Neoclassical Political Economy, the State and Economic Development

Abstract

In this article, I will focus on the role of the state in economic development. Recent research suggests that it needs some re-evaluation. I will begin with a discussion of the crowning achievement of neoclassical economics, namely, the two fundamental theorems of welfare economics to set the stage for an analysis of the role of the state. Then, I will describe and summarize briefly the dominant strands of recent research on this issue and their implications. Drawing on some of my own work with Jagdish Bhagwati and Richard Brecher, I will comment in some detail on the implications of one of these strands for the pure theory of international trade and policy. Finally, I will explore some of the implications of the theory for development policy, in particular, for trade liberalization, and relate them to the experience of India in more than three decades of development planning.

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