attack on the community of property is based mainly on the
‘Incentive Argument’
...

According to Aristotle, private property is superior to communal property on five grounds:
i
...
The principle ‘what is everybody’s business is nobody’s business’
will be applied here
...


Peace: Quarrels are bound to develop when the principle of ‘equal wages for equal
work’ is not followed
...


Pleasure: private property will give pleasure to the owner
...


iv
...


v
...


3
...
Like Plato he believed in class distinctions
...

4
...
He also held that the value of
commodity depended upon its usefulness
...
The greater the intensity of wants, the more will be paid for it
...
Interest
He condemned interest
...
”

MEDIEVAL ECONOMIC THOUGHT
The Middle Ages is the middle period of the traditional division of Western history into Antiquity,
Medieval, and Modern periods
...
Middle ages is the period beginning from the fall of the Roman empire in
476 A D to 1453 AD the year in which Constantinople fell into the hands of Turks
...
There are some who regard the Middle Ages as a complete break in the continuity of
economic thought since the thinkers of the Middle Ages had emphasized on the negative aspects of
life
...
However, today’s scholars note that the era was as complex and
vibrant as any other
...
However, as in Greek thought, economic speculation was only a by-product
of ethical and political thought
...
In medieval Europe, rural life was governed by a system
namely, “feudalism
...
Landless peasants known as serfs did most of the work on the fiefs: They planted and
harvested crops and gave most of the produce to the landowner
...
They were also promised protection in case of enemy invasion
...
On the religious side, the Church dominated the lives of men
...
Instead, the Catholic Church
became the most powerful institution of the medieval period
...
Christianity had a
profound influence on the life and thought of Middle Ages
...

i
...
All men were the children of a
common father

ii
...


iii
...


Aristotle influenced the views of the thinkers of Middle ages on many matters
...
Thus Aristotle became the philosopher of Middle ages
...
In Short, Medieval economic though is based on the idea of justice
...
No one, under any circumstance,
should take advantage of his neighbours
...
Thomas Aquinas (1225-1274)
St
...
The scholastics were the medieval
men of science
...
Thomas are found in his book, Summa Theologica
...
Thomas are based on the Bible, Aristotle and the Christian fathers
...
Thomas cover such matters as the institution of private property, the just price, and
the prohibition of usury
...
Private Property
He believed that the institution of private property is in accord with the law of nature
...
In short, like Aristotle, he suggests that property should be private in possession, but
common in use
...
Trade
He justified profits, if profits were used for self-support and for charity
...
St
...

3
...
Thomas discusses the problem of just price in his Summa Theologica
...
”
According to him to sell a thing for more than its worth, or to buy it for less than its worth, is in itself
unjust and unlawful
...
For instance, if a seller incurred a loss in parting with a good, he could charge a price slightly
more than the just price
...
The
regulated price was based more or less on the just price
...
Usury

The views of St
...
Jesus said,” lend freely, hoping
nothing thereby”
...
Thomas it is by its very nature unlawful to take payment for the
use of money lent
...
Firstly, if a lender suffered any damage because of having parted with his funds
...
Thirdly, if a borrower failed to repay
the amount borrowed in time
...
By that time people had started realizing the importance of the economic aspect of their
problems
...
Mercantilism was a revolt against the
medieval ways of life
...
The priest had been occupying a predominant position in the political, social and
economic life of the people
...
In the political sphere, the concept of national government and absolute monarchy started
gaining strength as compared to the existing concept of local government
...
A new class known as the merchant was born
...

Meracantilism is known by various names:
i
...


ii
...


Colbertism (in France)

Factors giving rise to Mercantilism
1
...
Agriculture was yielding place to manufacturing economy
...
Political Factors

Towards the close of the middle Ages, Nationalism became a strong force
...
As a
result of these changes, there was a fundamental political change
...
Feudalism came to an end and the king
became powerful
...
In order to create a strong and powerful state, the mercantilists tried to regulate
the political and economic activity of the people
...


