Productivity and Growth in Manufacturing Industry: A Reply

TLDR: For example, the authors defined economic maturity as a state of affairs where real income per head had reached broadly the same level in the different sectors of the economy, i.e., a state in which real income was equal to or higher than the marginal product of all workers.

Abstract: Professor Wolfe attacks me (in the May, 1968 issue of Economica) for being obscure and unconvincing in the inaugural lecture which I gave at Cambridge.1 In this lecture I attempted to put forward a complex thesis concerning the causes of high and low rates of economic growth under capitalism, and this was necessarily somewhat scanty; there is a limit to the material one can pack into a single lecture. Such a treatment could only be successful if received with imagination and some goodwill; Professor Wolfe has picked on a large number of individual points (many of them trivial in substance) without attempting to come to grips with the thesis as a whole. I propose to publish a more comprehensive statement of the theory in due course.2 Meanwhile rather than follow the negative approach of answering each point in turn-which would be both tedious and unconstructive-I shall concentrate on the main points which have clearly not been understood. Foremost among these is my notion of "economic maturity". This is not some vague notion which can be defined in terms of "a situation in which there is relatively small employment in agriculture". In my lecture I defined it explicitly "as a state of affairs where real income per head had reached broadly the same level in the different sectors of the economy". I could have added, to convey its significance better, that ''economic maturity" could also be defined as "the end of the dual economy"; or a situation in which "surplus labour" is exhausted; or one in which "growth with unlimited supplies of labour" (to use Arthur Lewis' phrase) is no longer possible. The neo-classical framework of thought cannot accommodate notions like "disguised unemployment", the "dual economy", or the distinction between "capitalist" and "pre-capitalist" enterprise. For neo-classical theory assumes that the structure of demand determines the distribution of resources between different uses; that competition and mobility assures that "factor prices" tend to equality in all employments; that profit maximization ensures equality of factor prices with the value of the marginal products of factors; subject only to friction