Agrarian Economics

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Economic Theory and Agrarian EconomicsAuthor(s): N. Georgescu-RoegenSource: Oxford Economic Papers, New Series, Vol. 12, No. 1 (Feb., 1960), pp. 1-40Published by: Oxford University PressStable URL: http://www.jstor.org/stable/2661989 .

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ECONOMIC THEORY AND AGRARIANECONOMICSBy N. GEORGESCU-ROEGEN

AccORDING to some recent studies, more than 1P3billion people still livein a self-subsistence conomy, hat is, as peasants. Most of these also liveon thevergeofstarvation. Asia and Africa,which together epresentmorethan 60 per cent. of the world's population, produce only a little morethan 30 per cent. of the world's agriculturaloutput. Conservative esti-matesshowthat ifbasic nutritionalneeds for he entirepopulation of theworldare to be met, t is necessarythat the foodproductionbe increasedby at least 30 per cent.' Neither the overwhelming umerical mportanceofpeasant economynor the scarcityof food is a new economicdevelop-mentpeculiarto our owntime.In spiteof all this, agrarianeconomics-by which mean the economicsof an overpopulated agriculturaleconomy and not merely agriculturaleconomics-has had a very unfortunatehistory. Non-capitalist econo-mies simply presentedno interestfor Classical economists. Marxists,onthe other side, tackled the problem with their characteristicmpetuosity,but proceeded frompreconceived ideas about the laws of a peasanteconomy. A lessknown choolofthought-Agrarianism-aimed at study-ing a peasant economy and only this. An overt scorn forquantitativetheoretical nalysis preventedthe Agrariansfromconstructing propertheoryoftheirparticular object ofstudy,and consequentlyfrommakingthemselves nderstood utsidetheir wncircle. There remain heStandardeconomists as a recentpracticecalls the members fthemodern conomicschoolforwhich neitherneo-ClassicalnorGeneral Equilibrium suffices sa single abel). Of ate, as economicdevelopmenthas becometiedup withprecarious nternationalpolitics,Standard economists have been almostcompelled o come togripswiththeproblemofunderdeveloped conomies,and hencewithnon-capitalist conomics. But in their pproach theyhavegenerally ommitted he same typeoferror s Marxists.Thus, the agrarianeconomyhas to thisday remained a realitywithouta theory.And thetopical interest fa sound economicpolicy n countrieswitha peasant overpopulationcalls for such a theoryas at no othertimein history. But one cannot aspire to present a theoryof a reality ascomplex as the peasant economywithin the space of an article. My farmore modest aim is to point out the basic featuresthat differentiaten

1 The above data are foundin W. S. and E. S. Woytinsky,WorldPopulation and Pro-duction,New York, 1953, pp. 307, 435passim.4520.4 B


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2 ECONOMIC THEORY AND AGRARIAN ECONOMICSoverpopulatedagricultural conomyfrom n advanced economy. I haveendeavouredto presentthe argument n terms of the familiar nalyticaltools of Standard theoryor others akin to these. The brief historicalcritique which prefacesthe theoreticalanalysis is intended to place thelatter n a betterperspective,particularly s concernspolicyimplications.

I. Theory, Reality,and Policy1. Theory and Reality. Theory s in thefirst nd last place a logical fileofour factualknowledgepertaining o a certainphenomenological omain.'Onlymathematics s concernedwith the propertiesof 'any object what-ever', forwhich reason since Aristotle's time t has been generallyplacedin a special category by itself. To each theory, therefore, here mustcorrespond specificdomain ofthe reality. In any science,the problemofprecisely ircumscribinghisdomainfaceswell-known ifficulties.Wherephysicsends and chemistry egins,and where economicsends and ethicsbegins, re certainly horny uestions, lthoughnot equally so. Here,how-ever, wantto discuss a quite pedestrianquery pertaining o the problemof the properdomain of a theory. And this query is: Can an economictheorywhichsuccessfully escribesthe capitalistic system,for instance,be used to analyse successfully nothereconomic system, ay feudalism?Let us observe that a similar question hardly ever comes up in thephysical sciences, for no evidence exists to make physicistsbelieve thatmatter ehavesdifferentlyoday than yesterday. In contrast,we find hathumansocieties vary with both timeand locality. To be sure, one schoolof thoughtstill argues that these variations are only differentnstancesof a unique archetype nd that consequently ll social phenomenacan beencompassed by a single theory. This is not the place to show preciselywheretheweakness of the various attempts n this direction ies. Sufficeit to mentionhere that when the theoriesconstructedby these attemptsdo notfail nother espects, hey are nothingbut a collection fgeneralitiesofno operationalvalue whatever. As Kautsky once judiciouslyremarked,'Marx designedto investigate n his "Capital" the capitalisticmode ofproduction and not] the formsof productionwhich are common to allpeople, as such an investigationcould, for the most part, only result incommonplaces.'2For an economic theoryto be operationalat all, i.e. tobe capable of serving as a guide forpolicy, it must concern tself witha specific ypeof economy,not with several types at the same time.Whatparticular eality s describedby a given theory an be ascertained

1 That is not to deny that theory may serve otherpurposes,but these are by-productsof its essentialnature.2 Karl Kautsky, The Economic Doctrinesof Karl Marx, New York, 1936,p. 1.


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N. GEORGESCU-ROEGEN 3only from the latter's axiomatic foundation. Thus, Standard theorydescribes heeconomicprocess ofa society nwhich the ndividualbehavesstrictlyhedonistically,wherethe entrepreneureeks to maximize his cash-profit, nd where any commodity an be exchanged on the market t uni-formprices and none exchanged otherwise. On the other hand Marxisttheory efers o an economycharacterizedby classmonopolyofthemeansofproduction,money-making ntrepreneurs,marketswithuniform ricesforall commodities, nd complete ndependenceof economicfromdemo-graphic factors.' Taken as abstractions of varying degree,both theseaxiomatic bases undoubtedly representthe most characteristic raits ofthe capitalistsystem.2 Moreover,farfrom eing absolutelycontradictory,they are complementary,n the sense of Bohr's Principle ofComplemen-tarity.3This is preciselywhy one may speak of Marx as 'the flowerofClassical economics'.4A far more mportant bservation s that the theoreticalfoundationsofboth Standard and Marxist theories consist of cultural or, if you wish,institutionaltraits. Actually, the same must be true of any economictheory. For what characterizes n economicsystem s its institutions, otthe technology t uses. Were this not so, we would have no basis fordistinguishing etween Communismand Capitalism, while, on the otherhand, we should regard Capitalism of today and Capitalism of, say, 50years ago as essentiallydifferentystems.As soon as we realize that for economictheoryan economicsystem scharacterized xclusively by institutional raits, t becomes obvious thatneitherMarxist nor Standard theory s valid as a whole for the analysisof a non-capitalistic conomy, .e. of the economyof a societyin whichpart or all ofthe capitalist nstitutions re absent. A proposition feithertheory may eventuallybe valid fora non-capitalisticeconomy,but itsvaliditymust be establishedde novo neach case, eitherbyfactualevidenceor by logical derivationfrom the corresponding xiomatic foundation.Even the analytical concepts developed by thesetheoriescannot be usedindiscriminatelyn the descriptionof other economies. Among the fewthat are of general applicabilitythere is the concept of a production

1 I refer o the fact that the assumptionof a permanentreserve rmy simplymeans thatat the subsistencewage-ratethe supplyof abour is 'unlimited' both in the short and in thelong run, while Classical economics held that this was true only in the long run. Infra,p. 18n.2 We have leftout the surplusvalue propositionfromthe Marxist axioms because thisproposition-as we shall argue later-belongs to feudalism,not to capitalism.3 This principleby whichBohr overcame the impasse created by the modern discoveriesin physicsstates that reality cannot be comprehended n a single picture' and that 'onlythe totalityof the phenomena exhausts thepossible information bout objects'. Niels Bohr,Atomic hysicsand Human Knowledge,New York, 1958, pp. 40 passim.4 Terence McCarthy n the Preface to the English translationofK. Marx, A HistoryofEconomic Theories,New York, 1952, p. xi.


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4 ECONOMIC THEORY AND AGRARIAN ECONOMICSfunction ogetherwith all its derivednotions. But this s due to thepurelyphysical nature of that concept. Mosteconomic concepts,on the contrary,are hard to transplant. 'Social class' seems the onlyexception, obviouslybecause it is inseparable from society' itself save the society of RobinsonCrusoeand probablythat of the dawn of the human species). This is notto say that Marxist and Standard theories do not provide us with usefulpatternsfor sking the rightkind ofquestionsand for eeking he relevantconstituents f any economicreality. They are, after ll, the onlyelaborateeconomictheoriesever developed.All this may seem exceedingly elementary. Yet this is not whatStandard and (especially) Marxist theorists have generally done whenconfronted ith the problemof formulating oliciesfor he agrarianover-populated countries. And, as the sayinggoes, 'economics s what econo-mists do'.

2. A Reality without Theory. As has often been remarked,econo-mists of all epochs have been compelled by the social environment o befar moreopportunistic han theircolleaguesin otherscientific ields,withthe resultthat their attention has been concentratedupon the economicproblemsof their own time.' And as the transitionof economic sciencefrom he purely descriptive i.e. taxonomic) to the theoretical tage coin-cided with the period duringwhich in Western Europe feudalism wasrapidly yieldingto capitalism,it was onlynatural that the latter shouldbecometheobjectiveofthe first heoretical conomists. That mayexplainonly why most Western economists have been interested n developingthetheoryof the capitalistsystem,but notwhynone attempteda theoryofa non-capitalist conomy. The only explanationof this omission s theinsuperabledifficultyn getting t the culturalrootsof societyother hanthat to which one actually belongs. And, as we have seen, an intuitiveknowledgeof the basic cultural traits ofa communitys indispensableforlayingout the basis of its economictheory.By its very nature,a peasant village is the milieu least fit for modernscientific ctivity. The modern scientisthad therefore o make the townhis headquarters. But, fromthere,he could not possiblyobservethe lifeofa peasant community. London, for nstance,offers ndeed 'a favorableview . .. forthe observationof bourgeois society'-a circumstance m-mensely ppreciated by Marx2--but not even a pinholethroughwhichto1 The point findsan eloquent illustration n the vogue that the problem of economicdevelopmenthas recently cquired among Westerneconomists: we have reached the pointwhere the developmentofunderdevelopednations is as much an economic problemof theWest as of these othernations.2 K. Marx, A Contributiono the CritiqueofPolitical Economy,Chicago, 1904, Preface,p. 14.


