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In recent years there has been increased attention to the changes in the returns to schooling that have occurred in many industrialised and newly developed countries and to the desirability of undertaking substantial schooling investments in low income countries. The introduction of new technologies can however, raise the returns to schooling if the new technology increases rather than decreases the scope for learning or input misuse. The returns to primary schooling, but not above primary, rose significantly in high-growth areas. The estimates of the relationships between contraceptive-method efficacy and schooling and that between exogenous technical change and the profitability of schooling do not shed light on the question of whether schooling facilitates learning or instead improves access to external information sources where learning has high payoffs. Schooling returns are high when the returns to learning are also high. It is possible, however, that schooling through selection, merely identifies who in a population is a good learner.

This article presents the authors' comments on different essays on the developmental problems faced by most underdeveloped countries. According to Simon Kuznet, the pre-industrial per capita income level of developed countries was several times that of most underdeveloped countries today. It is generally concluded that today's less-developed countries face a much more difficult development problem than faced nineteenth-century industrializers. The main problem is their poverty which is measured by per capita income. Some recent essays have directly challenged this view. Alan Heston and Robert Summers also point in a similar direction. One important conclusion in their paper is that a development plan in South Asia will require many fewer resources than calculations on official exchange rate suggest. According to them, per capita income is not the way to a satisfactory understanding of the development process. The economic historians are now recognizing the widely diverse patterns of development through which even the already developed countries have moved. In another paper, Albert Fishlow presents a discussion on the extent to which the links between Brazil and the international economy generated or held back new development.

In recent years economists have recognized that historical experience can be a valuable guide for both economic theory and policy. Nevertheless, many economists and policy-makers, especially in developing nations, persist in believing that the historical experience of modern industrial nations is irrelevant to the problems faced by developing nations. The purpose of this article is to argue the contrary proposition. This is not to say that contemporary developing nations will inevitably follow the same pattern of development as the highly industrialized nations, much less that the policies of the nineteenth century are appropriate in the vastly different circumstances of the second half of the twentieth century. Historians would be the last to deny that there are alternative routes to economic development, or that different conditions require different policies. Even Marxist economists no longer believe Marx's dictum that underdeveloped nations can see in the history of the developed ones the mirror image of their own future.

Subramanian Swamy finds that the assumption regarding distribution of saving and derivation of the national distribution from the rural and urban distribution are "obscure." If he reads the Reserve Bank of India Bulletin article, again, he will find that the assumption about distribution of saving is very clearly stated and the derivation of the national distribution by aggregating rural and urban distributions is clearly shown. His estimate of intersectoral inequality is based on his facts and assumptions. The urban households are assumed to represent 24 per cent of total households, while the estimate for the share of urban households in the total is 20.8 per cent. Even on a priori grounds, one could expect, during a certain phase of its development, a lower degree of inequality in income distribution in an underdeveloped country than that in a developed country. When an underdeveloped country starts its industrialization program by a fairly radical abolition of the big feudal and landed interests, the tendency toward greater inequality as a result of urbanization and industrialization would be more than offset for some time by the reduction in inequality as a result of agrarian reform. The estimates show that there is a tendency toward increasing inequality in the urban sector and if this continues, it may turn out that by 1970 the concentration ratio in India would be higher than that in the developed countries.

This article focuses on economic growth of developing countries. In discussing the growth and trade performance of three underdeveloped areas, the authors differ in mood, but not in conclusion. They all tell that no ways of identifying incremental as wholly distinct from established comparative advantage have as yet been discovered. In Brazil, industrialization based essentially on import substitution has been a big success, and if new export flows have failed to materialize, this is wholly the fault of protection in the older industrial countries. In India, where the impact of industrialization on the economy as a whole has been smaller than in Brazil, the failure to develop new exports cannot be dismissed quite so easily since India pioneered among underdeveloped countries in exporting manufactures and, in discussions of new patterns of international trade, her potential comparative advantage in steel, for example, had been frequently and hopefully pointed out. In Africa, finally, the road to economic development via import-substituting industrialization is less appealing than it had seemed elsewhere a decade or a generation ago, both because of intrinsic characteristics of most of the African economies and because one would like to do better than some countries that have run into trouble precisely by following that road.

This paper concentrates on the role of the industrial sector. The growth of industrial employment opportunities and output depends mainly on the strength of two forces, capital accumulation and technological change. The greater the rate of capital accumulation, the greater the rate of expansion of industrial employment and output. Moreover, in an economy with substantial surplus labor, innovations can also make significant contributions in the same directions, especially if they are sufficiently strong and are biased in the labor using direction thus making possible maximum use of the relatively abundant factor. If the combined forces of capital accumulation and innovation yield a rate of labor reallocation in excess of the rate of population growth, the economy may be considered to be successful in the development effort in the sense that the center of gravity is continuously shifted towards the industrial sector. As this process continues, the underdeveloped economy will sooner or later exhaust its surplus labor and reach a significant turning point in the development process. The aim of this paper is to examine carefully the role of industrial capital accumulation and technological change during the development process.

