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Visions and Revisions

Nitin Desai

By Ashok Rudra
Allied Publishers, New Delhi, 1975, 50.00

VOLUME I NUMBER 2 April - June 1976

Professor Rudra’s book, meant more for postgraduate students than for the layman, is an excellent survey of one approach to planned development in India. It deals with the use of ‘formal’ models of economic relationships—‘formal’ in the sense that these relationships are encapsulated in mathematical equations involving exactly specified variables. Such formalism has always had its critics both from within the profession and from outside. Two types of arguments are offered against this—one is that econo­mic relationships are inexact and cannot be represented in the form of equations without unacceptable distortions and the second is that, even though the relationships are, in principle, exact, they are too complicated to be embodied in the simple mathematical forms typically used in economic models. Both types of arguments have a very simple point—that the use of formal models in planning leads to error. Error however has to be defined in the context of the uses to which models are to be put. Professor Rudra recognizes several such uses of which the three impor­tant ones are, firstly to check the consistency of plan targets, secondly to actually assist in the formulation of these targets, and thirdly to provide a framework for determining policies that will help to achieve these targets.                The use of formal models to check plan targets for consistency is really nothing but a form of accounting and the possibilities of error in this use, as in accounting, arise principally from one cause—poor arithmetic­—which we cannot avoid by abandoning formal methods. Incidentally it is remarkably easy to build up a reputa­tion as an economic pundit by regular application of the simple accounting principle that in a closed system one man’s income is another man's expenditure and that hence the aggregates of income and expenditure must be equal. The second use that Professor Rudra mentions is probably more important. In fact the use of models to check the consistency of plan targets and their use in framing these targets are virtually indistinguishable. The use of formal models for this purpose has a long history and in India the two most celebrated instances have been the Mahalanobis model which formed the basis of the Second Plan and the Planning Commission model underlying the Fifth Plan. Error in such models can be said to arise if they lead to the formulation of unattainable targets. Since ...

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