Religious factors

The reformation movement raised a voice against the supremacy of Roman Catholic Church and
challenged international authority of the Pope in religious and political matters
...
The concepts of individual and personal freedom were also inherent in Protestantism
...
Cultural Changes
The renaissance gave a new light and learning to the people
...
As a result, money came to occupy a pride of place in human relations and materialism
started gaining in strength day by day
...
Scientific and Technological Changes
The discoveries of the Mariner’s compass and that of the printing press were of far reaching
importance
...
In 1492
Columbus discovered America and in 1498 a new sea route to India was established
...


The Ideas of Mercantilists
1
...
The government put heavy import duties to discourage imports of foreign goods and granted
tax concessions to encourage exports
...
It allowed direct importation of foreign workers in order to establish a new industry
...
It created ‘privileged trading companies’
...

2
...
Further, most of the mercantilists emphasised on the
store of wealth function of money too
...
Rate of Interest
They advocated a low rate of interest on economic grounds
...
And the rate of interest could
be low only if the supply of money was adequate
...
The Favourable Balance of Trade
This is the central doctrine in mercantilist thought
...
They insisted on a favourable balance of trade
...

5
...
It enables them to compete
successfully with those of foreign countries
...

6
...
Industry and manufacture were ranked
second in importance
...
Though agriculture might feed the
population it brought no money in the form of gold and silver in the country
...
It is a system of economic thought which took its
birth in France about the middle of the 18th century
...
Though the physiocrats wrote only for a relatively short
period (1756-1776), their ideas had a profound influence on the economic thought
...

The physiocrats are regarded as the founders of economic science because they were the first to
understand the general principles that guide the economic phenomenon and they were the first to
present those principles in theoretical form
...


Factors Responsible for the Rise of Physiocracy
The socio economic and political conditions prevailing in France were largely responsible for the rise
of Physiocracy in that country
...
Extravagant Court Life and Wars: During the reigns of Louis XV and Louis XVI (ie
...
The king became more and more authoritarian and his attitude was
reflected in their statement, “I am the State
...

Physiocracy was an intellectual attempt to save France from economic bankruptcy
...

2
...
Mercantilism was carried to an extreme degree resulting in the neglect of
agriculture
...
At the same time agricultural revolution was
taking place in England with emphasis on large scale farming and scientific techniques of
production
...
So in France too,
attention was diverted to the strengthening of agriculture
...


3
...
To compensate this, heavy taxes were imposed
...


Main Ideas of Physiocrats
1
...
This philosophy is the essence of their system
...
The natural laws inherent
within the society govern the activities of its members
...
Our responsibility is to discover and obey these laws
...

The society which is governed by the laws of nature is an ideal society and the society which is ruled
by positive laws-laws made by government- is an imperfect society
...
According
to them, only the natural order will increase the happiness of mankind
...
They include rules of prudent individual conduct
b
...

The natural laws are the expressions of the will of God
...
They
belong to the essence of matter and soul of humanity
...

In practical life, the natural order reveals itself through:
i
...


Individual liberty

To attain maximum pleasure with minimum effort is the economic aim of the natural order
...

2
...
They were the first to
advocated laissez-faire
...
Their idea is to
reform the government and its legislation in accordance with the ethical natural law
...

There are then only a limited number of functions to be performed by the state
...


Preserving the institution of private property and the system of economic liberty

ii
...


Educating the people on Natural Order

iv
...


Removing the international barriers

3
...
According
to physiocrats, agriculture is the only sector which yields net product or surplus produce because it is
only in agriculture wealth produced is greater than the wealth consumed
...
In commerce, we produce nothing but
only transfer the already produced commodities from one hand to the other
...
They simply
reproduced the value consumed in the form of raw materials and subsistence for workers
...

The physiocrats used the concept of net product both in physical as well as in value terms
...
(eg
...
This is called the physical surplus
...
This is the net
product in value terms
...
However, under perfect
competition, manufacturing industries are not capable of yielding the value surplus
...
Higher the price of the agricultural
products, greater will be the net product
...
So long as the natural
order prevails, it will endure the competitive exchange in the market
...
So they favoured a policy of free trade
...
Institution of Private Property
According to them, the most important natural right is the right to acquire private property
...
They perish when they are detached from it
...
Private property
can only be acquired by labour
...


They justified the individual’s right to private property on three grounds:
i
...