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N. GEORGESCU-ROEGEN 5look at a peasant economy. Even if, unlike Marx, an economistwas bornin a village, he had to come to town for his education. He thus becamea true townee himself, n the process losing most, if not all, verstehen fthe peasant society. It was natural, therefore, hat to Marx as well as toother Western economists to those coming from a peasantless country,especially) the peasant should seem 'a mysterious, trange, often evendisquietingcreature'.' Yet none showed Marx's unlimited contempt forthe peasantry. For him, the peasantry was just a bag of potatoes, nota social class. In the CommunistManifesto he denounced 'the idiocy ofrural ife' to the fourcornersofthe world. But these Marxist hyperbolesapart,there s, as we shallpresently ee, a spotlessrationalebehindMarx sattitude towardsthe peasant.The difference etween the philosophyofthe industrial own and of theagricultural ountrysidehas oftenattractedthe attention of sociologistsand poets alike.2 But few have realized that this differences not likegoing to another church, nd that it involves every concreteact concern-ing production nd distribution s well as social justice. Undoubtedlythebasis of this differences thefactthat the ivingNature imposesa differenttype of restriction pon homoagricola than the inert matterupon homofaber.To begin with,no parallelismexists between the law of the scale ofproduction n agriculture nd in industry. One may grow wheat in a potor raise chickens n a tiny backyard,but no hobbyistcan build an auto-mobilewithonlythe toolsofhisworkshop. Whythen should theoptimumscale foragriculturebe that of a giant open-air factory? In the secondplace, the role of the time-factors entirelydifferentn the two activities.By mechanicaldevices we can shorten he time forweavingan ell ofcloth,but we have as yet been unable to shorten he gestation periodin animalhusbandryor (to any significant egree)theperiodformaturityn plants.Moreover, gricultural ctivity s bound to an unflinching hythm,whilein manufacturewe can well do tomorrowwhat we have chosen not to dotoday. Finally,there s a difference etweenthetwosectorswhichtouchesthe rootofthemuchdiscussed aw ofdecreasingreturns inthe evolution-ary sense). For industrialuses man has been able to harness one sourceof energy fteranother,fromthe wind to the atom,but forthe type ofenergy hat is neededby life tselfhe is stillwholly dependenton the most'primitive' source,the animals and plants around him. These brief ob-servationsare sufficiento pinpointnot only why the philosophyof the

I Karl Kautsky, La Question graire, Paris, 1900,p. 3.2 In the Western literature, Oswald Spengler is probably the best known author forplacing a greathistorical value upon this difference. See especially his The Decline of theWest,New York, 1928,vol. ii, ch. iv.


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6 ECONOMIC THEORY AND AGRARIAN ECONOMICSman engaged in agriculturediffers rom hat ofthe townee but also whyagriculture nd industry till cannot be subsumed under the same law.Whether future cientific iscoveriesmay bring ife to the denominatorof inert matter s, forthe time being, a highlycontroversial-and no lessspeculative-topic.Probably the greatest error of Marx was his failure to recognize thesimplefactthat agriculture nd industryobey differentaws; as a resulthe proclaimed that the law of concentration pplies equally well to in-dustry nd agriculture.' To repeat, Marx had no opportunity o observea peasant economy. Nor is there anything n his vast literary ctivity toindicate that he ever studied a non-capitalistagriculture.2 The analysisof rent n Capital is based entirelyon capitalist production even duringMarx's brief xcursion nto peasant agriculture.3Probably no other theoretical berrationhas been refutedby historicaldevelopments as promptly and as categoricallyas the Marxist law ofconcentration n agriculture. During the second half of the nineteenthcenturyone census after another revealed that in agriculture oncentra-tion was continuously decreasing while the peasants instead of beingproletarianizedbecame landowners n increasingnumbers. In Kautsky'sown words, 'the capitalists were on the increase,not the proletarians'.The indictmentwas all the more unappealable sincethis phenomenonwastaking place in capitalist countrieswithout any planned intervention.That convinced everyone save the ultra-orthodoxMarxists that the con-centrationaw is false.

3. Policy and Factitious Theory. The aftermath f 'the sorestex-perienceof Marxist doctrine'-as Veblen labelled the refutationof theconcentration aw4-can be best appraised in the light of the Hegeliantenetwhich s the cornerstone ftheMarxist doctrine. To recall, accordingto that tenet it is beyond man's power to change the course of history.This is whyMarx arguedthat socialism is to come as thenaturalproductofthe evolutionofthe relationsof production,not because the interestsoftheworking lass would in any sense be superior o or more mportantthanthoseofcapitalists. Marx even scoffed t those who wanted to basea socialist platformon such 'unscientific' argumentsas greater socialjustice. But, always accordingto the MarxistHegelianism,man can speedup the historicalprocess so as to shorten the periods of growing-pains.A right olicymustbe based on the acceptance of the inexorableoutcome.

K. Marx, Capital, Chicago, 1906, i, ch. xiv, sec. 10.2 Kautsky, La Question graire,p. xii. Also F. Engels in the Preface to the third volumeof Capital (Chicago, 1909, p. 16). 3 Marx, Capital, iii, ch. xlvii, sec. 5.4 Thorstein Veblen, The Place of Science in Modern Civilization,New York, 1919, pp.450 ff.


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N. GEORGESCU-ROEGEN 7Because of the belief n the concentration aw in agriculture, ocialistswere advised to more than welcome any measure that would tend toproletarianize the peasants so that the advent of socialism would behastened. But since the peasant did not want to hear ofproletarianiza-tion,Socialistpartiesfound hemselves ejectedeverywhere ythepeasantmasses. Failures on the electoral front,combined with the mountingevidence against the Marxist theory, brought about the internal crisisimownas the Agrarian Question. At the Frankfurt 1894) and Breslau(1895) congresses, he Question almost wrecked the unity of the party.'Even if officiallyhis unitywas then saved, the Question continued tomake lifedifficult orMarxism. In the end Marx himselfwas obviouslydisturbedby the overwhelming vidence and the mounting riticism, orin the last two years of his life he painfully ought to amend his theory,but not so as to jeopardize the political movementwhich he had set inmotion and to which he was attached fromfirst o last.2 But his desirewas unrealizable,because contradictory. After Marx's death the partymade great efforts o cover up the AgrarianQuestion. They vacillatedbetweenLeninistopportunism, y proclaiming oudlythat no one intendsto destroythe peasant, and various dialectic circumvolutions imed atprovingthat there is concentration lthough in an entirelynew sense.3The AgrarianQuestion was thus kept on a low flameuntilStalin decidedto solve it by proclaiminga holy war against the peasants, a war withwhichneo-Marxismhas since become almost synonymous.It is hard not to see in this momentous decision the ultimateproductof Marx's scornfor the peasant. Indeed, this scorn constituted lasting

1 For the AgrarianQuestion onemay consultKautsky, La Question graire, and G. Gatti,Le Socialisme et l'agriculture, aris, 1902. The firstworkis importantbecause it appearedonly a few years afterthe Breslau Congress (German edition, Die Agrarfrage, tuttgart,1899), where Kautsky had a decisive role in defeatingthe 'deviationist' motion. Gatti,on the otherhand, was a prominentSocialist who ultimatelyembraced the non-Marxistview on agriculture.2 Marx's public concession,thoughsomewhatveiled, is found n the prefaceto the 1882Russian edition of theCommunistManifesto K. Marx and F. Engels, Correspondence,845-18.95,New York, 1935, p. 355). A clearer expressionof the deviation from the Marxistlimb' ame in a letterMarx wrote n 1881 to Vera Zasulich in answer to a definite uestionregarding he necessityof speedingup the proletarianizationof the Russian peasant. Theletter,however,was published by the Marx-Engels Institute only n 1924, whenthe strugglebetween Russian Marxists and their adversarieswas long since over. (D. Mitrany,MarxAgainstthePeasant, The Universityof NorthCarolina Press, 1951, pp. 31-33, was the firstto draw the attentionofthe English-speakingreaderto this letter.)We know also that in his last yearsMarx decided to learnRussian (and apparentlyevenTurkish)to have access to the original ourcesconcerning he agrarianproblemsofEasternEurope (Correspondence,. 353). For morethan one reason, it was too late.3 An epitome of these endeavours is offered y Kautsky, La Question graire. He arguedthat, although the concentration aw is not true as to the size of the holdings, it is trueas to the global ownership,with more landowners having important outside sources ofincome. Then he threweverything verboard by arguingthat peasant agriculturemustdisappear in any case because the optimumscale of production s that of latifundia.


