Knowledge that Transforms

SOVIET Russia can serve as an extremely fascinating case study in the field of economic development-a field where scientific curiosity is certainly not matched by available statistical data, and where a good deal of ingenuity or foolhardiness is needed for the construction and evaluation of estimates from scattered pieces of information. In studies of economic development a method frequently used for checking estimates and establishing their comparative importance consists of applying the lessons of the past experience of some advanced country (such as the United States) to economically younger areas. Our present knowledge of economic development is insufficient for a final evaluation either of this method as a whole or of its applications, especially in the case of countries whose economic development has been unique. But attempts to draw such comparisons, whatever their direct validity in specific cases may be, appear promising and useful as a source of material from which a theory of economic development can be gradually constructed. This problem came up during the recent controversy regarding the validity of the Soviet machinery index which took place in this REVIEW between Professor Gerschenkron and Mr. Dobb.2 Gerschenkron maintains that the official Soviet index of machinery output based on I926-27 weights is overstated, essentially because new machinery, not yet produced in 192627, was subsequently included in it at inflated prices. He presented the following comparison between the machinery index and an index of ferrous metals in Russia: I As shown in column (3), the ratio of ferrous metals to machinery fell drastically between I928 and I932; and for the whole period I92838, output of ferrous metals increased 5.4 times, while that of machinery increased I6.4 times. While a part of this divergence could be due to an increased degree of fabrication involved in production of machinery as compared with other metal-using industries, Gerschenkron felt that the ratio of I6.4 to 5.4 was too large to be explained by actual experience.4 Hence, he con-

JT was something of a shock to many economists to learn from Secretary of Agriculture Brannan's testimony before a Congressional committee (April I95I) that in I950 had earned on average only 69 cents per hour for their labor compared with a national minimum wage of 75 cents an hour and rates of one to two dollars or more in other occupations. The 69-cent average (now revised to 70 cents) seemed contrary to several common notions. It did not square with general belief that farmers are getting too much. It seemed out of line with many undeniable cases of real farm prosperity. Since it was an official figure, friendly critics argued not that it was inaccurate but that it was unduly weighted downward by including many submarginal who produce very little for markets. Others raised additional questions, particularly as to validity of comparing farm returns per hour with returns per hour in other occupations, and as to why people living on farms are willing to take less in dollar income. The problem of comparing farm with nonfarm has been a baffling one for many years; in fact, ever since annual estimates of farm were started more than 25 years ago. Ir I92 0'S, equality for agriculture, parity, and the farmers' share of national income were phrases in common use by farm leaders, agricultural politicians, and agricultural economists. The specialists in farm comparisons in 1920's recognized that were both entrepreneurs and laborers; that farming was both a business and a way of life; and, if comparisons with nonfarm were to be made, it was necessary to assign some value for farmer's labor to get residual return on his capital, or to assign some value for use of his capital and management in order to compute residual return for his labor. This, of course, is still an arithmetical necessity. There are other debated issues, such as how to impute values to production used in farm home and how to deal with differences between other elements in farm and nonfarm living standards. Agricultural statistics have been expanded and improved a great deal over past twentyfive years, and a great deal more is known about farm and national income, about per capita farm and nonfarm income, about size and distribution of farm and nonfarm income, and about reduced labor and increased capital requirements in agricultural production, but for most part basic questions in comparative are still unsolved.