ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Critical Minimum Effort Thesis of Harvey Libenstein for the Growth and Development of a Country

Updated on December 20, 2015
icv profile image

IRSHAD CV has been a student in Economics. Now he is doing Masters in Economics. He completed B.A. Economics from the University of Calicut.

Introduction

Critical minimum effort thesis is one of the theories in the economics of development. Every country of this world started their journey of progress and development from nothingness. Today, economics of growth and development is one of the most attracting branches of economics. It analysis the different stages of development which comes as the result of human endeavor.

Critical minimum effort thesis was developed by Professor Harvey Libenstein. He published his book titled “Economic Backwardness and Economic Growth” in 1957. By this theory he talks about some of the bad features of underdeveloped economies. The theory is emphasizing on to the path of development by an underdeveloped economy.

Critical Minimum Effort Thesis

Underdeveloped economies are characterized with much backwardness. Generally in underdeveloped countries, people earn lower income, low savings and investment. Since vicious circles of poverty is the core problem of under developed economies, productivity will be lower. This creates barriers to grow more. Anyway, critical minimum effort thesis is discussing about the ways which can be followed to escape from the economic backwardness of a country.

The thesis is based on the population trap concept of Malthus. According to Malthus, higher population growth rate is one of the great challenges of any economy. The theory assumes that, when a country enters in to the path of development, there will be simultaneous increasing tendency in between per capita income and population. But this increasing trend of population can be seen only ion the initial stages of development. At the same time higher population growth rate is one of the main problems of under development. But when the economy grows more, the growth rate in income will overtake the growth rate in population. This declining trend in population may happen because of many reasons like changes in social system, attitudinal changes among people etc. In short, when an economy enters in to higher level of development, population growth rate will decline.

Every economy is mainly characterized with two influences like shocks and stimulants. Shocks are those factors which tending to decrease the income generating opportunities of the people. On the other side stimulants are those economic factors, which encourage income generating forces. An economy can grow and achieve development only if stimulants are greater than the shocks. On the contrary, if shocks are greater than the stimulants, it will not be a favorable condition for economic development. For under developed economies, sufficient amount of investment is the best stimulant.

Professor Harvey Libenstein also mentioned about the role of some growth agents to uplift the economic growth and development. The growth agents includes peoples who are acting as entrepreneurs, savers, investors, discovers etc. These growth agents can stimulate the economic activities. Highest level of investment means that, the economy is capable of generating more employment, income, savings, growth etc. In short, a high level of role of these growth agents implies easiness of development.

Another point in the theory is the zero-sum incentives. This refers the distributive function of an economy. The economic system must be capable of distributing the incomes in an equitable way. At the initial stages of development, there is a possibility in spreading of income inequality. This may create a wide gap between rich and poor in the country. But, the distribution of national income must be based on the principle of equality. Otherwise, there is a chance for rising of monopoly powers in the economy. Therefore the economy must control such challenges.

Every economy is mainly characterized with two influences like shocks and stimulants. Shocks are those factors which tending to decrease the income generating opportunities of the people. On the other side stimulants are those economic factors, which encourage income generating forces. An economy can grow and achieve development only if stimulants are greater than the shocks.

Effects of Critical Minimum Effort

Once the economy attained development or critical minimum effort, there will be multiple effects. Some of them are listed below.

i) The economy may experience wide structural changes. There will be transformation of working forces from agricultural sector to industrial and service sectors.

ii) Once investment increased, there will be high use of technical know-how. This will ensure higher productivity. In developed economies, capital output ratio will be lower.

iii) There will be high range of mobility of factors of production like labor, capital etc.

iv) There will be higher level of specialization. This enriches the productivity and reduces cost of production.

v) There will be a wide social and economical progress. The economy will enjoy better healthcare system, good infrastructure and other services.

Limitations of the theory

The critical minimum effort thesis is not free from criticisms. Some of them are mentioned below.

The theory is based on the assumption that in the initial stages of development population will increase with respect to increase in per capita income. But after a particular level, population will decline while income increases at a higher rate. The theory is neglected the role of other factors of declining population growth. There are many factors which tend to decline the population growth like improvements in healthcare system, advancement in medicine etc.

Conclusion

In simple words, the critical minimum effort thesis tells us about the various factors of under development. It suggests the role of investment in the economy to overtake the under developmental conditions. Professor Harvey Libenstein connects the development of a country with many socio-economic factors like per capita income, population growth, capital-output ratio etc.

working

This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://corp.maven.io/privacy-policy

Show Details
Necessary
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
Features
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Marketing
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Statistics
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
ClickscoThis is a data management platform studying reader behavior (Privacy Policy)