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Vol.9. N0.2 July-December 2007 Journal of Social and Economic Development Vol. 9 No. 2 July - December 2007 Individuals, Values, Inequality and Governance: Brickbats and Bouquets for Developments in Mainstream Economics — N S S Narayana Children’s Working World through the Lens of Class — Anjan Chakrabarti and Anup Dhar Educational Challenges in AP: Role of Teachers — K Vidyasagar Competing Demand for Water in Tamil Nadu: Urbanisation, Industrialisation and Environmental Damages in the Bhavani and Noyyal Basins (1880s-2000s) — Velayutham Saravanan Land Tenure, Land Use and Input Intensity in Orissa — Jyotirmayee Kar Book Reviews Books at a Glance INSTITUTE FOR SOCIAL AND ECONOMIC CHANGE BANGALORE JOURNAL OF SOCIAL AND ECONOMIC DEVELOPMENT (Published biannually in January and July) Institute for Social and Economic Change Bangalore–560 072, India Editor: N Jayaram Managing Editors: R S Deshpande and M D Usha Devi Associate Editor: E Vishnuvardhan Reddy Editorial Advisory Board: Isher Judge Ahluwalia (Delhi) J B Opschoor (The Hague) Abdul Aziz (Bangalore) Narendar Pani (Bangalore) Simon R Charsley (Glasgow) B Surendra Rao (Mangalore) Dipankar Gupta (Delhi) V M Rao (Bangalore) G Haragopal (Hyderabad) U Sankar (Chennai) Yujiro Hayami (Tokyo) A S Seetharamu (Bangalore) James Manor (Brighton) Gita Sen (Bangalore) Joan Mencher (New York) K K Subrahmanian (Thiruvananthapuram) M R Narayana (Bangalore) A Vaidyanathan (Thiruvananthapuram) DTP: P M Arathi Aims and Scope The Journal provides a forum for in-depth analysis of the problems of social, economic, political, institutional, cultural and environmental transformation taking place in the world today, particularly in developing countries. It welcomes articles with rigorous reasoning, supported by proper documentation. Articles, including field-based ones, are expected to have a theoretical and/or historical perspective. The Journal encourages inter-disciplinary articles that are accessible to a wider group of social scientists and policy makers, in addition to articles specific to particular social sciences. The Journal also gives scope to Research Notes, Comments, Book Reviews and Review Articles. All correspondence to be addressed to: Editor Journal of Social and Economic Development Institute for Social and Economic Change Prof V K R V Rao Avenue Nagarabhavi P O Bangalore 560 072, India Copyright Copyright rests with the authors of the respective papers, who alone are responsible for the contents and views expressed. Journal of Social and Economic Development Vol. 9 July- December 2007 No. 2 Articles Individuals, Values, Inequality and Governance: Brickbats and Bouquets for Developments in Mainstream Economics — N S S Narayana 121 Children’s Working World through the Lens of Class — Anjan Chakrabarti and Anup Dhar 148 Educational Challenges in AP: Role of Teachers — K Vidyasagar 178 Competing Demand for Water in Tamil Nadu: Urbanisation, Industrialisation and Environmental Damages in the Bhavani and Noyyal Basins (1880s-2000s) — Velayutham Saravanan 199 Land Tenure, Land Use and Input Intensity in Orissa — Jyotirmayee Kar 239 Book Reviews Hinduism: A Gandhian Perspective. M V Nadkarni — Manohar Yadav 260 Local Democracy in India: Interpreting Decentralization. Girish Kumar — Anand Inbanathan 266 Management in New Age: Western Windows, Eastern Doors. Subhash Sharma — R S Deshpande 268 Poverty Mapping in Rajasthan. P C Bansil — Vidya Sagar 272 Agricultural Transformation in North - East India. M A Salem — S R Keshava 275 Critical Issues in Communication: Looking Inward for Answers, (Essays in Honour of K E Eapen). Srinivas R Melkote and Sandhya Rao (eds) — Surekha Sule 277 Books at a Glance 281-284 India’s Long-Term Growth Experience – Lessons and Prospects. Sadiq Ahmed. Harvest Song. Sabitri Roy. Translation of the Paka Dhaner Gan. Chandrima Bhattacharya Adrita Mukherjee. Strategies for Human Development in India – Public Support for Food Security: The Public Distribution System in India. N Krishnaji and T N Krishnan (eds). The Trauma and The Triumph – Gender and Partition in Eastern India. Jasodhara Bagchi and Subhoranjan Dasgupta (eds). Individuals, Values, Inequality and Governance Brickbats and Bouquets for Developments in Mainstream Economics♣ N S S Narayana* Abstract This paper surveys some of the controversial issues with regard to the treatment of the individual in economic theory. The discussion also includes personal and social values, inequality and incentive payments. It also discusses corruption and social costs as (un)ethical aspects of governance. Drawing attention to the divide made between orthodox mainstream economics and heterodox economics, the paper argues that mainstream economics too with the aid of the "representative individual" has been increasingly concerned