1. The document discusses the history of economic thought on development and different structuralist approaches. 2. It argues that while old structuralism advocated for an active state role in industrialization, new structuralism recognizes the need for a state to facilitate comparative advantages and technology upgrades during agricultural to industrial transitions. 3. Asia's experiences incorporated elements of different approaches, with prior developmental states laying foundations and subsequent liberalizing states selectively implementing policies, challenging the view that approaches need to be seen as rivals rather than entwined sequences.

1. The State and the big push towards modern
industry: "new" economics, defunct
economists, and farmers
[or: why a little history of economic thought
helps us to demystify development debates]
Agriculture, transition, new structuralism:*
rescuing development from new-classicals
Michael Lipton
Sussex Development Lecture, 2 Feb 2012
*Justin Lin, „New structural economics: a framework for re-
thinking development‟. PRWP 5197: World Bank Feb 2010

2. 1. Outline
• Potted history of economic/development thought
• Old structuralists and new: transitions, farms, States
• Reading Asia: classic/structural, or a sequenced State?
• Understanding Asia: open minds (classical, neo-classical, new-
structural) v closed systems (new-classical, ??old-structural)
• Non-new-classical foundations for new-structuralism
• Incorporating non-growth goals: distribution, sustainability
• Beyond structuralist farm-to-factory transitions:
-- Small farms: Asia’s technical & land-reform pre-transition
-- Population: re-linking economic transition to demography
-- Finance: Asia vs. the new-classical model
Conclusion: sector focus and the escape from new-classical dogma

3. 2. Potted history of economic thought on
development
• Pre-classical: goods better than services; food best
• Classical: prices measure values; stationary state or
„natural progress of opulence‟ via law, easy tax, public
goods, education?; free trade; population
• Neo-classical: “static”? Equating marginal utilities (value-
products) normal for consumers (producers) & optimal
for each, but only under VERY strong conditions socially.
Major State action is needed absent these conditions.
• New-classical : „as if‟ conditions met, so minimize State
• Structuralism: devel=agind transition‟; price-inelastic
antidevel structures; devel needs active state: doing
what?

4. 3. Old structuralists and new: transitions,
farms, States
• Old structuralism, OS: market failure v „big push‟ to ag
ind transition; State should own/protect/subsidize
industry [Anglo-Saxon old-str, or Latin American
dependencia?]
• New structuralism, NS: OS„State failure‟, rents; facili-
tating State still needed, but for comparative-advantage-
friendly industrial policy:
infrastructure, institutions, human capital for tech.
progress in agind transition
• Classicals, neo-classicals: „market‟+ State [„easy taxes‟
but public & merit
goods, regulation, infrastructure, redistribution]„natural
progress of opulence‟, including agind transition. New-
classicals (NwC): rational ex-pectations, efficient

5. 4. Reading Asia: classical v structural criteria
for the State, or a sequence of types of States
and of change?
• Many agind transitions to much faster growth & poverty re-
duction in Asia (few in Africa); but distribution, sustainability?
• (At least) 4 claimed „fathers‟ of Asian successes: liberalization,
developmental state, farm change, demographic transition
• 1. Prior old-structuralist Statesfacilitated 1) physical/human
capital, insttns, infrastrucs 2) protection, subsidy: rents; cor-
rupt, overstretched States; premature cap-intensity; urban bias
• 2. Liberalizing State selective, classical/neo-classical not NwC;
• 3. Developmental States: new-struc tech-upgrading priorities?
• Not 1-2-3 rivals but entwined 1,32,3, 2-3 sequences, leading
transition led by farms [as C18-19 Europe] and demog [new]

6. 5. Understanding Asia: open minds (classical,
neo-classical, NS, ?OS) v closed systems
(new-classical)?
• Optimal pure-market outcomes need huge assumptions;
un-met, so big role for developmental states. That‟s
stressed by classics (Smith: public goods, collusion;
Malthus: general glut, fertil.) , neo-classics (Pigou:
tax, distribution; Walras: Left CGE; Arrow(-Debreu):
ignorance; Stiglitz: asymmetry.
• As-if perfect comp & markets: Coase; contestable mkets; 
• NewCl „positive econs‟: State action selfish (public
choice), ineffective (rational expectations/efficient
markets/Ricard-ian equivalence), counterproductive
(crowding out). Maths, etric „barbed wire‟Keynes/devtl
state unarguably „wrong‟
• NwC: markets optimize transition; ag; demog; dist; finance?

