Technological dualism
Encyclopedia
Technological dualism is proposed by Benjamin Higgins. He was a professor at Ritchie Professor of Economics at the University of Melbourne in the late 1940s. His theory explains the causes of unemployment in the underdeveloped economies. The underdeveloped Countries of today are characterized by dualistic Economy. One is the modern Sector the other is the Traditional Sector. There relation has been explained by Higgins in his theory which is explained below.
.This theory was propounded by Benjamin Higgins in place of Social dualism
theory by Professor Boeke. In the words of Prof Higgins "dualism is the situation in which productive employment opportunities are limited not because of lack of effective demand
but because of resource and technological constraints in the two sector". The two sector here means the traditional rural sector and modern sector.
This theory is prevalent in less developed countries. According to Prof Higgins this is the cause of unemployment and underemployment in these less developed countries.The traditional rural sector and the modern sector both use different production function and have different resource endowments and this is the reason for technological dualism in these less developed economies.
2) Different techniques and combinations are used in this sector.It has variable technical coefficients of production. As technical coefficients are variable the products can be produced with a wide range of techniques and combinations of labour and capital.
3) As it is a traditional sector and factor endowment
is such that labour intensive technique is dominating in this sector as compared to capital intensive technique of production.
2) As it is the modern Sector hence capital intensive production is prevalant.
3) Different techniques and combination are not used.The technical coefficents in this sector is fixed due to this different techniques or combination cannot be used.
4) There is a limited degree of technical substitutability of factors and the production is characterized by fixed technical coefficients.
The production function in the industrial sector is shown.The X-axis or the horizontal axis is depicted by Labour and the vertical axis or the Y-axis is Capital.The curve which is an isoquant
shows the combination of labour and capital at the same level of output. The higher the curve the higher the levels of output i.e. O1 level of output is least and as you go to O2,O3,O4 the output level increases. The dotted line Ti shows the expansion path of the modern sector. From the figure 1 we can see that the production process is capital intensive.For instance to get an output of O2 then OC1 amount of capital will be used and OL1 units of labour will be employed. If OL2 units are available the excess supply of labour would not have any effect on production techniques and L1L2 (excess labour) will remain unemployed or will try to seek employment in the traditional sector.This proves that only when the capital increases more labour will be taken in and output will be expanded. In this case the labour and capital have to be used in fixed proportion to get any output. As we know the production process is capital intensive. Figure 1 shows that OC1 units of capital is used and OL1 units of labour is employed to get Q1 units of output. if the availability of capital increases the producer would shift to the higher isoquant curve showing higher level of output. Huggins argues that the technical coefficents are not as rigidly fixed and therefore the small slanting dotted lines where two isoquants meet in the figure above show that they are somewhat flexible.f there are very large differences in the factor endowments such as given by CoLn the entrepreneurs would probably think of using more labour intensive technique. The slope of the expansion path
(ti) shows that despite the increase in capital and output there is no significant improvement in the employment.
Initially this absorption takes place by getting more land under cultivation so as to keep the ratio of labour to land constant. For sometime the capital and labour combination remain constant as the output rises from O1 to O3 as given in Figure 2. As resources are not unlimited the good land tends to become scarce and due to inflow of labour the ratio of labour to capital in the sector rises and hence the techniques tend to become increasingly labour intensive. When the point On is reached all the available land has already been cultivated due to the high intensive labour techniques used and the marginal productivity of labour falls below zero. Disguised unemployment starts making an appearence at this point.Under these condition there is no incentive for farmers to or small industries to make an investment in this sector even if they have the money to invest. Nor wll they be interested in introducing labour saving innovations even if they knew about them. Since labour supply is in excess therefore labour as a group is not interested in increasing their efforts.Thus methods of production remain labour intensiva and economic and social welfare remain low.