with adequate treatment of real individuals. Methodologies such as aggregation over individuals pose the same problems for both schools of thought. When the social issues such as inequalities are to be analysed, neither framework may be adequate; and while specific modelling of individuals' psychological actions, which have economic relevance, is important, it is equally important to model the economic consequences of governments' actions. Introduction Like air, economics too touches every individual's life. However some critics usually point out that traditional micro/macroeconomic theories often work in terms of 'representative individual' or 'abstract individual', and the 'real individual' is hardly noticeable. How far the representative/abstract individual really represents the real individual - turns out to be an important question. Such criticism is based on the view that the orthodox economics (mostly mainstream neo-classical economics) cannot capture the complex economic phenomena, which can be explained only when human behaviour personally as well as socially is adequately taken into account. Discussing the Walrasian system and capital theory, Joan Robinson (1970) said, "… the harm that the neo-neo- ♣ Invited Paper for the Conference on Human Values in Economics and Related Disciplines, Department of Economics, Sri Satya Sai Institute of Higher Learning, Prasanthi Nilayam, Andhra Pradesh, February 2007. Thanks are due to Professors Viswanath Pandit, R.S.Deshpande and an anonymous referee of this journal. * Economic Analysis Unit, Indian Statistical Institute, Bangalore. 122 Journal of Social and Economic Development July - Dec. 2007 classicals have done is, precisely, to block off economic theory from any discussion of practical questions." This scepticism continues even today. Economists "tend to constrain their attention to a very narrow and empirically questionable view of human motivation." - Fehr and Falk (2002). Heterodox economists claim that their school of thought (largely institutional economics, Marxian and socialist economics, evolutionary economics, experimental economics, etc.) is better suited to explain the complex economic behaviour of the individuals. The divide in economics is sometimes expressed as 'Western economics' versus 'Eastern economics', with the former conceiving the economic activity as providing more and more goods to satisfy a set of given wants (i.e. material progress), and the latter as also concerned with traditionalism in addition to the wants satisfaction. See Vickery (1953) for more on this divide. This paper mainly deals with the controversial perspectives as noticeable in the economic literature with regard to treatment of individuals, their values, whether inequalities are justifiable, and ethics of governance. In section 1 it covers treatment of individuals in economics, in section 2 individuality, values and inequality, and in section 3 corruption and social costs as unethical aspects of the governance. Section 4 summarises our main arguments. The discussion below does not cover philosophic perspectives on these issues; therefore Locke, Hume, Russel etc. are not woken up here1. I. Treatment of Individual in Economics Which system individuals prefer? We begin with the issue of individual preferences for economic systems. Discussing consumer's sovereignty, Joan Robinson (1964) distinguished between capitalist (market) and socialist systems with regard to how far they satisfy what exactly the individuals in a society demand. According to her, in capitalist system the production initiatives, usually lying with the producers, would not be responsive to consumer needs. She argued for developing a class of functionaries in a planned economy to satisfy consumers. "They could keep in touch with the demand through the shops; market research, which in the capitalist world is directed to finding out how to bamboozle the housewife, could be directed to discovering what she really needs; design and quality could be imposed upon manufacturing enterprises and the product mix settled by placing orders in such a way as to hold a balance between economies of scale and variety of taste. No one who has lived in the capitalist world is deceived by the pretence that the market system ensures consumer's sovereignty. It is up to socialist economies to find someway of giving it reality." Thus in Robinson's view, in a capitalist system, individual preferences are usually bypassed and / or constrained to the extent of consumers living according to the producer's preferences instead of their own. In other words, individuals as Vol. 9 No.2 Narayana: Individuals, Values, Inequality and Governance 123 consumers, though not as producers, are likely to lose their identity in a capitalist world. If Robinson's
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