It is in accordance with the philosophy of natural order

iii
...

Firstly, the interests of the society are simply the sum total of individual interests
...
Secondly, private property is justified as a means to achieve the
objective of economic development
...
Therefore,
private property is held desirable both on moral as well as on functional grounds
...

5
...
Productive class(Farmers)
b
...
Sterile Class (artisans)
i
...
They work on land and extract
the net product from it
...


The Proprietary Class: all landlords come under this category
...
They are not required to perform any specific activity since they are
supported by the rental revenue
...


iii
...
It is regarded as
an unproductive class because it does not produce net product
...


The Tableau Economique, a famous work of Quesnay is a graphic representation of the way in which
the circulation of wealth takes place
...

Graph

All wealth is produced by the productive class (the farmers)
...
Of these agricultural classes require two million
francs for their maintenance
...
The remaining two million francs pass into the hands of landowners
and the government in the form of rent and taxes
...
The sterile class uses the two million francs for buying the necessaries
of life and the raw material of industries from the productive class
...
The cycle is complete
...

6
...
So they argued that taxes should be
paid from the net product, for it was surplus
...

They advocated a single tax system
...
Quesnay (1694-1774)
He is the founder of physiocratic school
...
He used the Tableau
technique to represent the flow of expenditures and products among the three classes
...
He believed in natural law
...


2
...
He gave a subject theory of value, according to which the value of a commodity is estimating
value, ie
...
The estimate reflects the relative utility and
scarcity of the commodity, and thus, decides the time and toil we are going to spend to obtain that
commodity
...
He believed that an individual knows his own
interest best
...
Alfred Marshall was the
leader of the second generation of the marginal utility school
...
Unlike most of his neo-classical contemporaries he maintained that mathematical
expositions, though invaluable aids to the economist in the clarification of his own thought, were
unnecessary to the communication of his findings
...
Published
originally in 1890, this work went through eight editions during his lifetime
Marshall is ranked with the most influential economists and his authority in the subject remains
unchallenged
...
He, on the one hand, understood and synthesised the seemingly conflicting
ideal of the earlier writers and solved the age old dispute between the classical and neoclassical
economists regarding the determination of value
...

i
...
Many of Marshall’s
disciples such as Pigou, Robertson, Edgeworth etc developed the theories of Marshall
...


Marshall was the first economist to show that perfect competition does not always
maximise output
...


The concept of elasticity has set a fashion of reasoning in terms of elasticity
...


iv
...
, Short time Analysis
...


Marshall is also the father of the theory of imperfect competition
...


vi
...


vii
...


Marshall also contributed to the development of modern econometrics
...
Economic Science and Economic Policy
Economic Science

Marshall’s Principles opens with a statement on the subject matter and scope of Economics: “political
economy or Economics is a study of mankind in the ordinary business of life, it examines that part of
individual and social action which is most closely connected with the attainment and with the use of
the material requisites of well-being
...
In this definition he makes it clear that economics is primarily
concerned with man and his activities; wealth is of secondary importance
...

Marshall raised economics to the status of science
...
”
Economics is a separate science because of two reasons
i
...
We
do not measure motives but only the moving force
...


ii
...


Marshall considered both induction and deduction methods as useful for economics
...
Marshall also was the great interpreter of Method of Partial Equilibrium
or One-at-a-time principle
...
The best method is to isolate a few forces (keeping others at
constant/rest) and to study their influences on the phenomenon
...
[Marshall in his
Principles, applied this method
...
]

Economic Policy
Marshall was, in fact more interest in the applied aspects of economics, that is
...
To him, the problem of poverty was a problem
of optimum distribution and not of maximum production
...
Maximum happiness and
genera well-being of the society was Marshal’s objective of economic policies
...
It says that
the free pursuit by each individual of his own immediate interest , will lead producers to turn their
capital and labour, and consumers to turn their expenditure into such courses as are most
conducive to the interests
...


