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The origin and application of the push theory

Indivisibilities and external economies[ edit ] The concept of externalities is relevant for the Industrialization of underdeveloped countrieswhere decisions are to be made regarding distribution of savings among alternative investment opportunities.

These arise from the interdependence in market economies.

  1. It is a rich book, full of stimulating ideas.
  2. It will never be right in the way that quantum electrodynamics is right.
  3. Aluminum flakes were suspended in the water, so that a camera perched overhead and rotating with the pan could take pictures of the pattern of flow. It is hard to know whether economic policy in the real world would have been much better if high development theory had not decayed so badly, since the relationship between good economic analysis and successful policy is far weaker than we like to imagine.
  4. It is said that those who can, do, while those who cannot, discuss methodology.

They arise in an industry say industry X due to internal economies of overcoming technical indivisibilities. This reduces the price of its product, which will benefit another industry say industry Y which use this output as an input or a factor of production. As a result, industry X's production and profits also expand.

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  • And yet the dish-pan exhibited an unmistakable resemblance to actual weather patterns;
  • Until their books, economists doing high development theory were trying to be good mainstream economists;
  • The private sector's activities are simultaneously inhibited due to lack of information of government policies and the general economic situation [4] Neglect of methods of production;
  • In the 1940s and even in the 1950s it was still possible for an economist to publish a paper that made persuasive points verbally, without tying up all the loose ends.

Prices fail to act as a signalling system in the following ways: Enlargement of the market size is another important externality which arises from the complementarity of industries.

There exists an incentive to expand the scale of operations because the employees of one industry become the customers of another industry. In terms of products too as in the above example of industries X and Yone industry generates demand for the output of the other when the scale of operations increase. These occur due to the following advantages of agglomeration identified by Alfred Marshall: Spillover of information Specialization and division of labor Development of a market for skilled labor.

This is not achievable by mere establishment of a few industries, but requires a large program of industrial growth. It is one of the most important external economies because absence of skilled labor is a strong impediment to industrialization. The investment in infrastructure and basic industries like power, transport and communications is 'lumpy' and has long gestation periods. The role of the state in this theory is therefore critical for investment in social overhead capital.

Even if the private sector had the requisite resources to invest in such a programme, it would not do so since it is driven by profit motives.

Big push model

Due to this there is no incentive for individual entrepreneurs to invest and take advantage of external economies. Some of the major criticisms are as follows. Difficulties in execution and implementation: The execution of related projects during the course of industrialization may involve unexpected or unavoidable changes due to revisions of plans, delays and deviations from the planned process.


Hla Myint notes that the various departments and agencies involved in the process of development need to coordinate closely and evaluate and revise plans continuously. This is a challenging task for the governments of developing countries. The implementation of industrialization programmes may be constrained by ineffective disbursement,short-term bottlenecks, macroeconomic problems and volatility, loss of competitiveness and weakening of institutions.

Credit is often utilized at low rates or after long time lags. There is often a loss of competitiveness due to the Dutch disease effect. When viewed in light of historical experience of countries over the last two centuries, no country displayed any evidence of development due to massive industrialization programmes.

Stationary economies do not develop simply by making large-scale investment in social overhead capital. In a mixed economywhere the private and public sectors co-exist, the environment for growth may not be a conducive one. Unless the origin and application of the push theory is a complementarity between the sectors, there is bound to arise competition between them, with the government departments keeping their plans confidential out of fear of speculative activities by the private sector.

The private sector's activities are simultaneously inhibited due to lack of information of government policies and the general economic situation [4] Neglect of methods of production: Rather than capital formation, it is productive techniques which determine the success of a country in economic development.

An integration of the invention-pull and population-push theories of economic-demographic history.

The big push model ignores productive techniques in its support for capital formation and industrialisation. Eugenio Gudin criticizes the theory of the big push on the grounds that underdeveloped countries lack the capital required to provide the big push required for rapid development.

If an underdeveloped nation had ample capital supply and scarce factorsit would not be classified as underdeveloped at all. Limited resource availability is the first impediment to such countries. Though this problem may be overcome by foreign aids, industrialization may not take off as expected if the aid flows are volatile. With its heavy emphasis on industry, the model finds no place for agriculture.

This is a gaping flaw in the theory, as in most underdeveloped countries it is this sector which is large and has labor surplus.

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Investments in agriculture need to go hand-in-hand with those in industry so as to stimulate the industrial sector by providing a market for industrial goods. If neglected, it would be difficult to meet the food requirements of the nation in the short run and to significantly expand the size of the market in the long run.

It follows from the neglect of the agricultural sector that food shortages are likely to occur with industrialization. Though it would take time for investments in social overhead capital to yield returns, the demand would increase immediately, thus imposing inflationary pressures on the economy. Cost escalations may even cause projects to be postponed and the development process in general to slow down. The emphasis of this theory on indivisibility of processes is too much, as investments need not necessarily be on such a large scale to be economic.

Social reforms are ignored, which are vital if a country is to grow on the basis of its own resources and initiatives. Development is bound to intensify if social reform is a part of the industrialization process.