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8 ECONOMIC THEORY AND AGRARIAN ECONOMICSferment orthe thinking fMarxist eaders. Quite early, none other thanEngels spoke of the necessity or he proletariat to crush generalpeasantuprising'.1Be this as it may, the Stalinist war, which by its number of victimssurpasses all otherwars known to history, ouldnot have foundsufficientmomentum n the cultural opposition between the urban and the ruralsectors. Nor could this war feed on 'sackingtherich',forprecisely n theregions where Stalinism has till now spread the capitalist-bourgeois lasswas paper-thin, nd the richpeasant quite a rarity. The war must havehad othersprings.That the interests f the town conflictwiththose of the countryside sby now a well-established act. However, it is not always realized thatthe price-scissors o not tell the whole story. For this story,we mustobserve that food is indispensable,whilethe need for ndustrialproductsis secondary, f not superfluous.To obtain its foodstuff rom he agricul-tural sector, nd moreover o obtain it cheaply, onstitutes real problemfor the industrialcommunity. In the ultimateanalysis, 'cheap bread' isa crydirected gainst the tiller f the soilrather hanagainstthe capitalistpartnerof the industrialworker. In some circumstances his conflictmaybecome very spiny. And it is permanently piny in the over-populatedcountrieswhere the income of the masses allows only the satisfactionofthe mostelementary eeds and wherethepopulationofthe town s undulyswollen by a rural exodus. That has been the situation n all countries-with one or two exceptions-where Stalinismhas come to power. And itis in this situation that the war against the peasant found its neededspring.2Clearly, heStalinistformula onstitutes solution at least a temporaryone) of the conflict etween the industrialand agricultural ectors. Butthe solution s based on the primacyof the interests fthe industrial ndbureaucratic sectionsof the society,not on some evolutionaryaw regard-ing the inexorable proletarianization of the peasants.3 Consequently

1 Quoted in Mitrany,op. cit.,p. 219.2 The conflict etween the interestsof the agriculturaland industrial ectors exists alsoin the advanced economies, ncluding he United States. Cf. J. D. Black, Discussion, Pro-ceedings f he ifth nternatio'nal onferencefAgriculturalconomists, ondon, 1939,pp. 86 f.The onlydifferences that n theseeconomies the conflict s attenuatedby thehigh ncome, ndtherefore t can be resolved by such methods as the Agricultural rice Support Programme.Overpopulation is the necessary conditionfor he conflict o become a social visviva.3 A London tailor, J. G. Eccarius, Eines ArbeitersWiderlegung ernationaldkonomischenLehrenJohnStuartMills, Zurich, 1868, was thefirst o arguethat toguarantee cheap bread'to the industrial worker the peasant must be placed under the dictatorship of the prole-tariat. The book, it is said, enjoyed great prestige among the Marxists duringthe 1870's(see Mitrany, op. cit., p. 15). That Eccarius's view has become the basis of Communistagrarian policy is beyond question: 'general collectivization of the peasants is indeed ameans of ... securing he supplyof food for he towns]' (V. Lenin,SelectedWorks,Moscow,1934-9, vol. xii, p. 13).


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N. GEORGESCU-ROEGEN 9accordingto the very essence of Marxism the Stalinist formulacannotclaim to be 'scientific'.'Marx was, however,aware of the conflictbetween the industrial andagricultural ivisionsofsociety. He once remarkedquite enpassant that'the whole economic historyofsociety s summedup in the movementofthis antithesis thedivision betweenthe cityand the countryside]'.2 Thisremark s extremely mportant. It shows thatMarx,foronce, recognizedthe existenceof an antithesiswhich-as we argued in the precedingsec-tion-seems rooted nthepermanent onditions f thehumanspecies, andwhich should therefore utweigh any antithesispeculiar to a particulareconomic ystem. Unfortunately,Marx did not explorethispointfurtherto explain how hewouldhave envisagedthe cientific intheHegelian sense)solutionofthat antithesis.

4. Policy without Theory. In the first alfofthe nineteenth entury,while theWest grew ntensively reoccupiedwith the lot ofthe industrialmasses, Russia witnessed the rise of a social movementconcerned solelywith the peasant. Time and again, essentiallydifferent conomic condi-tions imposed entirelydifferent reoccupations. It was not, therefore,because of the much discussed intellectualisolation of Russia that thefoundersofthis new ideologyborrowednothingfromWestern economictheories. They simply drew the logical consequencesfromthe fact thatthese theorieswere moulded on a differentconomic reality. But as theirintellectual nheritancecontainednothing regardingthe economics of apeasant community, he new social reformers ad to start from cratch.They soondiscovered hattheirpersonalsocial backgroundcould not helpthemin grasping the problems n whichthey were interested, nd as aconsequencedecided to go 'to the people'. This slogan earned them theRussian name of Narodniki,but outside Russia they became generallyknown as Populists.3As Marxism began to acquire a basis of its own in Russia, the incom-patibility between Marxist theoryand the Russian reality gave rise toa fierce nd more lasting conflictbetweenNarodniki and Marxists thanthat between the orthodox Marxists and the AgrarianSocialists in theWest. Some Narodnikidid become attractedby Marxism, primarilybe-cause itsprogrammatic mplications nd social dialectics appealed to theirrevolutionary pirit. But as it was impossibleto fit hepeculiaritiesof anagrarian economyinto the Marxist frame,most of these succumbed as

1 As we shall see, neither can it be justifiedon positive welfare grounds, nfra, p. 37n. 2, p. 38 n. 1. 2 Marx, Capital, i, ch. xiv, seo. 4, p. 387.3 Alexander Herzen, who in 1847 went into exile because of his political activity, isgenerallyregarded as 'the founderof Russian " Socialism ", or "Narodnikism ', as Leninput it. Quoted Corre8pondence,. 285.


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10 ECONOMIC THEORY AND AGRARIAN ECONOMICShetero-Marxists.The great majorityof theNarodniki,however,refused obe lured into denyingthe specific raits of that economy. And thus theAgrarian ideology came to be identifiedwith a double negation: notCapitalism, not Socialism. It is precisely this double negation that hasbeen called into question by Westerneconomists,whetherMarxist or not.Mitrany observes that Marx's view on peasant agriculture combines'the townsman's contempt for all things rural and the economist's dis-approval of small scale production'.1 But this is true for most Westernsocial scientists. Add to this, especially,their usual disdain for any ideathat is not presented througha mathematical model, and you have theexplanation for the misunderstanding f the Agrarians by the West.2Indeed the Narodniki, ike the Agrariansof latter days, have not onlyfailed to construct theoryof the peasant economy-as the othershavedone for capitalism-but they have distinguished hemselves by a lackof interest n, almost a spurn for, nalytical preoccupations. They reliedexclusively on the intuitive approach, on the verstehen f the peasant'sWeltanschauung,much like the German historical school advocated (al-though there was hardly any direct contact between the two schools).Populism, like Marxism, representednot only an economic doctrine buta faith as well. And this faith fed on a strong entimentalundercurrent,on the emotional piety and rustic ties' of its believers.3 All this laidPopulism open to the accusation of romanticism.The particular circumstances n which Narodnikism began its careermay account formuch of its peculiar spirit. But the lack of any truetheorizing n the Populist doctrinewas due moreto the unusual difficultyofcastingthepeasant's economicconduct nto a schemathanto anythingelse. For this we have the testimonyof one of the most praiseworthyRussian Agrarians,Alexander Tschajanov, who gave to one of his worksthe symptomatic itle: Die Lehre von derbduerlichenWirtschaft: ersucheiner Theorie der Familienwirtschaftm Landbau (Berlin, 1932). In theconcludingremarks of this book, in whichhe submits only the variousactivitiesofagriculturalproductionto quantitative analysis, Tschajanovconfesseshis dissatisfaction ver the fact that we still do not possess a

I Mitrany,op. cit., p. 6.2 In thisrespect, t is highly nstructive o compare,for nstance,the analysisof Populismby L. H. Roberts,Rumania, New Haven, 1951, pp. 142ff.,with that by Rosa Luxemburg,The Accumulationof Capital, London, 1959, pp. 271-91. AlthoughRosa Luxemburg was'a more genuine Marxist than any other member of the German movement' (Paul M.Sweezy, The Theory of Capitalist Development,New York, 1942, p. 207), her analysis isfarmore objective than Roberts's.On the Narodniki,onemay fruitfullyonsult also J.Delewski, Les Idees des "narodniki"russes', Revue d'iconomiepolitique,xxxv (1921), pp. 432-62, and above all Mitrany,op. cit.,ch. iv. The memoirs ofthe 'grandmother' of the Russian revolution,Katerina Breshkov-skaia, Hidden Springs of theRussian Revolution, tanford,1931, are interesting s personalhistory. 8 Mitrany,op. cit., p. 40.


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N. GEORGESCU-ROEGEN 11theory fthe economicbehaviour ofthe peasant. He significantlybservesthat the relation between Classical economicsand an economic theoryofa peasant community eems to be similar to that between Euclidian andnon-Euclidiangeometry.Yet he ends with the admissionthat an abstracttheoryofagrarianeconomics cannot easilybe constructed.'Whateverthe explanationforthe outlook of the Agrarians, here s nomoredramaticexampleofthedisasterthat awaitshimwhoinformulatingan economic policy disregardstheoretical analysis, than the well-knownfate of the Agrarianparties of Eastern Europe.

II. Overpopulation: A Re-examination1. The Facts Analysed. The Agrarians ave atalltimes ensed hattheplague of most underdeveloped grarian economies s overpopulation ndthat consequently he problemof a peasant economy s to a largeextenta population problem.2 It is natural, therefore, orus to see whether nanalysis of overpopulationwould not offer lead to the solution of theAgrarianriddle.Whoeverspeaks of 'excess' is naturally expected to define t in termsofa pointof referencewhich n some way mustrepresent normal f notan optimumsituation. But to define normal' or 'optimum' is not easy,especially f one facesa quibblingrelativist. Such a relativistmay argue,for nstance, hattheexcess capacityof a monopolistic ndustrys a fictionbecause all capacity could be used ifmonopolywere removed and a newsystemof distributionwere introduced. A wholly analogous position isadopted by Marx in arguingthat overpopulationexists only relative to'the average needs of the self-expansion f capital . Be this as it may,we must recognizethat the concept of overpopulation presentsunusualdifficulties. ormal (or optimum)population mplies heconceptofnormal(or optimum) ife. And even if thelatterwerenot such an elusive concept,we would still find t impossibleto choose a 'normal' valid for all timesand localities. To avoid the trivial conclusionthat every population isnormal forthe time and place in whichit lives, it is necessaryto adoptsome criterionof normality. This criterionmay be dynamic or static,dependingon theproblemat hand.4Ever since statistical data have been used for comparative purposes,it has become obvious that some agriculturalcountriespresented symp-tomssuggesting he existenceofsome sortofoverpopulation. It has been

1 Op. cit., p. 130. 2 Cf. Tschajanov, op. cit., p. 131, for nstance.3 Capital, i, ch. xxv, sec. 3, p. 695.4 Marx, for nstance, argued that the developed means of communication n the UnitedStates at the middle of the last centurymade that countrymore densely populated thanIndia. Ibid. i, ch. xiv, sec. 4, p. 387.