7. 6. Non-new-classical foundations, micro
and macro, for new-structuralism
• Micro-foundations: beyond new-classical models where
everyone maximizes expected lifetime utility:
--- 1950s: satisficing, second-bestness, Arrow
--- 2000s: economics experimental, evolutionary, neuro;
agent-based models; asymmetric info; “happiness”
• Macro-foundations? Relations or individuals?
• Adding-up problems, fallacies of composition or of thrift?
• And in poor/developing/transition countries?
-- Finance outside new-classic macro-model;
-- NwC foundations not plausible for demographics ;
-- NwC rejects special or „prior‟ sectors like farming

8. 7. Incorporating non-growth goals: poverty
reduction; less inequality; sustainability
• Classicals, neo-classicals but not new-classicals see a
State role against extreme inequality, for sustainability
• For NwC, distribution and hence poverty are market
outcomes, worsened by State action in development
• For NwC, private actions optimize sustainability (inclu-
ding demographics) if prices, including interest, „right‟
• Nee-struc goals v. poverty, inequality, unsustainability
• but vacuous if NS theory swallows new-classical
foundations, imposing one goal: non-comparable life-
time utility = f (income, risk) both largely due to output

9. 8. Beyond structuralist farm-to-factory
transitions - small farms: Asia‟s technical &
land-reform pre-transition
• Old-struc, to speed agind transition, imposed anti-ag
policy bias: subsidy, exchange-rate, interest, educ..
• Elephant in miracle: State inv, land ref (Old-struc);
tech/instns (New-struc): pre-trans smallhldr takeoff
• „Smallholder-based pre-transition‟ needs mainly new-struc
developmental State for research/extn/tech, land reform (&
some old-struc: water devel, fertilizer)
• Labour-intensity & neocl „factor efficiency‟ag,
smallholders antipov, distribution, in green rev. agind
transn. Surplus-first old-S counter-productive

10. 9. Structuralism and population transition:
Asia v SSA
• NwC: “pop-timal”. Neo-cl: Malthus+women‟s ed (+ con-
tracepn?) Old-struc: pop growth, cap/output ratioState
inv. needed‟ for growth. Contraceptive State:China/India?
• New demog evidence: age transitiondemog gift, 1/3 of
Asian growth; population-age earthquakes; all slower in
SSA, as is ag growth and lab-absorption. Reaping demog
„gift‟ needs prices & strucs to employ extra workers (ag?)
• Agind transition helps to speed fertility-transition but
--- rapid prior child mortality falls are key; need active State,
--- as do„drag‟ areas where ag, agind, fert fall all sluggish.
--- Absent ag takeoff, pre- & post-gift „theft‟ mop up gains.

11. 10. Beyond structuralist farm-to-factory
transitions: finance - Asia vs. the new-
classical model
• Financial transition to get finance to growing sectors; so
• all approaches tend to assume agind finance flows.
• Initial ag pre-transition needs finance esp in early seasons
• NwC assumes private flows (and constraints) optimal;
efficient markets; no finance in macro-model. Collapse?
• Classical/neocl case for free(r) trade does NOT imply
• national/internat financial dereg, as per NwC; Asians
resisted, especially after 1997, so West‟s disaster avoided
• Some good national experiences (rotating credit, some
micro-finance, shroffs, public banks) but structuralism old
and new lacks tested models for finance in development

12. 11.Conclusion: “sector” focus in transition
helps rescue development studies from
excess new-classical dogma
• The State & big push towards modern industry: "new" (vs crude
U-max) economics, defunct NewCl economists, (prior) farms.
• Small-farm-based transformn , normally before ag-ind transitn,
• helps neo/NwC factor-efficiency goal, but needs non-NwC State,
• as does ongoing, powerful demographic transition.
• Sound financial transition requires State to break NwC rules.
• Distribn/sstnblty: externalities, myopia v NwC night-watch State.
• Old-S saw partly-right State role, but anti-ag and slighted
rent, class, overstretch, trade distortion: all anti-growth &
unequalizing
• New-struc techno-facilitating State necessary but not sufficient.
• New-struc promising if and only if it shakes off NwC allegiances.