Paul Rosenstein Rodan

Summary

Paul Rosenstein Rodan, an influential economist, introduced the concept of 'The Big Push' in development economics. His 1943 paper argued that economic growth in developing countries requires large-scale, coordinated investment in multiple sectors, like infrastructure and factories, to stimulate demand and self-sustaining growth. While his ideas impacted post-WW2 development planning, criticisms include neglecting agriculture, cultural factors, and the risks of government corruption and ineffective planning. Despite its flaws, Rosenstein Rodan's theory remains significant, though many studies suggest that gradual, rather than explosive, growth is more common.

Takeaways

• 😀 Paul Rosenstein Rodan, born in 1902 in what is now Poland, was a key figure in the development of economic thought post-WW2.
• 😀 He worked at institutions like the LSC, the World Bank, and MIT throughout his career.
• 😀 Rosenstein Rodan introduced the idea of the 'Big Push' in his 1943 paper, which focused on the importance of coordinated, large-scale economic activity for development.
• 😀 He used the example of a shoe factory to illustrate his point: having a single factory is insufficient unless there are many factories creating economic activity in the city.
• 😀 The 'Big Push' involves advancing a developing economy across multiple fronts simultaneously, requiring government-led large-scale investment and infrastructure development.
• 😀 Rosenstein Rodan believed in 'increasing returns to scale,' where economic activity becomes more profitable as it grows.
• 😀 According to Rosenstein Rodan, the key to economic growth is not gradual improvements but a significant leap that transforms an underdeveloped country into a rapidly growing one.
• 😀 For economic growth to occur, Rosenstein Rodan advocated for significant government investments in infrastructure, such as roads, bridges, and dams, alongside open trade to increase market size.
• 😀 Despite the influence of his ideas, there have been criticisms, including the neglect of agriculture in his theory and the potential problems with government planning, like corruption.
• 😀 The 'Big Push' theory has been criticized for ignoring cultural factors that are crucial to economic growth, sometimes resulting in projects like dams or factories that fail to catalyze broader development.
• 😀 Empirical data suggests that, in most cases, economic growth tends to occur gradually, with exceptions like some East Asian countries, challenging Rosenstein Rodan's theory of a sudden growth explosion.

Q & A

Who was Paul Rosenstein Rodan, and where was he born?

Paul Rosenstein Rodan was born in 1902, in what is now Poland. He passed away in 1985 and had a significant career at institutions like the LSE, the World Bank, and MIT.

What concept is Paul Rosenstein Rodan most famous for in economics?

Rosenstein Rodan is most famous for his concept of 'The Big Push,' which refers to the idea that economic development requires a large, coordinated effort across many sectors of the economy.

What is the 'shoe factory' example that Rosenstein Rodan used?

Rosenstein Rodan used the shoe factory example to illustrate the need for simultaneous economic activity. If 20,000 workers are brought to a city to produce shoes, it wouldn't be enough because there wouldn't be enough demand. However, if multiple factories were set up, it would generate a high level of economic activity and support growth.

What does 'The Big Push' entail in Rosenstein Rodan's economic theory?

'The Big Push' involves advancing multiple areas of an economy simultaneously, including infrastructure and industrial development, to reach a minimum scale of investment and demand necessary for sustained growth.

How does Rosenstein Rodan's theory differ from gradual economic improvements?

Rosenstein Rodan believed that economic development is not about gradual improvements, but about making a significant leap from an underdeveloped economy to a rapidly growing one, often requiring large-scale government investment.

What are 'increasing returns to scale' in Rosenstein Rodan's theory?

Increasing returns to scale means that the more economic activity a country undertakes, the more profitable its remaining activities will be. This creates a cycle where increased production and investment lead to further growth.

What kind of government intervention did Rosenstein Rodan advocate for?

Rosenstein Rodan advocated for large-scale government investment in infrastructure like roads, bridges, and dams, alongside open trade to expand the market size, which would support the development of new factories.

What criticisms have been raised against Rosenstein Rodan's theory?

Criticisms of Rosenstein Rodan's theory include its neglect of agriculture, the inefficiencies and corruption in government planning, and the 'White Elephant Problem,' where large-scale projects like dams or factories do not lead to overall economic growth.

What is the 'White Elephant Problem' in economic development?

The 'White Elephant Problem' occurs when large infrastructure projects, like dams or factories, are built with the expectation of boosting growth, but they fail to generate the promised economic activity, leaving them as costly and underutilized investments.

Is Rosenstein Rodan's theory of 'The Big Push' still relevant today?

While Rosenstein Rodan's ideas had a significant impact on development economics, they are not universally accepted. Some data suggests that most growth is gradual, and the 'Big Push' model does not always lead to success, especially in cases where cultural and agricultural factors are ignored.