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12 ECONOMIC THEORY AND AGRARIAN ECONOMICSremarked that given the following ata fortwo prominently griculturaleconomies,as for nstance

Denmark YugoslaviaInhabitants per km.2of arable land 36-6 157*4Wheat yield in quintals per ha. 22 9 11.0

even ifYugoslavia could raise her agriculturalyield to the Danish level,the average Yugoslav would stillhave only one-quarteras muchfood asthe average Dane. This observation has supplied the basis for a crudeconceptof relativeoverpopulationupon whichare based the measuresofoverpopulation in terms of some crop basket as a standard.' As hasgenerallybeen admitted,the concept of relative overpopulationthus de-fined s ambiguous and the procedure for its measure debatable.2 Thechiefdrawbackofthisapproach, however, sthat t sidetracked heanalysisfromthe right direction. Indeed, a differencen the per capitalnationalproduct or a sector of t) may be a symptom f the differenceetween twoeconomicsystems,but by no means an intrinsic o-ordinate f that differ-ence. Otherwise we should regard the economic systemof Belgium asdifferentrom hatof the United States. But thebelief hatthe differencebetweenan agrarianand a capitalist economy s a matter ofdegree only,not ofessence, s stillvery frequent.And yet,the elementsforthe solution of the problemwere not out ofreach. In the 1930's, studies originatingn several countrieswith largepeasantriesrevealed the astoundingfact that a substantialproportion fthe population could disappear without the slightestdecrease in thenational product.3 The closeness of the independent estimates of the8superftuousopulation foreach case shows that we are confrontedwitha real quantitative phenomenon.4 If additional proofof this is needed,one may invoke some relevant 'experiments' historycarried out in vivo.For two years afterthe beginningofhostilities n 1914, agriculturalpro-duction in Russia was maintainedat the pre-war evel, althoughno lessthan 40 per cent. of the able-bodiedmale peasants were n the army.5The

1 Cf. W. E. Moore,EconomicDemography fEasternand Southern urope, Geneva, 1945,oh. iii.2 Ibid., pp. 55 ff.3 Referencesto the earliest studies forPoland and Bulgaria in Doreen Warriner, cono-mic8 of Peasant Farming, London, 1939, pp. 68 f.4 For Rumania, one study (Enciclopedia Romdniei, Bucharest, 1939, vol. iii, p. 60)estimated the percentageof superfluous easant population at 48, another, t 45 (V. Mad-gearu, Evolutia economieiromadeiti dupd rdzboiul mondial, Bucharest, 1940, p. 49). Thefirst stimate was derived fromnational statistical data, but the second was checked bydirect bservationn extensive field-work overing sixty villages chosen at random. Moore,op. cit., pp. 63 f., usingnational data, arrivedat a percentageof 51-4.5 Leonard E. Hubbard, The EconomicsofSovietAgriculture, ondon, 1939, pp. 59, 65.


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N. GEORGESCU-ROEGEN 13same phenomenon ccurred n Rumania duringWorld War II. Wheneveragricultural production collapsed in Eastern Europe during the WorldWars it was solelybecause of the extremerequisitionofdraughtanimals,the difficultyf replacingworn-out mplements, nd, of course,thedistur-bances caused bythemovement farmies. Even thedisappearanceof ometen millionUkrainian peasants duringthe so-called liquidation ofkulaks,although ccompanied also bya radical disturbanceoftheentire conomy,had only an ephemeral nfluence n agriculturaloutput.'Now, to say simplythat part of the population could disappear with-out causing any decrease n output s notsufficientor theoretical harac-terizationof overpopulation. The national product of the United Statescould easily be maintainedat the same level even thougha largepropor-tion of the population were to disappear. The differentiapeciftca etweenthe two situations is that in the latter the national product could beincreased fpeople simply chose to have less leisure, while in the former,not.2 This difference eveals that the situation where the marginalpro-ductivityof labour equals zero is the starting point in searching foradefinition f overpopulation. And that there exist countries where theactual marginal productivity f labour is zero for all practical purposes,has been admittedby nearlyall students ofpeasant economies.3All this clearly conflictswithProfessor chultz's categoricalstatementthat there s 'no evidence of any poor country nywhere hat wouldevensuggestthat a transferof some small fraction, ay 5 per cent., of theexistinglabour force in agriculture,with other things equal, could bemade withoutreducing ts [agricultural]production'.4 Nothing s fartherfrommy thoughtthan to challengethe fact that the concretecases citedby him prove that in several Latin American countries the agriculturalproductiondid fall off aftersome labour had been transferred o otheractivities.5 But that is not sufficient o justifyhis well-known posi-tion, namely that the overpopulation theoryof underdevelopment as a

I Cf. ibid., p. 117. In a recentpaper, 'The Theory ofUnderemployment n BackwardEconomies', Journal of Political Economy, xv (1957), p. 103, Harvey Leibenstein alludesto someexperiences n the Soviet orbitwhen industrializationwould have caused a shortageof labour in the agricultural ector, but failsto say to preciselywhich events he refers. Myguess is that they exhibited only the familiarkindofspurious shortage caused by wholesaledislocations of persons, if they did not reflect ither peasant resistance or administrativeinefficiency.2 Marx, Capital, i, ch. xxv, sec. 3, p. 698, asserts that ifthe population of England wouldbe reduced in the same proportionfor all categories, the remainingpopulation 'would beabsolutely nsufficient' o maintain the same level of output in spite of England's 'colossal'.means for saving labour. Clearly, this implies that no skilled labour has free leisure, acharacteristic ssumption of Marxist economics.E.g. Warriner, p. cit., p. 65.' Theodore W. Schultz, 'The Role of Government n PromotingEconomic Growth', inTheState of the ocial Sciences,L. D. White, ed., Chicago, 1956,p. 375. (My italics.)Ibid., pp. 375 f.


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14 ECONOMIC THEORY AND AGRARIAN ECONOMICS"theory" . . . failsin that the expected consequences are not those thatone observes'.1 The situation of most Latin American countries s notidentical with that of the East European or Asiatic countries, lthoughthey all have this in common: they are underdeveloped. While over-population is always accompanied by underdevelopment,t is neither anecessary nor the only cause of it. The underdevelopmentof LatinAmerican countries may have otherbases than overpopulation.2 Over-population, therefore, annot provide the basis for a generaltheory ofunderdeveloped economies,but only ofthose economic realities beset byit. This is concrete llustrationof the point which one of the precedingsectionssoughtto bringhome.To regard the notion of overpopulationas a mythis undoubtedlyaMarxist residual. And precisely because that notion still meets withopposition n some circles, few further emarks eem in order. If in the'so-called' overpopulatedeconomies the marginal productivity s zero-a critic may ask-how can we explain the fact that in such economiesthere is a greaterneed for skilled labour than in the other countries?Certainly-he may continue-you are not goingto say that the marginalproductivityof an engineer n India or Egypt is zero. But this way oflooking at the problem s to intermingle volutionaryfactorswith staticconcepts and to confuse abour with capital. An evolutionary change isbound to bringabout shortagesof some typesofskilled abour (and sur-pluses ofsome others) n any economy. Thus, Italy certainlyfeelstodaya shortageoftechniciansforhernewlydiscoveredoilfields.This, however,representsa quasi-bottleneck,to borrow an expression coined in theMarshallianspiritbyProfessor ewis.3 If no furthervolutionary hangesoccur, the quasi-bottleneckwill disappear just as any quasi-rentwill do.But once the new equilibrium s reached,will the marginal productivityof a petroleum echnician become zero? Not at all. For the equilibriummarginalproductivity f ucha technician epresents otonlythemarginalproductivityof his labour but also that of the capital invested in histraining.4 Obviously,this line ofreasoning regards abour as a uniform,plastic quality of all human beings,and is-I believe-somewhat in thetradition fClassical as wellas Marxisteconomics. But I fail to see a betterway to analyse theproblemsraisedby population n itspurelyquantitative

1 Theodore W. Schultz, The Economic Test in Latin America,New York State School ofIndustrial and Labor Relations, Bulletin 35, August 1956, p. 15.2 Althoughmy knowledgeof the factual situation in those countries s very superficial,I would ventureto suggestthat some are 'underpopulated' relative to the available landresources. Professor chultz's evidencemay even corroborate uch a view.3 W. Arthur Lewis, 'Economic Development With Unlimited Supply of Labor', TheManchester chool,xxii (1954), p. 145.4 Another part may reflect he 'rent' of his personal talents, but that is a side aspectofthe problem.


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N. GEORGESCU-ROEGEN 15aspect. Actuallythis viewof abour is evenmorenecessary n theanalysisof economic growth han of a stationary tate, wherepopulation may verywell be regarded as a frozendistribution f qualities.Therefore, he statement that the marginal productivityof labour iszero implies that the marginalproductivity f skilled abour consistsonlyof the marginal productivity f the capital investedin the productionofskill. It is a most rational expectation that an overpopulated economyshould feela greater hortageofskilled abour than a non-overpopulatedone. Everything ointsto thefactthat a shortageof skilled abour meansa shortageofcapital, not necessarilyof abour. It is a peculiar featureofoverpopulated economies that the skilled laboureris overburdenedwithworkwhiletheunskilled s loafingmostof the time. Furtherstill,the realeconomic spect ofspreadingknowledge n anunderdeveloped ountry owappears in full ight: the need for additional education competes with theneedfor dditionalphysicalmeans of production, fact whichwe are apt tooverlook ttimes nd underestimate ften. Whereresources re very carce,free ducationfor ll types of skills s as uneconomics haphazard produc-tionof capital equipment. Some countries,ike Soviet Russia, seem to havegrasped this truth; others, such as Italy, apparently have not.It is a simplematter ofdefinitiono observenowthat n any economy,whetheroverpopulated or not, there is only one way to measure themarginalproductivity f labour: at themargin, .e. where abour appearsunadulterated by capital. The marginal productivityof labour in anyeconomythen is the marginal productivity f its unskilled abour. It isa mere factual coincidence that in poor countries agriculturallabourgenerally s unskilled abour. But this fact throws a new light upon theconstant correlation foverpopulationwith the agricultural onditions ntheeconomic iterature. For clearly, f the marginalproductivity f abourin a countrys zero,so mustbe the marginalproductivity f thepeasant.

