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Updated: September 9, 2009 14:12 IST

Treatises on economy

AMIYA KUMAR BAGCHI
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Students of economics who grew up in Bengal (before 1947) or West Bengal (after 1947) between the 1930s and the 1950s had the good fortune of studying under three outstanding teachers, although in different institutions. They were Amiya Kumar Dasgupta, Panchanan Chakrabartty, and Bhabatosh Datta. Dasgupta, the senior-most of them, has left for us the most comprehensive corpus of work. Chakrabartty wrote very little except two or three brilliant articles. Datta wrote an out standing book on the economics of industrialisation and a stream of lucid articles on contemporary economic problems.

All the three possessed a deep knowledge of theoretical debates in economics, mostly emanating from the United Kingdom. But it was only Dasgupta who put forth his public arguments in terms of theory, although many of Datta’s articles and the few papers of Chakrabartty displayed their firm grasp of Marshallian microeconomics and Keynesian macroeconomics.

These reflections are prompted by the re-publication of Dasgupta’s writings, edited with loving care by his daughter, Alaknanda Patel, herself an economist by training. The three volumes are introduced by three distinguished economists — Dilip Nachane, Sir Partha Dasgupta (Dasgupta’s son), and I. G. Patel (Dasgupta’s son-in-law), which adds to their value.

Conflict

One of the most interesting aspects of Dasgupta’s writings is an unresolved conflict between his ardent social commitments, his awareness of the necessity of public action to address the deep-seated inequalities of Indian society — exacerbated by colonial rule — and his fascination with the variety of neoclassical economics propagated by Lionel Robbins in the London School of Economics of the 1930s.

This conflict surfaces again in his theory of wage formation, heavily dependent on the pre-Keynesian Hicks’s book, Theory of Wages (1932), and his acceptance of the Keynesian proposition that in a capitalist economy, the level and movements of real wages are determined by the movements of the macroeconomy rather than by a fictitious equilibrium derived from the crossing of a supply and a demand curve for labour.

The conflict is glaringly obvious, if we compare the two books on economic theory Dasgupta published — The Conception of Surplus in Theoretical Economics (1942) and Epochs of Economic Theory (1985). Both the books are included in the first volume. The first book is a meticulously worked out conception of economic surplus derived from Dupuit and Marshall, with a summary of contributions made by classical economists and a casual dismissal of the Marxian theory of surplus value on the basis of critiques of the Austrian school of ultra-liberal economics.

Its contribution to welfare economics has been rendered obsolete by the development of new welfare economics, which is independent of the assumption of cardinal utility. Its contribution to classical theories of surplus value and growth has been rendered redundant by the resurgence of the use of the concept of surplus by neo-Marxian and post-Keynesian theories pioneered by Michal Kalecki, Joan Robinson, Josef Steindl, Piero Sraffa, Paul Baran, Paul Sweezy, Nicholas Kaldor, Richard Goodwin and Luigi Pasinetti, among others.

Misconception

In Epochs of Economic Theory, Dasgupta shows his awareness that useful economic theory is always contextual and necessarily bears the birthmarks of the geography and the calendar dates of its generation. This is how after all Dasgupta conducted his theoretical practice, though, even there his loyalty to the Robbinsian paradigm got in the way of his analysis, as, for example, in his Theory of Wage Policy, which finds a place in the second volume. Epochs of Economic Theory, supplemented by updated histories of economic thought, could serve as an introduction to the history of economic thought.

There was a widespread misconception among economists in India after Independence that Keynesian economics was as such inapplicable to India. They generally believed that deficit financing by itself could not promote economic development. This idea was given authoritative currency by V.K.R.V. Rao’s ‘Investment, income and the multiplier in an underdeveloped economy’ (1952). Whatever Rao has to say about the subject can easily be derived from Chapters 19-21 of Keynes’s General Theory of Employment, Interest and Income (1936), once we put in supply elasticity of agricultural products as less than unity and take it that money wages are rigid downward.

In ‘Keynesian economics and under-developed countries’ (Economic Weekly, 1954) reprinted in the second volume, Dasgupta provided a far more sophisticated analysis. He divided the Indian economy into an organised or ‘capitalistic sector’ and what was termed the ‘unorganised sector’ (which included agriculture) and showed that most of the workforce was engaged in the latter. He then pointed out that increases (presumably short-term) in expenditure or decline would primarily lead to changes in employment in the organised sector. He was wrong in thinking that the unorganised was virtually outside the cash nexus, but surely right in considering that only long-term public investment can tackle the huge problem of creating productive assets that would give employment with dignity in such an economy.

Clarity

Scrutinising his other papers on ‘pure’ economic theory, I cannot but express my regret that such an astute mind should have stopped at the borders of that rather barren terrain. If he had, for example, scrutinised the various constructs of the so-called ‘unlimited supplies of labour,’ he would have surely seen that low-wage and apparently supplies of labour come out of capitalist cycles, colonial suppression of freedom, or even renewed structures of bondage in a semi-feudal society such as India is still burdened with. Dasgupta lived and breathed economics more intensely than any other Indian economist I have known.

The sheer limpidity of his exposition makes us realise again that for a proper understanding of the conditions of living of ordinary people, the corpus of ‘pure’ economic theory has to be enriched with analyses of many structures of oppression and many lost opportunities that many theorists are singularly ignorant of.

THE COLLECTED WORKS OF A. K. DASGUPTA — 3 Vols.: Compiled and edited by Alaknanda Patel; Oxford University Press, YMCA Library Building, Jai Singh Road, New Delhi-110001. Rs. 995 each.

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