Marshall gave two conclusions of the doctrine of maximum satisfaction which may serve as useful
guide in formulating an economic policy
...
The total happiness can be increased through redistribution of income
...

b
...
If an
individual spends his income on commodities which obey the law of diminishing returns, he
makes those commodities more difficult to be obtained by his neighbours, and thus lowers
the real purchasing power of their incomes
...
According to him the
Government can increase the welfare of the society by taxing the commodities which obey the law of
diminishing returns and subsidising the commodities which obey the law of increasing returns
...
Value and Distribution-The General Principle of Demand and Supply
The whole of his masterpiece, Principles has been devoted to one fundamental idea that is
...
It is with the help of this general principle that Marshall
could synthesise the two seemingly antagonistic approaches (the classical cost of production approach
and neoclassical utility approach) and thus was able to evolve a single analytical system of value and
distribution
...
By demand, Marshall means the quantity of a commodity
demanded at a certain price, other things remaining the same
...
As the satisfaction from the additional units of a commodity diminishes,
the price we are going to offer for these additional units will also fall
...

Marshall developed his theory of supply on the lines similar to his analysis of demand
...
Just as the marginal utility diminishes
as a consumer increases his consumption of a commodity, the marginal costs rise as the production
of a commodity expands (in accordance with the law of diminishing returns)
...

Equilibrium price is determined by the point of intersection between market demand curve and
market supply curve
...
At the equilibrium price,
the amount produced is equal to the amount demanded and there is no tendency for the former to
increase or decrease
...
As Marshall says;
“we might as reasonably dispute whether it is the upper or the under blade of a pair of scissors
that cuts a piece of paper, as whether value is governed by utility or cot of production
...


Market value

ii
...


Long period value

iv
...
The Theory of Distribution
According to Marshall, the theory of distribution is essentially a theory of factor pricing
...
The value
of a factor is decided by the forces of supply and demand
...
A producer who aims at the most profitable application of his resources, will go
on making marginal shifts in the employment of factors of production in accordance with the
principle of substitution and will employ each factor upto that margin at which its cost is
proportionate to the additional net product resulting from its use
...
To overcome
Hobson’s objection that a single factor cannot be varied without affecting the amounts employed of
other factors, Marshall used the term marginal net product
...
The other side
is the aspect of supply
...
The

equilibrium price of a factor of production, is determined by the interaction of demand and supply
forces
...
Diagrammatic approach
Marshall was in favour of using diagrams to illustrate the theories
...
Keynes describes him as the founder of
modern diagrammatic economics
...
Marginal Utility and Demand
According to him, demand is based on the law of diminishing marginal utility
...

On the basis of diminishing marginal utility, Marshall developed the law of substitution, known as the
law of equi-marginal utility in consumption
...

3
...
Elasticity of Demand(explain)
5
...
Laws of returns(explain)
7
...
, durable capital goods)
...
Land and other free gifts of nature are permanently fixed in supply
...
But there are man-made appliances (eg
...
The income derived from such appliances is also of the nature of rent
...
Marshall called it quasi-rent
...
A study of the history of Indian economic thought provides the first
overview of economic thought in the sub-continent
...
Among these, the
two most well-known ancient Indian writings are Arthasastra and Manusmriti
...
He wrote the
Arthashastra ("Science of Material Gain" or "''Science of political economy" in Sanskrit)
...
He is known by the name of Kautilya because he was
an expert in diplomacy and political strategy
...

Arthashastra provides an authentic account of the economic and political ideas of the day
...
prevailed at that time
...

According to Kautilya, the king's happiness lies in the happiness of his subjects and his welfare lies
in the welfare his subjects
...
Kautilya has given vivid
description of the administrative procedures, the duties of kings, ministers and government officers,
in his book, Arthasastra
...
It
also deals with nature and purpose of material wealth, varta - agriculture and animal husbandry,
dignity of labour, trade, public finance, population, slavery, welfare state, social security, interest,
price control, socio-economic institutions and town planning
...
Hence the king shall be ever active in the management of the economy
...
In the absence of (fruitful
economic) activity, both current prosperity and future growth will be destroyed
...
The
term Artha (wealth) occupied an important place as one of the Purusharthas, in the system of
economic thought during the Vedic Period
...