2. A Theoretical Schema.1 To make the argument as simple aspossible, et us assumethatthenationalproduct, epresented ggregativelyby x, is produced by an atomistic industry' an assumptionfully ustifiedin overpopulated agrarian economies).This means that the productionfunction fthe entire conomy s homogeneousof the first egreex= F(L, T) - TG(L/T) (1)

whereL stands for abour, and T fora composite variable of land andcapital. To obtain this function,for each proportion of the factorsof1 I preferthe term 'schema' to the commonly used 'model', for I wish thereby toemphasize the essential difference etween the blueprint-modelf natural sciences and the8imile-schemafsocial sciences.


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16 ECONOMIC THEORY AND AGRARIAN ECONOMICSproductionOp (Fig. 1), we determine he optimum ize, U, of the produc-tion unit,from he system

T pL Lkaf T af - f(T, L) (2)OL aJTwhere f(T, L) is the productionfunctionof the 'firm'. The maximumproduct obtainable froma given combinationof factors,R, is equal toOR/OU times the output of U. That determines 1) for everyR. It is

P

FIG. 1important,however,to rememberthat to obtain the output computedfrom 1), the resourcesR(L, T) must be equally divided among OR/OUidenticalproductionunits.' It is also seen that giventhe amounts ofthefactorsofproduction,the optimumscale of the 'firm' s uniquelydeter-minedforeverytechnologicalhorizon. Hence, in the case wherethegeo-historicalconditionsof an economyare such that all available resourcesmustbe used in production s longas they ncreaseoutput,the argumentregarding he superiority f the large-scaleproduction s poor economics.2

1 Strictlyspeaking,OR/OU is not necessarilyan integer,but foran atomistic industrythis does not matter. We should also point out that U is placed out of scale in Fig. 1;otherwise t could hardlybe distinguished rom on the drawing.2 That is the faultof the argument dvanced by Kautsky et l. against peasant holdings.Supra, p. 7 n. 3.


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N. GEORGESCU-ROEGEN 17There s noneedto go over the reasonswhy he soquants of any produc-tion function ooner or later become parallel to the axes. Thus, in theregionLOca,for nstance, the output can be increased f and only f thereis an increase in the factor and-capital. We shall refer o such a factoras limitative.' Clearly, in the region where a factor is limitative its

marginalproductivity s constant,while that of all other factors s zero.A fewdefinitions.Let the population,P, of a given economybe dividedinto Pe, the working lass, and Pa, the 'government'class. In the latterclass we include all members of the economy who are not dependent onwages or salaries received from he 'industry' producingx.2 Let s and s'be the individual minimum tandard of iving of the working nd govern-ment class respectively. The positiontaken in this paper is that both thesevariables are historically determined, and consequently susceptible ofbeing changed by economic policy. They condition the minimum ublicneed forx (public roads, armaments,capital accumulation, &c.). If thisminimum s denoted by E, the minimum f the community s

X= Pw +Pg s'+E. (3)Let us also put F - S , Lo = F (4)where F is the size of the potential abour force, and 8 representsthelabour-time workercan supplyabove he iologicallyecessary inimumof sleep and rest. For symmetry, he time necessaryfor he latter purposewillnot be included n leisure.The primordial conomicproblemofany community s to find modeby whicha national product equal at least to X can be obtained with theavailable resources. One co-ordinateof the problem s the labour supply.Since ex hypothesihe workingclass cannot maintain itselfon a smallerreal ncome hansPw, he supplycurve of abourmust startdiscontinuouslyfrom an end point M of co-ordinatesLo, sPw!L0 (Fig. 2). Since mengenerally ive in families, he abour supplyofone individualdepends uponthe ncomeofhisfamily.To getaroundthedifficultyfcircular ependence,we may assume that the labour supply ofthe communitys obtained bysumming p the suppliesof all families. Withthisremark, et us considerfirst he situation in which people can freely ell leisureat the marketwage-rate,and let MKN representthe amount of labour supplied atvariouswage-rates. Clearly,MKN is the short-runupplyof labour in a

1 Not to be confused with liritational. A factor is limitationalwhen its increase is anecessarybut not a sufficientonditionfor an increase in output. Cf. Nicholas Georgescu-Roegen, 'Limitationality, Limitativeness, and Economic Equilibrium', in ProceedingsoftheSecondSymposium n Linear Programmintg, ashington,D.C., 1955,vol. i, p. 301.2 This class corresponds o what Veblen called 'the kept class'. It naturally ncludes allkinds of servants,public and personal.4520.4


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18 ECONOMIC THEORY AND AGRARIAN ECONOMICSwage economy.' Its relationwith the preference-fields shownmoreclearlyfwe refer o a familiarmap of indifferenceurves. In Fig. 3,OE = 8 and OF - s. The economic roblem f the workers in fact adiscontinuousump:from , where is naturalncome laceshim, t anypoint n the area XFF'E' (Fig. 3a). Wherehe willfinallyanddepends

I'

K

0 Lo LFIG. 2

upon thetypeofeconomic ystemn which e ives. If this s a freewagemarket, islabour-supplys givenby a Hicksianprice-consumption'curve F", and all swell.Avery requentatternfbehavioursthatforwhichhe upplyf abours inelasticorwage-ratesustabove heminimumossiblei.e.the lope fFE). Be this s itmay,wecan afelyassume hatthe supply urve f abourhas everywheren elasticitysmaller hanunity.The iteraturen underdevelopedountries,ow-ever, ftenmentionsvery urious atternfbehaviour;hatof theindividual ho after arningheminimumfsubsistenceecomesn-terestedxclusivelyn leisure. uchbehaviour,nderstandably,ould1 Classical economics argued that the long-run equilibriumwage-rate is constant andequal to ON', so that N'N' represents he long-run supply curve of labour. For Marxisteconomics, however,N'N' representsboth the short- nd the long-run upply of labour, adirect consequence of its assumptionof a permanent reserve army. This is the analyticalexpression of the distinctivefeatureof Marxist economics n refusing o accept any relationwhateverbetween economic and demographicfactors. On thispoint,see a letter of Engelsin Correspondetwe,. 199.


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N. GEORGESCU-ROEGEN 19make any policy maker despair: the individual seems to refuse to bedeveloped. The behaviour eads to the ndifference ap shown by Fig. 3b,and to a supplycurverepresented ya branch of an equilateral hyperbola,MH (Fig. 2).1 Whateverthe patternofbehaviour,the curve MH consti-tutes a relevant element forthe analysis of distribution: t represents heminimumaverage share per unit of labour-time for any amount ofemployment.

E'

(a) E b) EFIG. 3

The second co-ordinateofthe economicproblem s the productivity flabour under the assumptionthat all land-capital resources,T0,are usedin theproductionofx. The curve,/uA, epresentinghe average produc-tivityof labour obviously varies with To, but its shape presents someconstantfeatures Fig. 4). All these curvesbegin by a horizontal egmentat the same level Ojt,because x/L remainsconstant n the domain TON.They also coincidewith equilateral hyperbolasbelow the level OQt' qualto the value ofx/LonIf T0 s sufficientlyarge, the curve of the marginal productivityoflabour juB intersectsMN in B (Fig. 4a). In such a case the stage is setfor the solution of the community'seconomicproblemaccordingto themarginalproductivity rinciple provideds'PI+E is not too large,as hasbeen the case in many countriesduringthe World Wars). The economy

1 I feelthat for histypeofbehaviour we must assumea zeromarginalrate ofsubstitutionbetweenreal income and leisure. But if I am wrong, policy-makers onfrontedwith thishopelessreaction to a wage scheme should be able to get around the difficulty y imposinga corvee imultaneouslywith a very high wage-rate forfreely ontracted work. A simplediagramwill show that in thisway theycan induce the individual to move inside the areaXFF'E'. 2 TOP and Oa refer o Fig. 1.


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20 ECONOMIC THEORY AND AGRARIAN ECONOMICSmay even allocate part of T to the direct use by consumers, so thatalthoughthe available resources re representedby Ro,onlythe amountsrepresented y 1 are used in production Fig. 1). At the otherextreme,for ow values ofT0,we find he case wheretheaverageproductivity urve*of abour uA ies below/'Z' forL Lo (Fig. 4b). That is thecase ofstrictoverpopulation.' This corresponds o Bo in Fig. 1.) Obviously, n such a

IN1

H

- O ~~ ~~L, L-oL(a) FiG. 4situationhere anbe noeconomicdvantagenusingabour eyond1,wheretsmarginalroductivityecomesero.Tocontinuexistingith-outbeing eset y.Malthusianorces,he conomyannot ave s'P1+Elarger hanA Wx L1. In practice,owever,hismaximumsalwaysat-tained, o thatordinarilynoverpopulatedountries X0,X0beingthemaximumational roductbtainable ith he vailable esources.It isobvious, owever,hat he conomyannotossiblyunctionccord-ingto theprinciplesfmarginalroductivityheory. his s true lsofor neconomy herehemarginalroductivityf abour spositiveorL = Lowithout eing reaterhanLON (Fig. 4c). For this ndother

1 We consideronlythe alternative wherepA intersectsMN. The opposite case involvesMalthusianaspects whichthough interestingie beyond the scope ofthispaper.


