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04 small is beautiful

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Schumacher pointed out that Large scale production leads to large s

Schumacher pointed out that Large scale production leads to large s

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  • 1. SMALL IS BEAUTIFUL: The study of Economics as if People mattered. E.F. SCHUMACHER Prof. Prabha Panth, Osmania University
  • 2. Causes of present environmental crisis According to Schumacher: 1. Modern technology: inhuman, excessive mechanisation, kills creativity. 2. Impact on environment: Producers and consumers do not care about the environment. 3. Depletion of Non-renewable resources: Natural resources are finite, so economic growth cannot be infinite. 17-Oct-13 Prabha Panth 2
  • 3. Criticism of Economics Normative and Ethical aspects are neglected. Economics gives importance to: 1.Profits: Large scale production. Higher profits, with lower AC of production. But large scale production leads to Giantism – with massive NR depletion and more pollution. 2.Economic growth is important, but it does not matter how the economy grows, 3.Dominance of large scale monopolies and oligopolies, not perfect competition. 17-Oct-13 Prabha Panth 3
  • 4. 4. All items are considered to be homogeneous: Rs.5 of iron (non-renewable resource) = Rs.5 of wheat (renewable resources) = Rs.5 of spoons (produced resource) = Rs.5 doctor’s fees (service). • Whichever gives higher profit, Investment goes into that sector. • But all 4 items are heterogeneous. • Spoons cannot be produced without iron, • Production cannot shift from wheat to doctor if medical field is more profitable. 17-Oct-13 Prabha Panth 4
  • 5. 5. Economies of scale: To reduce costs, large scale production is taken up. Efficiency is where LRAC is at minimum. But large scale production large scale natural resources depletion large scale pollution. 6. Inhuman Technology: modern technology is inhuman and destructive. Destroys the environment, and creativity of labour. Labour also becomes mechanical and dull. 17-Oct-13 Prabha Panth 5
  • 6. Economies of scale But large Rs scale requires large inputs of natural resources, and creates large amount of pollution. Good P economically, but not for the environment. 0 17-Oct-13 Increase in scale of production lowers LRAC LRAC LMAC c1 c2 AR=MR a q1 q2 Prabha Panth Q 6
  • 7. Solution by Schumacher 1. Small scale production: Large scale production is the cause of all environmental and social problems. Small scale is manageable and human. Therefore “Small is Beautiful”. 2. Ethical: and Normative. Use of ethical principles in production and consumption. “The study of Economics as if People Mattered.” 4. Human approach: Technology should be nonviolent and creative. “Technology with a Human Face.” 17-Oct-13 Prabha Panth 7
  • 8. 5. Environmental responsibility: All stake holders should show responsibility towards environmental protection. 6. Intermediate Technology: based on renewable resources technology, labour intensive, and creative. Schumacher says: Man is small, and so should produce on a small scale. “Small is Beautiful”. Gandhi said, “the poor of the world can be helped not by mass production, but by production by the masses.” 17-Oct-13 Prabha Panth 8
  • 9. Intermediate technology provides: • Local employment, • Lower capital requirements, • More creative, • Cheaper, • Based on local resources, not imported resources, • No foreign dependence. • Local people are interested in protecting their own environment. 17-Oct-13 Prabha Panth 9