SMALL IS BEAUTIFUL:
The study of Economics as if People mattered.
Prof. Prabha Panth,
Causes of present
According to Schumacher:
1. Modern technology: inhuman, excessive
mechanisation, kills creativity.
2. Impact on environment: Producers and
consumers do not care about the
3. Depletion of Non-renewable resources:
Natural resources are finite, so economic
growth cannot be infinite.
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.
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.
5. Economies of scale: To reduce costs,
large scale production is taken up.
Efficiency is where LRAC is at minimum.
But large scale production
natural resources depletion
6. Inhuman Technology: modern
technology is inhuman and destructive.
Destroys the environment, and creativity
of labour. Labour also becomes
mechanical and dull.
Economies of scale
but not for the
Increase in scale of
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
5. Environmental responsibility: All stake
holders should show responsibility towards
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
Intermediate technology provides:
• Local employment,
• Lower capital requirements,
• More creative,
• Based on local resources, not imported
• No foreign dependence.
• Local people are interested in protecting their