Knowledge that Transforms

IT IS CURious how in scientific disciplines very similar results of investigations into problems appear to emerge at the same time. It is as if the essential reality of a situation comes into increasing conflict with accepted ideas until, at a certain point, reality cannot be gainsaid. From various quarters attacks begin to mount and we begin to wonder why we were so simple-minded as to accept uncritically earlier concepts. Even so, we do not lightly reject these other views because, after all, a good deal of intellectual energy has gone into their formulation and propagation. We wait to be convinced; each new, available piece of research is scanned to see whether it supports the tenets of the old doctrine, or whether it adds to the growing swell of disillusionment. Finally, if we are honest, we are forced to admit that reality has not been explained by our older notions-there are too many discrepancies between facts and theory-and we embrace the new approach. These reflections are engendered upon reading three books published at the end of 1970 or the beginning of 1971.1 All deal with the results of many years of development efforts by developing countries and all are critical of present policies. Broadly speaking, we may say that the LittleScitovsky-Scott book concentrates its criticisms on policies of import-substittiton whilst the ILO and Turnham books focus upon the failure of policies to obviate growing unemployment. Let us look at the Little-Scitovsky-Scott book first. This is an interesting example of what can be achieved by teamwork in economic research. The book was based on researches undertaken in various countries (Brazil, India, Pakistan, Mexico, Philippines, and Taiwan) by those who had extensive knowledge of the countries concerned. Their individual contributions were analyzed by the three authors (who also incorporated material on Argentina). The result is a well-documented multiple casestudy of development, with theoretical iinplications far beyond the particular countries covered.2 Little-Scitovsky-Scott3 concern themselves first with a consideration of the factors which have led to the growth of import-substitution. One factor was the de-

I am grateful to Professors Ralph Andreano, Arthur S. Goldberger, and W. Lee Hansen of the University of Wisconsin for their encouragement and comments on an earlier draft of this paper. Many valuable suggestions were contributed by two anonymous referees and the participants in the Workshop in Applied Welfare Economics at the University of Wisconsin, Fall 1970, especially Morley Gunderson. Charles Leitzke assisted in the arduous task of data collection. The usual caveat is applicable.

AS CRITICISM of the traditional theory of production and exchange has mounted in the postwar period, increasing attention has been given to new analytical approaches that seek either to supplant classical marginalism or to extend its scope. In the latter category is the important body of literature that has grown up around the notion of property rights structures. The contributions here are quite diverse in style and content but are characterized by a common emphasis on certain basic ideas concerning the interconnectedness of ownership rights, incentives, and economic behavior. The purpose of the present paper is to summarize the essential features of this line of research, examine some of its important areas of application, and discuss the promise the approach holds for improved understanding of economic problems.