Varta- National Economy

2

The most common word used at that time as Varta meaning the national economy
...
Later on money lending and
artisanship were also brought under Varta
...
The term Arthasastra was wider in scope than Vartha and it was a combination of
economics, political science and jurisprudence
...
Arth or material prosperity was necessary for the smooth
functioning of social structure, organizations
Agriculture
Ancient Indian scholars laid considerable emphasis on agriculture including animal husbandry
...
Agriculture was the highest occupation in society
...
Three principal vocations are
recognised as providing men with the means of livelihood namely, krsi (agriculture), pasupalya
(cattle rearing) and vanijya (trade)
...

In those days the state and the community were responsible for the development of agriculture for
which waste land were to be cultivated The lands which were neglected by absentee landlords were
to be taken away and given to those who could cultivate them with greater advantage
...

Labour
The economic thinkers of ancient India regarded that labour as unproductive which failed to achieve
its end
...
Kautilya
clearly mentioned that women should help men in productive activities in agriculture and trade
...
There were free trade in those days in India
...
The state had framed trade regulations which show that commerce
in ancient India had reached an advanced stage
...

Welfare State
The state was to promote the welfare of people by regulating the life of people
...
Various

3

regulations relating to financial transactions, weights and measures, essential industries, currency
and exchange, public works, prevention of adulteration, usury, etc point towards the ideal of a
welfare state
...
"In the happiness of the King's subjects lies his happiness, in their welfare, his welfare
...
"
Private Property
Our ancient economic thinkers supported the institution of private property
...
The state dominated all forms of
property and levied cesses and fines when needed
...
Interest in those days was part of profit
...

Production and Consumption
The starting point of the ideals of consumption in ancient India was the acceptance of the doctrine
of the four ends of life
...
In those days four agents of
production – land, labour, capital and organization appear to have been recognised
...

Functions of the State
Our ancient economic thinkers had a clear idea about the functions of the state
...
It is important to note that private individuals could also undertake the manufacture
and sale of commodities monopolized by the state
...
Ancient Indian
thinkers supported tax for beneficial purposes and not to be wasted by the government
...
Kautilya's discussion of taxation has several underlying principles - the taxing power of the
state should be limited, tax should not be felt to be heavy or excessive, tax hikes should be
introduced gradually, tax should be levied in the proper place, time and form, and tax level should
be equitable and reasonable
...
Kautilya's scheme of
taxation involved the elements of sacrifice by the taxpayer, direct benefit to the taxpayers,
redistribution of income (the state took care of the poor), and tax incentives for desired
investments
...


4

Town Planning and Social Security
Town planning which included the re-orientation of main roads and street, and the sub-division of
city areas was found in a much developed form, particularly during the days of Mauryan Kings
...
Regarding social security, Kautilya
emphasized that it was the prime duty of the state to protect the weak and the aged, to provide
jobs to the unemployed, and to set up poor houses and charitable institutions
...
Economic life was governed by religious ideals and moral
sanctions
...
Economics was not regarded as a separate
discipline but combined with ethics, politics and philosophy
...
Due emphasis
was laid on the establishment of a welfare state
...
The Kind should also adopt measures to increase their
prosperity
...
The economic
ideas of Kautilya are undoubtedly the precious gems of ancient economic thought
...
His celebrated work Thirukkural
is one of the important works of the Sangam era and it is a work on ethics
...
Valluvar’s teachings were an appeal to the people and he was not a mere
scholar but a prophet to his countrymen
...
The basic economic ideas of Thiruvalluvar are contained
in the four chapters of Thirukkural and it is one of the most revered ancient works in the Tamil
language
...
Thirukkural is a combined word formed by joining the two words Thiru (meaning revered) and
Kural (is a form of poem writing style, like Ballad in English Poems)
...
Although two sections, Aram and Inbam, are
devoted to the private life of an individual more than half the couplets in Thirukural are grouped
under Porul which discusses ethics in public life
...
According to Thiruvalluvar, the four principles for a prosperous society
are (i) faith in God (ii) economic resources (iii) spiritual leadership and (iv) observance of moral law
...

Wealth
Porutpal literally means things, wealth etc
...
According to Valluvar, wealth
is only a means and not an end
...
Thus, Porutpal covers all consumer and producer goods
...