In spite of the fact that 50 to 80 per cent of the populations of most underdeveloped countries are engaged in agriculture, surprisingly little economic research has as yet been devoted to the interrelationships between agriculture and general economic development. Insofar as general economists have concerned themselves with the problem at all, their approach has usually been too global to throw much light on the role of agriculture in economic development. To be sure, their typically macroeconomic approach has had certain important virtues in terms of its over-all perspective, its emphasis upon major intersector relationships, and its tendency to view economic development in a dynamic rather than static context. However, the general economists of both advanced and underdeveloped countries have usually been abysmally ignorant of agriculture and village life. Hence the validity of their analyses has frequently turned on their assumptions as to fact. For example, the extent of disguised unemployment in rural areas and the potentialities of increasing food output with given supplies of land and labor, about which far too little is as yet known. They have also tended to deal in such abstract agglomerates as capital without regard for the fact that, within agriculture, the expansion of certain minor components of the aggregate capital might, by supplementing the supplies of particular limitational factors, have very low incremental capital-output ratios. As a consequence, particularly for overpopulated countries with a clear and present danger of food shortage, the policy implications of their analyses have, in my opinion, often tread on perilous ground.

The article presents an analysis of the relevance of classical and contemporary theories of growth to economic development. Great Britain's economic development has often been discussed in terms of the classical theories of economic growth. What marks off the economic history of Great Britain in the earlier period, 1550-1780, from that of her continental neighbors is both the extent of general economic development, with much investment in "social" capital, and the difference in the kind of industry, such as engineering, which developed. The problem of newly developing countries are now being posed in terms of the contemporary theories. But for many countries key problems of economic development are inextricably linked with the performance of the major industrial nations, performance which in itself is related to the nature of their past economic growth. However, some of the important propositions of the classical and contemporary theories apply to past experience and to prove this point this article provides a brief presentation of some of the salient elements in the economic development of Great Britain, Western Europe, and the U.S. Afterwards it appraises the relevance of the theories in terms of the present-day complex of economic development.

This article focuses on commercial policy in the underdeveloped countries. Industrialization is an inescapable part of the process of change accompanying a gradual improvement in per capita income in these countries. In response to differences in the income elasticities of demand and in rates of increase in productivity, the active population in underdeveloped countries is tending to shift, chiefly through the distribution of its increment, from occupations with a relatively low income elasticity of demand, principally primary production, to industry and other activities where this is relatively high. This process has characterized the development of the industrial centers and is now advancing into the periphery. Industrialization of the centers is not a matter of dispute, it seems quite obvious that industrial countries should continue to industrialize. On the other hand, industrialization of the periphery has always been a controversial subject, not only in the centers, but also in the peripheral countries themselves. Although the opposition is receding, there are still some who consider industrialization to be a harmful diversion of productive resources from primary activities.

This article presents a discussion on the research paper "Using the Resources at Hand More Effectively," in the context of fundamentals of economic development in underdeveloped countries, by Arnold C. Harberger, a professor at the University of Chicago, published in the May 1959 issue of the journal "American Economic Review." As maintained by Harberger, economic growth can be maintained by eliminating monopolistic, political and capricious intervention with the free forces of the market and by accelerating the application of the best known techniques. However, "misallocation" is not only quantitatively unimportant but is very nearly irrelevant to the development problem. Harberger's recipe is not supposed to work unless it is accompanied by drastic structural change, involving wholesale transfers of population from peasant agriculture to industry, which market forces alone and unaided will not produce. Such transfers require simultaneous industrialization and agricultural revolution and so necessitate substantially capital accumulation and government intervention in the allocation of resources.

The industrialization's three-fold impact on a pre-industrial labor force is summarized below. People are forced to adjust to a new environment i.e. a city. This necessarily involves social disorganization which manifests itself, at the social level, in higher rates of crime, unbalanced sex ratios, political extremism and the like. These maladjustments require some centrally implemented policy if they are to be overcome. People must adjust to a new technology. This is the least difficult of the three adjustments and requires mainly an increase in the number of vocational training facilities. People must submit to new social relationships, particularly those required by factory organization. The absence of alternative social arrangements to provide such foundations for industrial communities quickly strikes one even in such a relatively advanced country as India. There would be great difficulties in execution, in potential and real abuses, in stimulating employer concern for such behavior and possibly in straining scarce capital resources.

