Reddaway and the Indian Economy
Reddaway took a keen interest in the Indian economy and he wrote, among other things, an excellent small book on the subject called The Development of the Indian Economy (1962). In the first of these books, he examined the issues which arise in defining the nature of a developing country from that of a developed country, describing the logic behind comprehensive long-term planning. Reddaway starts with the question of defining unemployment for a developing country. He suggests that the proportion of people in India who are unemployed, according to a Western-type definition—for example, who have done no work in the last week—must be quite small. Reddaway suggested this has to be the case in the absence of any public provision for the unemployed. One methodological conclusion which follows from his analysis is that one should not think of India’s problems in terms of unemployment but rather in terms of inadequate numbers of openings for really productive activities.
Reddaway makes another subtle point in this context, namely even though there may be few people unemployed on Western definitions, development should nevertheless be planned in the sense that there was an inexhaustible supply of unemployed workers. This indicates that workers can be attracted to worthwhile jobs on any scale that is likely to be of practical interest without their recruitment leading to a fall in the output of other goods or services. In Reddaway’s words (1962: 4):
Does this effectively unlimited supply of labour mean that one can apply ‘depression economics’ or ‘Keynesian remedies’ to secure a large increase in the national output, merely by increasing monetary demand? The answer to such a simple question is clearly ‘No’—but the question is, none the less, not as simple- minded as it might seem.[1]
In his work, Reddaway discusses the question of capital formation by bare hands and presents his interpretation of the third Five-Year Plan period for the Planning Commission of India. He makes the important point that, in addition to capital and labour, organisation is an essential input for increasing the supply of capital, particularly with bare hands. Reddaway’s approach to the problems of the Indian economy is thoroughly modern and emphasises the role of practical long-term planning. Reddaway was very close to the Indian planners; to a considerable degree, his 1962 book reflects this close association. Reddaway’s work on development problems suggests his emphasis on structural change and growth. His analysis supports the role of modern industry and import substitution, emphasising concern with the balance of payments. However, in a review of The Development of the Indian Economy, distinguished American economist, Professor Bert Hoselitz, takes Reddaway to task for his relative neglect of agriculture, the unemployment problem, and other similar subjects (Hoselitz 1963).
In the long history of Reddaway’s scholarship, there is an interesting debate between the Indian economist Professor Padma Desai and Reddaway. In this exchange, Reddaway outlined his own basic philosophy of research:
I have attempted to tackle practical problems, whether on full employment, growth, underdeveloped economies, inflation, the effects of direct investment overseas, the selective employment tax, or the investment of portfolios. To do so, I have sought to combine theory with realistic data and to look for the factors which are quantitatively important, rather than those which are intellectually stimulating. I have tried to be pragmatic in my choice of methods for tackling problems and to be clear about the alternative position with which comparisons are effectively being made (and to be sure that it is a meaningful and consistent one). Favourite slogan for pupils and research colleagues: ‘It is better to be roughly right than to be precisely wrong (or irrelevant)’ (Reddaway quoted in Blaug 1999: 932).
Reddaway’s depiction of Indian development always emphasised careful judgement over blind faith in numbers, resting ‘on a logical foundation of cause and effect’ (Reddaway 1963a: 320). As I explain in Singh (2006: 292):
In other words, in the real world, even though data are scarce, it is better to have rough orders of magnitude than none at all, in order not to operate entirely in the realm of abstraction. If data (or theory) did not exist, Reddaway’s method was to use surveys to ask people for the information. If existing theory was inadequate, he would attempt to extend it to fill the gaps. However, the latter was not his prime aim. Colleagues recall him referring to theory as ‘talky talk’.
We come back now to the specifics of the Desai-Reddaway exchanges. The whole debate appeared in a single issue of the journal Oxford Economic Papers. Reddaway’s opening salvo was as follows:
I saw, and still see, no advantage in expressing the reasoning in the form of mathematical equations. Such equations are a useful device where there is a great deal of mutual dependence of variables, because a verbal description cannot then easily show the interactions and the process of mutual determination; moreover, it is then very laborious to arrive at the solutions which fit the conditions, except by some mathematical process analogous to the solution of simultaneous equations; and one might fall into the trap of not realizing that the system was under-determined, and arriving by trial and error at a set of figures which fulfilled the conditions but had no superiority over many other sets which would also do so (Reddaway 1963a: 326).
As I explain in Singh (2006: 292), this is how Desai criticised Reddaway’s book:
Desai argued that the book did not set out a fully specified planning model so that it was difficult to judge whether the plan was efficient or not. She also thought that, from the information given in the book, the model was under-determined, i.e. the number of variables to be determined was greater than the number of equations. She further expressed irritation over the fact that Reddaway had not bothered to specify his model in terms of equations, which she regarded as essential to understanding the underlying economic and statistical analysis.
Desai thus criticised Reddaway for not explicitly stating the model he was working with, which she in any case also considered underdetermined. Reddaway, in his response, pointed out that his purpose was not to assess the efficiency of the Indian planning models but just to see whether the specific model of the third Five-Year Plan was compatible with the availability of resources. Reddaway was highly critical of Desai’s defence of mathematics in economic analysis.
Reddaway’s attitude towards government intervention was greatly influenced by his wartime experience. At that time, among the British government economists, Reddaway was regarded as being very much on the interventionist side. The statisticians at the Board of Trade were half-jokingly nicknamed the ‘Gosplanners’ because of their interventionist outlook. In contrast, other government economists, notably Meade and Keynes, were called ‘thermostaters’, indicating that they believed in limiting government intervention to macroeconomic policy to ensure full employment. In this view, microeconomics should be entirely the sphere of private households and firms. Reddaway was a pragmatic economist and a problem solver first and foremost. These attributes, as well as his wartime service, led him to regard the government as part of the solution rather than the problem. Indeed, he took a very active part in government activity and policy making on various occasions. As already noted, Reddaway served the UK and other national governments and the international community in a number of different ways, making notable contributions to the work of each.
- [1] For a full analysis of this issue, see Reddaway (1962).