Poverty
Thiruvalluvar was aware of the dangers of poverty and hence cursed poverty and he was against
begging
...

Agriculture
Valluvar attached very much importance to agriculture
...
According to him all are dependent on agriculture for food
...
He was not in favour of
compulsion in taxation and preferred balanced budgeting
...
He believed
that people should be free from hunger which increases welfare of the society
...


Modern Indian Economic Thought
1
...

He was the first Indian to become a member if British parliament
...
Naoroji is considered as
the ‘Father of Indian Nationalism’
...

Naoroji is famous as an economist for his ‘Drain Theory’
...
The drain theory emphasised
the fact that the management and institutions of the British India were prone to a mechanism of the
economic drain
...

i
...


Through internal drain
...
Through the transfer of purchasing power by means of taxation,
interest payments and profits from poor classes and regions
...
, through exports which produced no equivalent returns in the form of
imports
...


Dadabhai Naoroji has collected a lot of statistical data to prove his drain theory
...
Indians were employed largely on low paid jobs
...

Naoroji suggested the following measures to remove India’s poverty and to reduce the drain
i
...

iii
...

As the Englishmen were paid reasonable salaries while they served in India, there is no need to
pay pension to them
...


2
...
Gandhiji became the
leader of the Indian Nationalist movement
...
In 1930, he led the Salt satyagraha and in 1940, launched the civil dis-obedience
movement
...

Gandhian Economics is based on ethical foundation
...
”
i
...
He was interested in developing the villages as
self-sufficient units
...


7
ii
...
Gandhi was not against machinery in
general
...
He welcomed such instruments and
machinery that saved individual labour and lightened the burdens of millions of cottagers
...

Industrialisation: Gandhi considered industrialism as a curse on mankind
...
But Gandhi suggested the
development of village industries
...

iv
...
He advocated a decentralised economy based on
non-violence
...

Village Sarvodaya: According to Gandhi, real India was to be found in villages and not in towns
and cities
...
He
wanted every village to develop into a little republic
...

vi
...
‘Bread Labour’ or ‘body labour’
was the expression that Gandhi used to mean manual labour
...
The actions of trade union should be based on nonviolence
...

The Doctrine of Trusteeship: Gandhi has developed the doctrine of trusteeship to provide an
alternative to Marxian socialism
...
Gandhi made a distinction between “possession”
and “possessiveness”
...
He desired the capitalists to become trustees of the nation by running their
business with integrity and efficiency and for the welfare of the people
...
It is based
on the faith that human nature is never beyond redemption
...

➢ Trusteeship provides a mean of transforming the present capitalist order of society into an
equalitarian one
...

➢ It does not exclude legislative regulation of the ownership and the use of wealth
...

➢ Under the Gandhian economic order, the character of production will be determined by social
necessity and not by personal whim or greed
...

On the food problem: Gandhi was against any sort of food controls
...

ix
...
He
was, however in favour of birth control through Brahmacharya or self control
...


3
...
He helped in founding the Deccan Education Society’
...

Historical Method of study

8
Ranade was a great advocate of the historical method of study in economics
...
He was a practical economist
...
He thought that the historical method of analysis which takes past into account
in its forecast of the future
...
These
factors are; conservative attitude, uncertain conditions in agriculture, scarcity of capital, unskilled labour,
drainage of resources and talents from the country and so on
...
Capital is immobile and scarce
...

Agriculture is carried on traditionally
...
Indian industries are backward and lopsided
...
The basic cause of
India’s poverty is too much depended on backward agriculture
...
These are given below: in country like India, industrialisation and
urbanisation bust be linked together
...
India should concentrate more on the industrial development of the country
...

Role of State
Ranade urged the government to undertake a positive role for the industrial development of the country by
protecting home industries and though various other ways
...
Economic development in India was essentially
dependent on political, social and economic institutions whose activities are channelled by the state
...

According to Ranade, for a poor country like India, the policy of lasses-faire theory could be doing more harm
than good
...
G K Gokhale ((1866-1914)
Gokhale taught History and Economics at the Ferguson College, Pune and he was elected to the Bombay
Legislative Council in 1899
...
In 1905 he was elected the
President of the Indian National congress
...
He was an expert in fiscal economics
...
He suggested a number of
reforms in taxation and budgetary policies
...
He was not in favour of
surplus budgets
...
He objected to the practice of using budget surpluses for repaying the debt
incurred for the construction of Railways
...

