Economic Development and Planning Publisher's Note Two further volumes of ESSAYS IN HONOUR OF JAN TINBERGEN, also edited by Willy Sellekaerts, are published simultaneously: INTERNATIONAL TRADE AND FINANCE and ECONOMETRICS AND ECONOMIC THEORY. Jan Tinbergen Economic Development and Planning Essays in Honour of Jan Tinbergen Edited by Willy Sellekaerts Palgrave Macmillan Editorial matter and selection © Willy Sellekaerts 1974 Chapter 1 © Irma Adelman and Cynthia Taft Morris 1974 Chapter 2@ Bela Balassa 1974 Chapter 3 © V. S. Dadajan 1974 Chapter 4 @ John C. H. Fei and Gustav Ranis 1974 Chapter 5 @ Karl A. Fox 1974 Chapter 6@ Arnold C. Harberger 1974 Chapter 7 @Harry G. Johnson 1974 Chapter 8 @ H. Leibenstein 1974 Chapter 9@ John Letiche 1974 Chapter 10 @ Hans W. Singer 1974 Softcover reprint of the hardcover 1st edition 1974 978-0-333-14976-8 All rights reserved. No part of this publication may be reproduced or transmitted, in any form or by any means, without permission. First published 1974 by THE MACMILLAN PRESS LID London and Basingstoke Associated companies in New York Dublin Melbourne Johannesburg and Madras SBN 333 14976 9 ISBN 978-1-349-01935-9 ISBN 978-1-349-01933-5 (eBook) DOI 10.1007/978-1-349-01933-5 Contents Preface vii Introduction Bent Hansen ix 1 The Derivation of Cardinal Scales from Ordinal Data: An Application of Multidimensional Scal­ ing to Measure Levels of National Development Irma Adelman and Cynthia Taft Morris 1 2 Project Appraisal in Developing Countries Bela Balassa 41 3 A Long-Term Macroeconomic Forecasting Model of the Soviet Economy V. S. Dadajan 61 4 Technological Transfer, Employment and Develop- ment John C. H. Fei and Gustav Ranis 15 5 Combining Economic and Noneconomic Objectives in Development Planning: Problems of Concept and Measurement Karl A. Fox 104 6 The Case of the Three Numeraires Arnold C. Harberger 142 7 An Informal Classical Model of the Current Eco­ nomic Development Problem Harry G. Johnson 157 8 Efficiency Wages, X-Efficiency, and Urban Unem- ployment H. Leibenstein 168 9 Dependent Monetary Systems and Economic Devel­ opment: The Case of Sterling East Africa John Letiche 186 10 International Policies and their Effect on Employ- ment Hans W. Singer 237 Bibliography of Jan Tinbergen 251 Index 263 Preface In 1969 Ragnar Frisch and Jan Tinbergen were selected to share the first Nobel Prize in Economics. As former students of Professor Tinbergen my wife and I decided to honour him by compiling and editing a collection of previously unpublished articles, written by leading economists. In order to create a lasting monument to Jan Tinbergen we decided to use the royalties from the volume to create a scholarship fund from which outstanding Dutch students in economics will receive financial assistance during their first year of study in the North American university of their choice. Further details will later be arranged with the Netherlands School of Economics in Rotterdam. Several North American and European economists were invited to write a paper, preferably focusing on Tinbergen's pathbreaking work in international trade, economic develop­ ment and planning, econometrics and economic theory. Most invited economists readily accepted the invitation. I thank all the contributors for their continuous interest and spontaneous co-operation during the two years between the mailing of the invitations and the completion of the manuscript. Although a Nobel Prizewinner does not need to be introduced to the scholars of his discipline, I decided to include in this collection of essays a paper written by Bent Hansen, in which he not only skilfully appraises Professor Tinbergen's contributions to economics, but also pictures Tinbergen the man as a humani­ tarian idealist, a worthy candidate for the Nobel Peace Prize. I thank the Swedish Journal of Economics, and in particular Peter Bohm, for giving me permission to reprint Bent Hansen's paper. As an appendix to each of the three volumes of this Festschrift, a selected bibliography of Jan Tinbergen's contri­ butions to economics has been included. In addition to the contributors, many persons have helped to make the publication of this collection of essays in honour of Jan Tinbergen possible. I thank Professor Dole Anderson, Director of the Institute for International Business and Econ­ omic Development of Michigan State University, who supported viii Preface my idea and made the facilities of the Institute available to invite the contributors. The Faculty of Social Sciences of the University of Ottawa also contributed to the success of this volume. I thank Patrick Meany of The Macmillan Company of Canada for his assistance in the publication of the Festschrift. Above all, my wife, Brigitte made the publication of this Festschrift feasible, by providing invaluable technical and editorial assistance. WILLY SELLEKAERTS Ottawa, November 1971 Introduction JAN TINBERGEN An Appraisal of his Contributions to Economics* BY BENT HANSEN