Who among the following is the author of the book, Choice of Techniques?

Correct — A, (a) A. K. Sen. Choice of Techniques: An Aspect of the Theory of Planned Economic Development was published in 1960 by Amartya Kumar Sen, and it grew out of the doctoral thesis he completed at Trinity College, Cambridge, in 1959.

The book intervenes in the central planning argument of the 1950s. A poor country with abundant labour and scarce capital has to decide what kind of machinery to install. One camp said the answer was obvious: use labour-intensive techniques, because labour is what the country has and employment is what it needs. The other camp — the position associated with the heavy-industry strategy of India's Second Plan — said the opposite: use capital-intensive techniques, because they yield a larger surplus over wages, that surplus is what gets reinvested, and reinvestment is what makes the economy grow.

Sen's contribution was to show that neither answer is right in the abstract, because the two camps are maximising different things. If the objective is output and employment now, the labour-intensive technique wins. If the objective is the rate of growth of output, the criterion becomes the reinvestible surplus a technique generates, and the capital-intensive technique can win even though it employs fewer people today. Which objective is correct depends on how heavily the future is weighed against the present — that is, on the planner's time horizon and rate of discount — and Sen made that dependence explicit rather than leaving it buried in an assumption. That is why the book is remembered as the one that turned a slogan-driven debate into a properly specified optimisation problem.

The stem prints the author as 'A. K. Sen', which is how Indian economics literature of the period cites him, and a candidate who knows him only as Amartya Sen — Nobel Memorial Prize in Economic Sciences, 1998, for his contributions to welfare economics — has to make that connection under time pressure. The book title itself is printed in italics in the booklet, set inside an otherwise roman stem.

Why the others are wrong

• (b)K. N. Raj — K. N. Raj was one of the architects of Indian planning rather than a theorist of technique choice. He worked on the drafting of the First Five Year Plan while still in his twenties, wrote on the monetary policy of the Reserve Bank and on the economics of the Bhakra Nangal project, and in 1971 founded the Centre for Development Studies at Thiruvananthapuram, which became the home of the work on Kerala's development record. His name belongs to plan-making and to Indian macroeconomic policy, not to Choice of Techniques.
• (c)V. K. R. V. Rao — V. K. R. V. Rao is remembered above all as the pioneer of national income estimation in India — his study of the national income of British India was the first systematic attempt of its kind — and as an institution builder who founded the Delhi School of Economics and the Institute of Economic Growth, and later served as a Union Minister for Education. His theoretical contribution most often cited is on the working of the investment multiplier in an underdeveloped economy, where he argued that the Keynesian multiplier does not operate in the usual way because supply is inelastic. That is a different problem from the one Choice of Techniques takes up.
• (d)Sukhamoy Chakravarty — Sukhamoy Chakravarty is the most plausible of the three, because he did work on exactly this territory — optimal savings, planning models and the theory of capital accumulation — and he chaired the Reserve Bank's committee to review the working of the monetary system, which reported in 1985, as well as the Economic Advisory Council to the Prime Minister. His best-known book is Development Planning: The Indian Experience, published in 1987, which is a retrospective assessment of Indian planning rather than the 1960 monograph named in the stem. A candidate who confuses the two has the right field and the wrong author.

The choice-of-techniques debate asks which production method a capital-scarce, labour-abundant economy should adopt when several are technically available. The labour-intensive answer maximises employment and current output per unit of scarce capital. The capital-intensive answer, associated with the reinvestible-surplus criterion, notes that output is divided between wages, which are consumed, and surplus, which can be ploughed back; a technique that produces a larger surplus per worker therefore raises the rate of accumulation and hence the growth of future output, even at the cost of employing fewer people today. Sen's Choice of Techniques set out both criteria formally and showed that the choice between them is not a technical question at all but a question about the objective function and the time horizon: the greater the weight placed on future consumption relative to present consumption, the more capital-intensive the optimal technique. The book sits in the same intellectual moment as the Mahalanobis model that shaped India's Second Five Year Plan, the Harrod-Domar growth relation between the savings rate and the capital-output ratio, and the Lewis model of development with unlimited supplies of labour. Sen went on to work on social choice, poverty and famine, and the capability approach, receiving the Nobel Memorial Prize in Economic Sciences in 1998.

Key facts

• Choice of Techniques: An Aspect of the Theory of Planned Economic Development was published in 1960 by Amartya Sen.
• It developed from the doctoral thesis Sen completed at Trinity College, Cambridge, in 1959.
• Its subject is how a capital-scarce economy should choose between labour-intensive and capital-intensive methods of production.
• Sen showed that the answer depends on the objective — current output and employment, or the reinvestible surplus that drives future growth — and on the planner's time horizon.
• Amartya Sen received the Nobel Memorial Prize in Economic Sciences in 1998 for his contributions to welfare economics.
• K. N. Raj worked on the First Five Year Plan and founded the Centre for Development Studies, Thiruvananthapuram, in 1971.
• V. K. R. V. Rao pioneered national income estimation in India and founded the Delhi School of Economics and the Institute of Economic Growth.
• Sukhamoy Chakravarty chaired the Reserve Bank committee that reviewed the working of the monetary system and reported in 1985, and wrote Development Planning: The Indian Experience (1987).
• The booklet prints the author's name as 'A. K. Sen', the form used in Indian economics writing of the period.

Common traps

• Failing to connect the initials 'A. K. Sen' with Amartya Sen under time pressure.
• Confusing Choice of Techniques with Sukhamoy Chakravarty's Development Planning: The Indian Experience, which covers adjacent ground three decades later.
• Attaching V. K. R. V. Rao to planning theory rather than to national income accounting.
• Assuming a labour-abundant economy must always choose the labour-intensive technique; that is the position Sen showed to be conditional, not the conclusion of his book.

• practice — not a real PYQ

  The central question examined in Amartya Sen's Choice of Techniques (1960) is

  • (a)how a capital-scarce economy should choose between labour-intensive and capital-intensive methods of production
  • (b)how national income should be estimated in a colonial economy
  • (c)how a central bank should conduct open market operations
  • (d)how famines arise from a collapse of exchange entitlements

  Answer(a) how a capital-scarce economy should choose between labour-intensive and capital-intensive methods of production

• practice — not a real PYQ

  Who chaired the Reserve Bank of India's Committee to Review the Working of the Monetary System, which submitted its report in 1985?

  • (a)K. N. Raj
  • (b)V. K. R. V. Rao
  • (c)Sukhamoy Chakravarty
  • (d)Amartya Sen

  Answer(c) Sukhamoy Chakravarty