Gokhale suggested an equitable distribution of tax proceeds between the Centre and the provincial
governments and local bodies
...
Opium, salt, customs, posts and telegraphs might be given to the imperial
government
...

He suggested certain reforms in the land revenue system
...

On public expenditure, Gokhale expressed the view that ever since the transfer of power from the
East India Company to the Crown, there was a tremendous growth of public expenditure
...


The suggestions of Gokhale can be summarised as follows
...

ii
...

iv
...
Public expenditure should not exceed public revenue
...

Indianisation of civil service
Audit should be made independent
...
He joined the Indian Civil Service in 1869 and
served in many capacities
...
Later on, he lectured on Indian History
at the University of London
...

ii
...


Dutt was a nationalist
...

Economic Ideas
➢ Dutt was concerned mainly with the problem of poverty in India
...
Low productivity of Indian agriculture and fall of handicrafts, he
attributed to the British Rule
...
The Indian peasants were made poor by the uncertain land taxes and the decline and fall of
cottage industries
...
Indian handicrafts, unable to face the competition of machine made goods of England,
declined
...
Our cultivators and even our village industrial classes
therefore virtually depend on the soil as the one remaining source of their subsistence
...
(“One
of the saddest results of British Rule in India is that effacement of that system of village self-

10
government which was developed earliest and preserved longest in India among all the countries of
the earth
...
He felt that nearly one half of revenues received in India were remitted
out of the country
...

ii
...

iv
...

vi
...

Indian revenues should be largely spent in India itself
...

Rate of interest on public debt should be lowered and sinking fund must be created to liquidate
public debts
...


B R Ambedkar
Dr
...
He was the architect of the Indian Constitution, a
custodian of social justice and a champion of socialism and state planning
...
Ambedkar’s economic writings included:
1
...
National dividend of India: A Historical and Analytical Study
3
...


ii
...
He made a pioneering study of the evolution of provincial
finance in British India
...

According to him, the inadequacy of imperial finance was mainly due to an unsound fiscal policy
...
Under the injurious
revenue system of the imperial Government, the taxing capacity of people decayed so that
notwithstanding the numerous resources from which it derived the revenue, the Imperial
Government was unable to make both ends meet
...
Ambedkar’s significant
contribution to agricultural economics lies in his suggestion that input-output relationship should
be true economic test
...


To Ambedkar, the population pressure was the chief cause of subdivision and fragmentation of landholding
...
His remedy to the
problem is to transfer the idle labour in agricultural sector to non-agricultural channels of production
...


iv
...
It makes the whole concept of division of
labour ridiculous
...
To him the caste system based on birth would not improve individual or social
efficiency
...
It resulted in social
stratification
...

Economics of Socialism: he was a champion of State Socialism
...
He was for
state monopoly of insurance business
...


He advocated the establishment of state socialism, with parliamentary democracy and without dictatorship
...
He was a member of the Planning commission
and he was a close adviser to Nehru on economic affairs, especially on matters relating to planning
...

His one sector model resembles very closely Harrod Domar growth model
...
One of the important assumptions of the model is this: the economy
is divided into two parts according to the final use of products, consumer goods and capital goods
...

The above approach was carried over later into a more elaborate formulation (four-sector model) by him for
preparing the Draft Plan formulation of the Second Five Year Plan
...


VKRV Rao
According to professor P R Brahmananda, the great trinity of pre independent and post independent Indian
economists consisted of Gadgil, Vakil and Rao
...
Some of his important books are :
What is wrong with Indian Economic Life?, National income of British India, Investment, Income and
Multiplier in an underdeveloped economy, Essays in Economic Development, India’s National Income, etc
i
...
He was a student of J M Keynes
...
But Rao
considered it as purely scientific exercise
...

ii
...

• Absence of capital and of advance protection keeping down growth of home industry
...
But he became disappointed after watching the performance of planning in India for
a few decades
...




---