Letters: Why nations grow

This refers to the report "Bhagwati versus Sen: What's going on?" (July 25). The recent debate (spat?) engaging two of India's esteemed economists on opposing sides on which strategy of economic growth India should pursue has dominated headlines. Sadly, the media coverage including media writings of Bhagwati and Sen have completely ignored the theoretical concepts of what causes economic growth. The neoclassical contribution to growth started with Solow (1956), got a big boost in the late eighties through endogenous growth theory (initially Arrow, later developed by Romer, Lucas). Needless to say, the growth theory has yet been unable to resolve quite a few empirical facts. Notwithstanding these limitations, none of the models could explain sustained economic growth only through accumulation of labour or capital - human capital (or, say,effectiveness of labour ) makes a significant difference in nations achieving sustained per capita growth. So why aren't I a card-carrying Sen follower? The reason for this reticence is a recent book (Why Nations Fail, by Daron Acemoglu and James Robinson) which highlights the role of inclusive institutions. This is where, I think, Indian's failings lie. Just increasing budgetary allocation for, say, primary health or nutrition with enabling institutions to carry out the role effectively will bring in leakages and tragedy, as the recent Patna and Tamil Nadu incidents illustrated. In a federal polity like ours, power has to be decentralised with accountability fixed at every level; yet the government seems to be learning just the opposite lesson. Institutions like the National Counter Terrorism Centre are all efforts to centralise power without reckoning for coordination failures. The irony of having an Adam Smith prize winner as the the prime minister of the country is not lost on me.

Indranil Chakraborty Bangalore

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