Criteria for choice of production techniques in a developing economy

Abstract

The author states that after long disputes the theory of choice of production techniques in a developing economy has reached a "draw" position. The maximization of the long term rate of growth adopted as a strategic goal of choice of production techniques in all past theoretical considerations, has not proved very fertile. While in a highly developed economy economic growth also ensures the development of the whole economy, in a developing economy the situation is reversed: growth with no development is possible. Strategy should, therefore, focus on the maximization of the rate of development and not of the growth rate. This sheds a completely new light on the problem of choice of production techniques. In principle, these considerations are confined to developing economies, although many comments and conclusions may to a greater or lesser extent be applied to any economy in which a programme of econoınic development is being implemented. In the new approach to the problem the choice of production techniques must be subordinated to structural changes, i.e. to the development of the whole economy and not, as has been fashionable so far, to the maximization of the growth rate as the main strategic goal.