The Theory of Coordination Failure Underlying the Hypothesis of Rosenstein-Rodan
‘’ But when was ever honey made with one bee in a hive!’’ stated the English poet, author and humourist, Thomas Hood in his poem ‘The Last Man’. These words give an idea about the perfect coordination of bees as they work to produce honey. One bee will fail miserably at producing honey if it sets out to accomplish this task independently. Similarly, coordination in economics involves the integration of various activities by agents in the complex economic system to ensure that scarce resources are efficiently used for the good of all in the society – in the bee’s case, making honey.
According to Ray (1998), an alternate, superior equilibrium exists provided…show more content… In addition, a strategy for planned industrialisation made up of concurrent arrangements which cater for various complementary industries has never existed.
In the arguments put across by Rosenstein-Rodan (1943), providing training for labourers who were peasants in the Eastern and South-Eastern European region ought to be the paramount task of industrialization. This would eventually change them into either full-time or part-time workers in industries and increase their level of income. He suggested this because private firms did not consider this venture profitable to them since entrepreneurs may lose capital if they invest in training labourers who will ultimately work with another firm. In order words, a bulk investment in capital and labour was beneficial for development rather than depending on individual firms to accomplish that task.
Rosenstein-Rodan’s (1943) most significant reason in support of large-scale investments stems from the idea of complementarities of diverse industries. In his paper, he explains that numerous industries serve as complements to each other. He gives the logical argument which favours planning an extensive form of industrialization citing an example with a rather