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N. GEORGESCU-ROEGEN 21XL \N

, _j\H\

N\% \L, Lo L(b)

~~~~~~~~~~~~p 1

Lo(C)FIci. 4


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22 ECONOMIC THEORY AND AGRARIAN ECONOMICSgood reasons, such an economy should be regarded as overpopulated,withoutthe qualification strictly'.'The importantconclusion s that overpopulation s correlated with alow To,more preciselywith a low TO/LO.Overpopulation, therefore,stantamount to poverty;the opposite situation, o 'land-of-plenty'. n thereal world, however,most underdeveloped agrarian economies are poornot onlybecause of theinsufficiencyf and, but also because ofa chronicdearth of capital. For these countriesthe difference etweenToand thesize ofusable land, AO) s negligible. That justifies he use ofLO/AOs anordinal index of agricultural overpopulationinstead of LO/TO.Finally,by replacingLO/AOy P/AO,we obtain the most commonly sed but crudeformofthat index.

3. Further Remarks. In approaching ssues concerning he economyas a whole theeconomisthas but two choices: to use either generalequi-librium apparatus or an aggregative schema. In the first ase, he mustresign himself o being rather sterile on practical matters; in the second,he must accept the theoretical calamities of aggregation. For morethanone reason, I have chosen the latterprocedure. It is, however, possibleto illustrate the conditions of overpopulation by a schema in which thenational product is not completely aggregated. Let us assume that theeconomyproduces an agriculturalproduct,X1, and an industrialproduct,X2. Bearing in mindthat in an overpopulated economy the standard ofliving barely coversthe most elementaryneeds, and that theseneeds arehighly igid,we mayproceed on the assumptionthat the two products arenot substitutable. If the minimumnecessary product is representedbyX1, XO, the case of overpopulation is illustrated by Fig. 5a. The onlysolution is M, where the marginalproductivityof labour is zero in bothproductive sectors. Hence, in this case too, no advantage can be derivedfromusing labour beyond L1.The schema of Fig. 5 forces upon us a series of highly interestingproblems. We shall mention only one. A non-isolated economyhas thechoice between producing one kind of product at home and obtaining tthroughforeignrade. The question then s whether he resulting ationalincome (X1, X'2) could allow an overpopulated economy to move fromMto mnor in') wherethe marginal productivity f labour is positive (Fig.5a). We cannot pursuehere this intricateproblem,but we may at leastremarkthat no agrarian country eems to have been able to escape theconditions of overpopulation by mere trading. Most probably, over-populationwill remain a local problem callingfor ocal remediesas longas people in generalneitherwish nor are allowedto leave theirown lands.

1 In Fig. 1 this case corresponds o Ro.


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N. GEORGESCU-ROEGEN 23

T T TO \ IO O/'L ~~~. \j0_

Ti S

Mt

__ _ _ _ _ _ _ _ _ _ L_, ILo

6 (a) 2 T'T

(b)FIG. 5

III. AnAnalysis fTheoreticalssues1. Profitversus Tithe. Thequestion f whether heWalrasian ystemhasa mathematicalolutionasbeen lwaysonsideredcrucial neforStandardtheory. But no Standard economist eemsto have realized thatthe Walrasian systemraises a stillmorevitalquestion: Is its mathematical


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24 ECONOMIC THEORY AND AGRARIAN ECONOMICSsolution also an economically alid one? That it is valid has been takenfor granted by all who tackled the unusually difficult roblem of theexistence of the mathematicalsolution. To recall, Abraham Wald wascontent withprovingthat in a (simplified)Walrasian systemthe 'equi-librium' prices are non-negative.' Wald was hardly an economist,butafter hepublicationoftheoriginalpaper in German 1934), no economistobservedthat unlesswe also knowthat the 'equilibrium' price of labouris at least equal to theminimum fbiological subsistence, he theoremhasonly meagre economic relevance. The trulyeconomicaspect of the prob-lem s mostclearly et aside in the morerecentworkof Arrow nd Debreu.These authorsstart out with the assumption that everymember of thecommunitys endowed ab initio witha sufficienteal income forhis entirelife pan.2 What we doknow,however, s thatman is endowedwith abourof limitedefficiencynd can use resources of limited quantities. Theselimits n some cases may be such that althoughthe economy can producea sufficienteal income forall, this economic olution cannot be reachedby the mechanism of marginalproductivitywhich is part and parcel ofthe Walrasian system.3We have seen that overpopulatedeconomies arein thisparticular situation. The problem now is to see how productionand distributionmay be regulated n such an economy.A lead for he solutionofthisproblem s offered y the observation hatagricultural verpopulationhas usually been manifest n countrieswherefeudalismwas late in beingsupplanted by capitalism. To see thedifferencebetweenthe distribution nder feudalism and capitalism, et us draw thefamiliar urve ofthe marginalproductivity flabour on the available To,ABCL, in Fig. 6. Let also abcL, be drawn so that the ratio between theordinateofthe shaded area and that ofABCL,, say betweencC and C'C,be equal to the titheratio, p. It is elementary hat if OB' labour is usedinproduction, heshareoftheentrepreneur-landlords AabB in thefeudalsystem,while the same share under capitalism is AB"B. The differencebetween the two systemsis thus clear. But there is also an analogy:to the interest of the governmentclass to maximize profit-rentn thecapitalist system, n feudalismtherecorresponds he interestof the sameclass to maximize tithe. Obviously, forany given value of p, tithe is

1 Abraham Wald, 'On the System of Equations of Mathematical Economics', Econo-metrica, ix (1951), pp. 368-403.2 K. J. Arrow and G. Debreu, 'Existence of Equilibrium for a Competitive Economy',Econometrica, xii (1954), pp. 266, 270.3 On thesurface, his statementmay appear to contradictthe theoremproved by Arrowand Debreu. That is not the case. Indeed, their proof assumes the economic problemalready solved: the individual has already jumped from intoXFF'E' (Fig. 3a). In theirapproach, the Walrasian solution may consist of everyoneconserving his initial positionwithoutany alteration.4 Economic relations under feudalismpresented almost an infinitegamut. However,


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N. GEORGESCU-ROEGEN 25maximum at L1. In a strictlyoverpopulated countrythis maximumisbound to be reached as the result of workers' own necessity of securing

MP. OF LA

a

---------------- BS

O B C' Li LFIG. 6a share at least equal to sPa,. We should keep in mind also that in thefeudal system of distribution here re workerswho earn morethantheirspecific ontributionooutput. This is seen immediatelyfOSS'L1 is drawnso thatits area is equivalent to that ofOabcLj; all labour betweenB' andL1 receives more than its net contribution o output. Strikinghistoricalevidenceofthis aspect of feudalism s provided by the gleaners,who re-ceived a share greater han the quantityofcorn gleaned. In contrastwiththis, capitalismhas no place forgleaners.It goes without saying that a feudal governmentclass would seek amaximummaximorum f titheby maximizing lso p. Obviously, hemaxi-mum ofp is given by the ratio A W/AL1of Fig. 4b, or alternativelybythe relation Xo(1-p) sPW. (5)the most frequentfeaturesof feudal economywere the corvie' and the crop-sharing. Thecorvee usuallyconsistedofworkperformed t themanor,on the land underspecial culturesappurtenantto the demesne (vineyards, orchards, gardens), and forpublic works. Boththese institutions urvived the legal abolitionof the feudalsystem, s we have had occasionto observeduringourown timeeverywheren Eastern Europe. The use of the term tithe'for the share of the landlord is, admittedly, mproper, ut convenient.


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26 ECONOMIC THEORY AND AGRARIAN ECONOMICSThis means thatworkers eceive only theirminimum f subsistence. Yet,this s not a sine qua non conditionof the system,for t least in a strictlyoverpopulated economythe workerswould still workup to L1 even ifpwere equal to zero.

The formula the abourermust be poor to be industrious'came to be akey forthe feudal system onlyas the conditionsof strictoverpopulationceased to exist owing to land reclamation, o the increase n accumulatedcapital, and finally o the increase of labour productivity s the resultoftechnicalprogress. These factors aused theproductivity urves of abourto shiftupwardsand to the right. Ultimatelythe marginalproductivityof labour for L = Lo became positive,but still less than ML0 (Fig. 4c).Clearly, the economyin question was not yet ready for the capitalistformula. Hence, feudalism,which could still provide a solution to theproblem of distribution, ontinued its existence although plagued by anewconflict. f themarginalproductivity f abour is positiveforL =Lomaximization of tithe requires that workers should have no leisure.Whetherthey would work to that limit of their own accord in a (notstrictly) verpopulated countrydepends upon the value ofX0(1-p), i.e.on p. To render he labourerswilling o work up to Lo, the average shareof abour must not exceed Lo K. This is how theabove-mentioned ormulacame to be an undisputed economic dogma for late feudalism. EvenQuesnay argued that the labourerwho can buy his bread cheaply becomes'lazy and arrogant'.' How deep-rooted this formula must have been (atleast in the late feudalism) s shown by its echoing n economic iteratureas late as the nineteenth entury.2With a ratio T0/Pstill too low for the curve ofmarginal productivityof abour to intersect he supply curveof abour,it was onlynatural thatthe feudal formula should have been used also by the non-agriculturalsectorduring hefirst hase of the ndustrial evolution, nd thatit shouldhave survived by inertiawell beyond the beginningof capitalism. Onlybecause of this circumstance was it possible forMarx to mistake thebasic formula f feudalismfor n essential featureof capitalism and thusto formulate theoryof surplus value which is only an elaboration ofcondition 5).2. A Discussion of Conduct. Very often, ome featuresof a system

1 Oeuvres conomiques tphilosophiquesde F. Quesnay, Auguste Oncken ed., Paris, 1888,p. 248. The only objectionraised by Quesnay is that ifabused to the extremethe formulamay bring the labourer so close to the status of an animal that he will ultimately behavelike one, i.e. respond only to the most elementary needs of the moment and thus loseany interest in his own economic progress (ibid., p. 354). Such a behaviour corre-sponds to that of Fig. 3b. The fact that it has frequentlybeen reported in the poorestcountriesof long-standing xploitationconfirmsQuesnay's remarkson the point.

2 An Inquiry nto ThosePrinciplesRespecting heNature of Demand, London, 1821, p. 67,cited by Marx, Capital, i, ch. xxiv, sec. 3, p. 653.