Higgins notes that the problem of disguised unemployment has become more and more serious in the rural sector during the last two centuries. This happened as technological progress took a form of capital intensive sector and not technological progress took place n agriculture, handicrafts. The technological progress has been rapid in modern sector. Particularly after the second world war both he trade union activity and direct government intervention has led to increase in the industrial wage rates in certain countries but these policies have had no effect on the rural wage rate. As a result the tendency towards technological dualism has increased.
Prof Eckaus begns wth a simple case where one one good is produced in the economy, national product, with two factors of production labour and capital. It is assumed by him that the factors gven are used in fixed proportions.Eckaus finds out that the relatively abundant factor i.e. labour faces structural unemployment. This happens even if the technique used is labour intensive. So from his studty it showed that structural unemployment of labour exists even when labour intensive technique is used.
In the next step the national product is divided into two goods-one is output of local enterprises which are relatively more labour intensive and output of western enterprises which are relatively more capital intensive. Again the result is the same very high capital-labour ratio results in structural unemployment of labour. This cannot be removed even if prce is adjusted, or by creation of increased effective demand.
This conclusion remains unchanged even if variable coefficients replace the fixed coefficients in the more labour intensive field of employment.
Some of the reasons for aggravation of these structural employment is
1) If the technological progress takes a form of capital intensive sector.
2) If the rate of population growth is higher than the rate of capital accumulation in the labour sector.
3) If government polices or the trade union are able to increase the wages to a higher level.
1) Prof Higgins fails to offer an explanation of nature and growth of unemployment in the traditional sector in the dual society
2) It is also questionable to assume that development of the industrial sector is dependent entirely on the imported technology.
3) He gives importance to only technical factors affecting labour and capital whereas social and psychological factors are completely ignored.
4) His theory is based on the assumption that the technical coefficients are fixed in the modern sector a little degree of elasticity cannot be ruled out completely.This makes his assumption questionable.
5) The theory explains the under employment in the traditional sector but it never gives any solution.
Technological Dualism
The theory of technological dualism comes under the subject of development economicsDevelopment economics
Development Economics is a branch of economics which deals with economic aspects of the development process in low-income countries. Its focus is not only on methods of promoting economic growth and structural change but also on improving the potential for the mass of the population, for example,...
.This theory was propounded by Benjamin Higgins in place of Social dualism
Social dualism
In sociology and economics, Social dualism is a theory developed by economist J.H. Boeke which characterizes a society in the economic sense by the social spirit, the organisational forms and the technique dominating it...
theory by Professor Boeke. In the words of Prof Higgins "dualism is the situation in which productive employment opportunities are limited not because of lack of effective demand
Demand
- Economics :*Demand , the desire to own something and the ability to pay for it*Demand curve, a graphic representation of a demand schedule*Demand deposit, the money in checking accounts...
but because of resource and technological constraints in the two sector". The two sector here means the traditional rural sector and modern sector.
This theory is prevalent in less developed countries. According to Prof Higgins this is the cause of unemployment and underemployment in these less developed countries.The traditional rural sector and the modern sector both use different production function and have different resource endowments and this is the reason for technological dualism in these less developed economies.
Difference in Production Function
There are differences in the production function in the two sectors. There are fixed technical coefficients in the modern sector whereas in case of traditional sector the technical coefficients are variable.This duality is analyzed by Higgins in the context of Factor Proportions. Prof Eckaus offers a detailed explanation of this feature.This will be explained later on in this topic.This concept of Factor Proportion is used by Higgins for the analysis of the unemployment in the underdeveloped countries.Difference in Factor-endowment
There is a difference in availability of labour and capital this forms the fundamental basis of technological dualism.In the modern sector more amount of capital than labour is observed so therefor capital intensive techniques would be used. In the traditional sector more of labour is present than capital. So here labour intensive techniques will be incorporated.Thus two distinct techniques of production can be observed in these two sectors.Features Of Dual Sector
As mentioned above in case of technological dualism the economy is divided into traditional sector and modern sector. Following are some characteristics of these sector.Traditional Sector
1) