Productivity and Growth in Manufacturing Industry: A Reply

Abstract

Professor Wolfe attacks me (in May, 1968 issue of Economica) for being obscure and unconvincing in inaugural lecture which I gave at Cambridge.1 In this lecture I attempted to put forward complex thesis concerning causes of high and low rates of under capitalism, and this was necessarily somewhat scanty; there is limit to material one can pack into single lecture. Such treatment could only be successful if received with imagination and some goodwill; Professor Wolfe has picked on large number of individual points (many of them trivial in substance) without attempting to come to grips with thesis whole. I propose to publish more comprehensive statement of theory in due course.2 Meanwhile rather than follow negative approach of answering each point in turn-which would be both tedious and unconstructive-I shall concentrate on main points which have clearly not been understood. Foremost among these is my notion of economic maturity. This is not some vague notion which can be defined in terms of a situation in which there is relatively small employment in agriculture. In my lecture I defined it explicitly as state of affairs where real income per head had reached broadly same level in different sectors of economy. I could have added, to convey its significance better, that ''economic maturity could also be defined the end of economy; or situation in which surplus labour is exhausted; or one in which growth with unlimited supplies of labour (to use Arthur Lewis' phrase) is no longer possible. The neo-classical framework of thought cannot accommodate notions like disguised unemployment, dual economy, or distinction between capitalist and pre-capitalist enterprise. For neo-classical theory assumes that structure of demand determines distribution of resources between different uses; that competition and mobility assures that tend to equality in all employments; that profit maximization ensures equality of factor prices with value of marginal products of factors; subject only to friction

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