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N. GEORGESCU-ROEGEN 27become noticeable only under the light cast by a contrasting tructure.That-as we have seen-is the case of some aspects ofmarginal produc-tivity heorywhenconfronted ith feudalmechanism n anoverpopulatedcountry.The same is true of the Edgeworth-Paretopatternof ndividualbehaviour when contrasted with the behaviour of an agrarian (peasant)community.The foundersof modernutility theoryall agreed that 'each individualacts as he desires',1 statementthat has ever since been repeated in oneformor another. But its truth s so tautologicalthat it has no value fora student ofhuman conduct; this student wants to knowpreciselywhatpleases the individual. In answeringthis question, Standard theoryas-sumes that whatpleases an individual can be expressed as a function (Y)involvingonly the quantities of commodities n his ownpossession repre-sentedbythe vectorY). That is what I meantearlierby strictlyedonisticbehaviour.Undoubtedly, uch a descriptions rigorously rue forRobinsonCrusoe,but it can hardlyfitmost individuals living n societies. For even homocapitalisticus-which Standard theory s deemed to describe-often varieshis tips according to his impression of the attendant's neediness, orpatronizesa shop only because its owner s hard-pressed. Whetherornotthisconduct reflects he facultyof nter-personal omparisonof needs,thefactremains that many an individual responds to changes in the incomeofthe others. A more realistic view of the matter,therefore,eads us toregardthe ophelimity

Q = O(Y; Ys,) (6)as a functionnot onlyof Y but also ofY8,which stands forthe particularcriteriabywhich the individual views the welfareof his community.Theindividualdescribedby (6) still reacts hedonistically-that s, as he desires-but not strictly edonistically.2The problemofindividual distributionn a small group-as we know-has no determinate quilibrium n a purelymechanistic chema, whetherthisrefers o an oligopolistic ndustry r to a small exchange market. Inpracticea solution s howeverreached only because the group follows omeinstitutionalpatterns grown out of its particular historical conditions.And we shouldnot be mistaken about it: price leadership, cartel quotas,product competition, nd what not, are just as much cultural patterns

1 Irving Fisher, Mathematical Investigations n the Theory of Value and Prices, NewHaven, 1925,p. 11. Also VilfredoPareto, Manuel d'economie olitique,Paris, 1927,p. 62.2 Clearly,hedonistic behaviour does not necessarily imply 'altruistic' behaviour; alldepends upon the sign of ao/aY8. The pattern (6) accounts very well for the individualwho wants to 'keep up with the Joneses', and who consequentlyfeels a 'pain' ifhis neigh-bour's income ncreases.


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28 ECONOMIC THEORY AND AGRARIAN ECONOMICSas 'ploughing he and of the widow' or maritaldowry, or nstance. With-out institutionalpatterns concerningdistribution, ven the firsthumansocieties, small by necessity, ould not have arrivedat that modicum ofstabilitywhich s thesinequa nonconditionoforganicexistence. Whetheror not the faculty f sympathy'forhisneighbour s partof man's originalnature, hat facultymust have evolved before hefirst iable communitiescould be formed. Even today, only a type of conduct conformingo (6)can account for hestability fsmallcommunities.That, ofcourse, ppliesfirst f all to thepeasant communities.A completedescription fhow individual distributionn a peasant com-munity s regulatedmust include the institutionalpatternsprevailing nthatparticular ommunity.That is whya mechanistic chemaofpeasantbehaviour, ike the schemaofStandardtheory, rovedto be an impossibleprojectfor ll who thought f t.' And that is not all. If one finally ecidesto studythepeasant institutions o as to construct homo econornicusorepresenthepeasant,one soondiscovers hatthese nstitutions re almostinfinitelyariable, a fact that precludesany relevant classification. It isnatural that such a baffling nd elusive problemas the conduct of thepeasant should have attracted few students and resisted being caughtwithin simpleformula.The small community ot onlyneeds a typeofconductoriented lso byY8,but it also providesthe necessaryconditionsforthe operationalityofformula 6). In such a community he individual is bound to realize thathis own actions influencehis own ophelimity lso indirectly, ia the co-ordinateZ. In addition, everyonenaturallyarrives at a fairly ccurateidea of the situation of everyoneelse. If these two conditions are notfulfilled,he co-ordinateY. cannot be an activeagent for the conduct ofthe individual, even if Ys is an element of the individual's ophelimity.The most relevantexample is provided by the urban agglomerationsofan industrialsociety. In such large communities, he individual can nolongerknowthe situationofall hisfellows. On the otherhand, he is boundto realize that by his isolated actions he can exert only an infinitesimalinfluence pon thevariable Y,. He is thusnaturally compelledto conducthimself s if Ys did not enter into his ophelimityfunction. We cannotavoid noticing hegreat similarity fthis situation with that of the indi-vidual producer n an atomisticindustry,who also is compelled by hisparticularsituation to act as if his own offerhad no influence pon themarketprice. There are thus two reasons that account for the successStandardtheoryhas had with theassumptionof a strictly edonistichomooeconomicus.The theoretical uccess stems fromthe simplicity of the

1 Cf. Tschajanov, op. cit.,p. 131.


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N. GEORGESCU-ROEGEN 29atomisticstructure, reason that finds onfirmation lso in the complete-ness of the theoryof competitive ndustry.' The practical success, on theother hand, is due to the fact that the applications of the theory havealways concerned capitalist economy.Yet, as J. M. Clark remarked ong ago, the demand (i.e. the demandderived frompurely hedonistic conduct) cannot reflect ny of the socialpurposes of the community.2 For the fact that homocapitalisticus ngeneral behaves as ifhis ophelimitywere ndependentof Ys does not meanthat he is basically an egoist in comparison with homo agricola-as hasoftenbeen argued. Yet, a prolonged eclipse of the social variable, Y8,asa co-ordinate f conduct s apt to cause the disappearance of that variablealso from he ophelimityfunction i.e. from he individual's awareness).This actually happened at the heightof bourgeois iberalism n the Westas economic goods in the strict sense became the only co-ordinate of'rational' conduct. As a Populistwrote n the 1870's, in thisconducttherewas no room for he principlesof justice and solidarityof the village life,but only for uccess by 'shrewdness nd tricks. That a society could not'last long on this basis is proved by the gradual emergenceof the welfarestate. And to continue our parallel, let us observethat the welfare tateis a genuine cartel, the cartel of an atomistic society with the purpose ofdealing with a problem forwhich solated action is impotent. That is theraison d'etre of all cartels. However, the cartel of the welfare tate is asmuch an institution s the social patternsofpeasant communities.

IV. ConcludingRemarksBecause some conclusionsof thepreceding rgumentshave a directbearingon practical issues, it seems appropriateto presentthemtogether n thislast section.

1. The undifferentiatingchema ofgeneral equilibriumcan onlydivertour attention fromthe unique role that leisureplays in economics. Forinstance,man has always endeavouredto discover abour-savingdevicesbecause in the longrun eisure s an economic summum onum and fornoother reason). In the short run, on the other hand, leisure may beeconomicallyunwanted. An advanced economy,such as that representedby Fig. 4a, may verywell have less leisurethan a strictly verpopulatedeconomy, Fig. 4b. And indeed, visitorsfromthe lands-of-plenty ftenpointout reprovinglyhat the people ofpoor countries ndulge n greater1 The completenessof monopoly theory also has its counterpoint n the theoryof theconsumer. As already remarked, n a mono-societysuch as Crusoe's, 0 cannot possiblycontain Y8.

2 J.M. Clark, Economic Theory in an Era of Social Readjustment', AmericanEconomicReview, x (1919), Suppl., 288 f. 3 Quoted in Mitrany,op. cit., p. 40.


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30 ECONOMIC THEORY AND AGRARIAN ECONOMICSleisurethanthemselves. They seemto ignore he fact that n strictly ver-populated countriespeople have no choice: in those countries eisure isimposedupon themby geo-historical onditions, nd is not the result ofan opportunity hoice between greater eisure and greater real income,as is the case inadvanced economies. In a strictly verpopulatedeconomy,leisure s not properly peaking an economic good, for t has no use butas leisure. Its value thencan be but zero.' The peculiar characteristic fthe strictlyoverpopulated economy,namely that leisure has no valuealthough abour has a positive 'price', bears on the definition fnationalincome.Walras seems to have been the firsteconomist to include leisure innational ncome.2 If x is taken as numeraire, nd ifw and r represent hepricesof L and T respectively,Walras's definition f thenational ncomeamounts to =x+wl+rt - wLo+rTo, (7)where1,t are the amounts of L, T directly sed by the consumers. Theeconomicrelevanceof (7) was further evealed by Barone's famouspro-positionofwelfareeconomics. To recall, this proposition states that forgiven pricesof L and T, optimum welfarerequires that the Walrasiannational ncomebe maximum.3 It follows that ifnational ncome s to beused as an indexofeconomic rogress,ts only rational definitionmust bethat of 7). But Barone's argument s valid only for n advanced economy,where eisure is time allocated by an opportunitychoice and where itspriceobviously s identicalwiththatof abour. In a strictly verpopulatedeconomy, however, eisure has a zero value. It is natural to think ofeliminatingt from henational income and hence to define he latterby

01 x+w(l-11)+rt = w(L0-lj)+rT0, (7 bis)where1,represents he amountof eisure, nd I-1, the amountofpersonalservices. Yet, even the labour corresponding o personal serviceshas noalternativeuse. Moreover, n overpopulatedeconomiest is usually negli-gible,forsuch economiescannot affordhuntinggrounds,national parks,and the like. The conclusion s that in a strictly verpopulatedeconomy,the most rational index ofprogress s the national product stricto ensu.We should thenput = x. (7 ter)

I Further proofof feudal featuresbeing attributed to capitalism by Marx is the factthat in his economic theoryhe assumes that labour power has no use-value to its owner.Cf.Kautsky, The EconomicDoctrines,p. 60.2 Leon Walras, Elementsof Pure Economics, Homewood, Ill., 1954, pp. 215, 379.8 Enrico Barone, 'Il ministro della produzione nello stato collettivista', Giornale degliEconomisti, 908, pp. 267-93, 391-414. Referenceswill be made here to the English transla-tion in Collectivist conomic Planning, F. A. von Hayek, ed., London, 1935, pp. 245-90.The above-mentionedproposition s foundon pp. 253-7.


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N. GEORGESCU-ROEGEN 31In the factthat in an overpopulated economy the feudalformula eads tothe maximum national product, we have an equivalent of Barone's pro-position: in such an economy the feudal formula warrants maximumwelfare.It is curious that in spite ofBarone's proposition he current efinitionofnationalincome n advanced economies s thatof (7 bis). Only recently,SimonKuznets proposed to return o the Walrasian formulaon groundsthat recall the theoretical mplicationsofBarone's theorem.' He rightlypoints out that by excluding eisurefromnationalincome we may obscurean important effect of technological progress. The preceding analysisyields an even strongerconclusion: in comparingthe rate of economicdevelopmentof one advanced and one overpopulated country,we shoulduse in each case the appropriatedefinition f national income.2 Indeed,only for he latter economies s it appropriateto define conomic progressas the increase per capita net product.2. Ordinary tatistical data may be highlymisleadingfora measureofleisure n the case of overpopulatedcountries. As surprising s thismayseem, the overpopulatedcountries furnish he highest occupation ratios(F/P).3 On thewhole, t appears that in those countries t is hard to findsomeone unemployed,yet almost everyone is loafing. The paradox iseasily clearedup. With an excess of labour, everyone fights o establisha solid claim to a share of the national product. This leads to a socialpatternwhichmay be labelled 'splitting-the-job'.Several personsare ona job that technically requires only one person,but each one insistsonbeing considereda full-time mployee for fear of seeinghis claim chal-lenged.This practicehas been frequently enounced as the hallmark of ineffi-ciency if not of remissness. The more scientific ritichas justifiedtheverdicton the principlethat an efficientconomyshould pay no factormore than its marginalproductivity.It is clear,however, hat this argu-ment is an unwarrantedextrapolationof a law valid only in advancedeconomies. Indeed, as we have shown,an overpopulatedeconomydoesnot operate efficientlynless some labourers earn more than theirowncontributiono output.The questionofthe over-sizedbureaucracy-an unfailing haracteristic

1 Simon Kuznets, 'Long-term Changes in the National Income of the United States ofAmericasince 1870', in Incomeand Wealth, eries I, Simon Kuznets, ed., Cambridge, 1952,pp. 63ff.2 That is, especially important for the topical comparisons between East Europeaneconomiesand the advanced economies of the West. For I greatlydoubt thatin any of theEastern European countries the increasein To has as yet been sufficientn face of popula-tion growth o eliminate the conditions ofoverpopulation.

8 For example the occupation ratio in Rumania before World War II was one of thehighest n the world, Enciclopedia Romadniei, ol. i, p. 154.


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32 ECONOMIC THEORY AND AGRARIAN ECONOMICSof overpopulation-also has been approached from wrongangle. Fewstudentshave realized that n overpopulatedcountries and only n these)an over-sized ureaucracy s a normaleconomicphenomenon. With abourused up to its technical imit,nothing can be gained from reduction nthe number of public or personal servants; such a reduction may createonly social turmoil. Many an overpopulatedcountrydeserves to be cen-surednotbecause ithas a large bureaucracybutbecause itsentiregovern-ment class has a high standard of living amidst poverty. Undoubtedly,too high a standardof livingfor the government lass is a deterrent oeconomicdevelopment,for t greatlyreduces the already meagre powerof capital accumulation of the economy. If in an advanced economyequality of standardoflivinganwers to an ethical principle, n an over-populated countryt represents n economic mperative.

3. Glossing ver academicrefinements,emay regard conomicdevelop-mentas an upward shifting f the labour productivitycurves (Fig. 4).A fabulousamount offoreign id apart, no economycan jump fromthesituationofFig. 4b to that ofFig. 4a. In otherwords, t is quasi-certainthat in its developmenta strictlyoverpopulated economyhas to passthrough phase like that depictedby Fig. 4c, i.e. through phase wherethe working lasshas no leisureat all. This situationwith ts sixteen-hourday and seven-day week is well knownowingto its detailed descriptionby the socialist literatureof the last century.1As already pointed out,Marx erroneously ook it fora basic featureof capitalism. The periodinthe economichistory f the West that servedhim as a modelfordepicting'the calvary of capitalism' corresponds rather to the growing-pains fcapitalism. For capitalism,understood as an economicsystemregulatedby profitmaximization, ould reallyexist onlyafter hemarginalproduc-tivityof labour had reached a sufficiently igh level so that it could beequated with the wage-rate. Capitalist development proper began onlyafter his phase had been consummated. Increasing eisure notunwantedleisure) fortheworking lass constitutes ts most distinctivefeature. Towit,the forty-hour eek is a relativelynew institution, nd the idea ofa four-dayweek is already beingaired.2

1 Even in theUnited States the average workingweekwas seventyhours as late as 1850.Undoubtedly,earlier t was even longer. Interestingalso is the fact that the first ttemptto limittheworkof childrenunder 12 to a ten-hourday was that of the CommonwealthofMassachusetts in 1842. W. S. Woytinsky and Associates, Employment nd Wages in theUnitedStates, New York, 1956, p. 98. The ten-hour day did not become a widespreadstandard for the other workersuntil 1860. Philip S. Foner, Historyof the Labor Movementin theUnitedStates, New York, 1947, p. 218; G. Gunton, Wealth nd Progress,New York,1887, pp. 250 f.

2 Marx failedto see that one possible synthesisof his antithesis could be preciselythis.Instead he wrote that 'the relative overpopulation becomes so much more apparent in acertain country, he more the capitalist mode of production is developed in it'. Capital,iii, ch. xiv, sec. 4, p. 277.


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N. GEORGESCU-ROEGEN 33Strictlyspeaking, the East European countrieshave never come toknow the so-called calvary of capitalism. From the middle of the nine-teenthcentury, fnot before, hese countriesbegan instead to receive theimpact f Western apitalism. Althoughusuallyregarded s a phenomenon

equivalent to the 'calvary of capitalism', the impact was an essentiallydifferent rocess. The plain fact is that the East European economieswerenot yet sufficientlyeveloped to begin the calvary. The true storycan be told in a fewwords. Increasingtradewith the West revealed theexistence of othereconomicpatternsand at thesame timeopened up newdesires for the landlords and new ambitions for the bureaucracy. Underthis nfluence hefeudalcontratocial begantoweaken. Anever-increasingnumber of landlords switched to the capitalist formulaof maximizingprofit-rent, change which,even if t did not always increase their hare,had the advantage of freeing hemfromtheirtraditionalobligations to-wards the villagers. This process was laterto culminate n producingthepure absentee. From thisviewpoint,the main beneficiary f the freedomof the serfswas the landlord,not the peasant. That is true also of theearliest agrarian reforms 1861 in Russia, 1864 in Rumania), which inreality anctionedthe separation of the economic nterests f the landlordfrom hoseof the peasant.

Now, to regulateproductionby profitmaximizationis probably theworstthing hat can happen to an overpopulatedeconomy,for hat wouldincrease unwanted eisure whilediminishing he national product." To besure, newly mportedtechniques alleviated the crisis,but hardlythe lotofthe peasant. This is theexplanationof the factoftencommenteduponthat in Eastern Europe capitalism worsenedthe lot of the peasant, whilein puzzling contrast ncreasingthe prosperity f othersectors. It is thissituationpeculiarto the countries aught aggingbehindWesterncapital-ism that gave riseto the Agrarian deology. And this ideologyremaineda regionalphilosophyat which the West looked as at a curio,preciselybecause in its economic developmentthe West had not had a similarexperience.4. In a nutshell, he main tenetsof theAgrariandoctrineare:

1. Because of theirgeographical ituation omecommunitieswill alwaysrelyon agriculture s a maineconomic ctivity. Andsinceagricultureis an intrinsically ifferentctivityfromndustry, uch communitiescannotdevelop along identicallineswith the industrialeconomies.1 Kautsky,EconomicDoctrines, . 235, recognizesthe difficultiesreated by the adoptionofprofit-maximization,ut fails to see the real explanation of the process.

2 Only veryrecentlyhave Westerneconomistscome to accept the view ofthe Agrariansthat the East European countrieshad sufferedhe impact offoreign atterns not befittingtheirown cultures and conditions. Cf.Mgthodes tprobhlmes e l'industrialisation espayssous-diveloppJs,nited Nations, New York, 1955, p. 141.4520.4 D


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34 ECONOMIC THEORY AND AGRARIAN ECONOMICS2. For the countrieswith an agriculturaloverpopulation, ndividualpeasant holdingsand cottage industry onstitute he best economicpolicy.Evolution is subject to pure uncertainty, nd the most we can do intacklingan evolutionaryproblemis to trustthe existingevidence as abasis formeeting he future. As to this evidence,we have dealt at lengthwiththe historicalrefutation f the law of concentration n agricultureand withthespecific ifferencesetween ndustrial nd agricultural ctivi-ties. We mayadd, however, hat nothing s yet has happened to cast anydoubt upon the validityof that analysis, and hence upon the first ointof the Agrariandoctrine. Besides, the economicdevelopmentofDenmark

and Switzerland s well as parts of Germany nd Austriaprove that agri-culture anprovidethe basis of ts own economic development.Moreover,both anthropology nd economic historyconfirm hat only a substantialfoodproduction independentof its source) has led to capital accumula-tion.1 Quesnay's celebratedmaxim worksboth ways: riches aysans, riceroyaume.The logic is surprisinglyimple: Robinson Crusoe could not beavailable forforging sicklebeforeFriday could gatherenoughfruits orboth. 'Industrializeat all costs' is not the wordof economicwisdom,atleast in overpopulatedagricultural ountries.The second pointof the Agrariandoctrine learlyaims at using as muchlabour in productionas is forthcoming. t also reveals that Agrarianswerethefirst o feel ntuitively hat the economicforms ompatiblewithoptimumwelfare re not identical forall geo-historical onditionseven fthe echnologicalorizon s the ame. We should recallthatthe real noveltyof Barone's work mentioned above was the proof that the controlledeconomyofa socialist state mustimitatethe capitalistmechanism, .e. itmustadopt theprinciples fmarginalproductivity heory,f t is to obtainoptimumwelfare.However,neitherBarone nor othersafterhimseemtohave been aware of one importantrestriction, amely, that marginalpro-ductivityprinciples resupposethe existenceofa well-advancedeconomyinorderto achieveoptimumwelfare. And thusnumerous rgumentshavefelt secure in using the converse proposition: capitalism and controlledsocialism provide the best systems for developing an underdevelopedeconomy. Yet this proposition s patently false, at least for an over-populated economy.In this ight,the intuition hat led the Agrariansto theirdouble nega-tion-not Capitalism, not Socialism-proves to have been surprisingly

1 V. Gordon Childe, Social Evolution, New York, 1951, p. 22; Bruce F. Johnston,'AgriculturalProductivity and Economic Development in Japan', Journal of PoliticalEconomy, ix (1951), p. 498.


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N. GEORGESCU-ROEGEN 35correct. But then, what is the theoreticalschema of the Agrarian doc-trine Because Agrarianshave hardlybotheredwiththeoretical chemata,one can only attempt an ex post ra

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