The economic development of underdeveloped countries is contingent upon the introduction of industry. Industrialization is associated with urban growth and the relationship of the two processes is usually assumed to be so close that some writers speak of industrialization and urbanization as two facets of one and the same process. The evidence for the need for industrialization and urbanization is found in the historical experience of the economically more advanced countries and in general considerations on the economic situation of the farm populations in many under-developed countries. The advanced countries contain the most heavily industrialized and at the same time most densely urbanized regions of the world and to the extent to which industrial cities have grown up in underdeveloped countries, they have been patterned after British, German and American models. The improvement in the economic position of subsistence farmers who make up two-thirds or more of the people in many underdeveloped countries is dependent upon industrialization. There are scarcely any under-developed countries in which there is not a large surplus of un-employed agricultural labor. Although industrialization and urbanization go usually hand in hand, there is no necessary connection between the two processes. Industries can be and have been established in rural districts and cities have grown up without large industrial plants. The introduction of new technology may sometimes change existing social relations very little and sometimes subvert them completely.

In the literature on economic development a certain notable division between optimists and pessimists is apparent. This division is highly predictive of disciplinary origin. Economists-representatives of the dismal science are customarily optimistic about economic growth and its social consequences. Anthropologists and sociologists are customarily pessimistic about the possibilities of economic growth and particularly about its consequences. Although possibly these fields attract different personality types, the manic and the depressed, it seems more likely that conventional theory and habits of thought explain the differences. Traditional economic theory has not been strongly concerned with attitudes and motives. Human attitudes and motives are simply assumed to be appropriate to rational choice of means effective for maximizing satisfactions as economically defined and measured. Human wants are thought to be essentially unlimited and human nature pretty much the same wherever encountered. A monetary market system co-ordinates the factors of production and allocates rewards and financial incentives are assumed to be effective in allocating labor. The movement of labor between sectors of the economy is regarded as a function of its differential marginal productivity, which is principally determined by relative states of capitalization, technique and, possibly, enterprise.

Industrialization is the main hope of most poor countries trying to increase their levels of income. It is also the most controversial aspect of the problem of economic development. Attempts to apply general economic principles to this field have usually proven in-conclusive. This result has been due to an incomplete theoretical formulation of the problem as well as to inadequate data. In most cases there remains a wide margin of disagreement between the advocates of international specialization and investment in primary production on the one hand and the proponents of balanced growth and industrialization on the other. Most of the participants in this controversy would probably accept the proposition that the primary aim of a developing country is to secure the greatest increase in its income total or per capita from its available resources in the long run. The main problem lies in evaluating the amount of scarce resources, which will actually be required by alternative types of production. For a number of reasons, the price system, which makes this evaluation fairly accurate in more highly developed economies, is often a rather unreliable guide to the desirability of investment in an underdeveloped economy.

The previously mentioned fact, namely, the higher productivity of the foreign trade sector in underdeveloped countries might, at first sight, be considered as a cogent argument in favor of the view that foreign trade has been particularly beneficial to underdeveloped countries in raising their general standards of productivity, changing their economies in the direction of a monetary economy, and spreading knowledge of more capital-intensive methods of production and modern technology. That, however, is much less dearly established than might be thought. The question of ownership as well as of opportunity costs enters at this point. The productive facilities for producing export goods in underdeveloped countries are often foreign owned as a result of previous investment in these countries. Another factor which has contributed to the view that foreign trade is unimportant in underdeveloped countries is the indisputable fact that in many underdeveloped countries there are large self-contained groups which are outside the monetary economy altogether and are therefore not affected by any changes in foreign trade. In industrialized countries, by contrast, it is true that repercussions from changes in foreign trade are more widely spread; but they are also more thinly spread.

The article presents views of researcher Henry Rosovsky on research related to economic history conducted by economist Rondo Cameron. Rosovsky while discussing Cameron's research suggests that it is very difficult to disagree with the lessons which Cameron finds in the historical record. History demonstrates the virtues of greater efficiency, hard work, education, and the spirit of private enterprise. Rosovsky finds too little attention paid to the changing historical nature of the industrialization process. Cameron tells that initial conditions vary, and that economist Karl Marx's dictum concerning the mirror image is unacceptable. And yet his theory concerning the influence of changing initial conditions is never made explicit, and many of his lessons could lead one to believe that Marx was correct. He details that Germany was a leading European aggressor twice in this century; Russia went through a great revolution; Japan tried to conquer much of Asia in the 1930's. These events may suggest some of the disequilibrating influences, or pathology, of modem economic growth, and they are also part of economic history. To him they illustrate some of the dangers of "growth at any cost," and they deserve full consideration when giving advice to others.