Human attitudes and economic growth.

• Author: Kirzner, Israel M.

Peter Bauer was very much concerned with the question of how attitudes may affect the potential for economic development in underdeveloped countries. He was forced to deal with it because much of the conventional wisdom on development, which he was contending, denied the relevance of basic economic theory to developing countries.

The Relevance of Economic Theory to Developing Countries

In Economic Analysis and Policy in Underdeveloped Countries, Bauer (1957: 15-16) wrote:

Those who dispute the relevance of the propositions of economics to underdeveloped countries usually base their arguments on the differences in attitudes and institutions between the underdeveloped world and the western countries.... A few years ago in the Gold Coast a highly placed civil servant told me that his experience had convinced him that economics was irrelevant in Africa, because the African simply did not respond to economic motives. But Bauer was thoroughly convinced that basic economies, in particular, supply and demand theory, was emphatically relevant to underdeveloped countries. As he and Basil Yamey noted in their classic The Economics of Under-developed Countries:

Although many of the differences between the different parts of the under-developed world are very deep-seated, some of the basic tools and concepts of economics apply widely to under-developed countries. This is true, for example, of the basic elements of supply and demand analysis [Bauer and Yamey 1957: 8]. Moreover, from his own extensive study and direct observation in Asia and Africa, Bauer (1957: 15) concluded:

I am now convinced of the very wide applicability to underdeveloped countries of the basic methods and approach of economies.... I am thinking especially of the elements of supply and demand analysis and its simpler conclusions, the tendency of people to seek activities and occupations which yield the highest net advantage within the opportunities open to them. In a 1967 paper, Bauer emphasized the importance of elementary economic principles. He criticized sophisticated economic models "in which the abstraction and aggregation involved render them irrelevant ... they become travesties which divert attention from the essentials and obscure the issues." He pointed out that "the necessity of emphasizing the importance of apparently trite elementary propositions is that in the last 20 years or so economists themselves have ignored them." Among these "elementary propositions" are those...