PROFESSOR Jan Tinbergen was born on 12 April 1903. He graduated from Leiden University where he also obtained his doctoral degree. From 1929 to 1945 he was, with certain interruptions, an official of the Netherlands' Central Bureau of Statistics. As from 1933 he has also been a professor of economics at the Netherlands School of Economics at Rotter­ dam. During the years 1936 to 1938 he served on the staff of the League of Nations at Geneva. At the end of World War II, in 1945, he was appointed Director of the newly created Central Planning Bureau of the Netherlands. He resigned from this position in 1955 and has since then - besides teaching and research - served as an adviser and consultant to numerous governments and international organisations. As from 1966 he is the Chairman of the United Nation's Committee for Develop­ ment. Planning. A considerable number of universities have awarded him honorary degrees. The message that Professors Ragnar Frisch and Jan Tin­ bergen were selected to share the first Nobel Prize in Economics was received by the profession with great satisfaction. Few * Reprinted with the permission of the Swedish Journal of Economics. The original reference: Hansen, Bent, 'Jan Tinbergen: An Appraisal of his Contributions to Economics', Swedish Journal of Economics, LXXI (1969) 325-36. X Economic Development and Planning contemporary economists are respected as they are. Few, if any, can look back to a stream of pathbreaking contributions to economics comparable to those achieved by these two men. And their work has been so closely related that it was only natural that they should share the prize. Thus the choice of the Swedish Academy of Science was both wise and correct. It was a happy choice, too, because both Ragnar Frisch and Jan Tinbergen increasingly have turned their attention towards development policy, searching for feasible solutions to the economic policy problems of the poor countries and it is in this capacity that they are best known nowadays outside the profession. It will always remain a matter of subjective judgement what exactly constitutes a great contri­ bution to economics and, more generally, to science. But it would certainly be most natural for the Academy to consider not only the extension of knowledge for knowledge's own sake, but also its applied aspects, its potential benefits to mankind. At a time when funds for civil development aid tend to dry up and developed countries self-righteously begin to 'lose patience' with their earlier possessions and tum their back to the Third World mess, it is gratifying to see the problems of the poor countries recognised - if not explicitly then certainly by implications - as the important scientific problem of economics rather than turnpikes, double-switching and other esoteric matters. Frisch and Tinbergen have both contributed to the pure theory of economics and its applications, for developed as well as under-developed economies. The whole range of economists, from the celebrities in the ivory towers and think-tanks of the rich countries to the anonymous people doing the dirty development work in the poor countries, may therefore all of them rightly feel that 'our men' have been chosen for this unique honour. But nobody will probably feel this more strongly and with more justification than the latter category. This makes the choice of the Academy particularly satisfactory. 1. Tinbergen's stages of development It is convenient to divide Tinbergen's activities and contribu­ tions to economics into three groups which also happen to represent consecutive periods of his career (see above). During Introduction xi each period he made pioneering contributions to economics and exerted a profound and lasting influence within the field to which he devoted his attention and energy. During each period he helped to set economics on a new track. Each time his contributions opened up new vistas for both economic theory and economic policy. His work paralleled to some extent that of Ragnar Frisch. They were always in close contact and in­ fluenced each other on several occasions. In the sequel we shall therefore meet Frisch's name several times. The first period includes the years from the end of the twenties to World War II. This was the period when Professor Tinbergen together with a few other economists and statisticians created econometrics as a science. During the war years Tinbergen was by and large isolated from international contacts, but he used this time in preparing himself for the second period, the decade 1945 to 1955 when he, as the Director of the Central Planning Bureau, laid the foundation for modern short­ term economic policies. The third period, beginning in the middle fifties and, hopefully, continuing many years ahead, Tinbergen has devoted almost exclusively to the methods and practice of planning for long-term development, in particular of under-developed countries, and international economic cooperation.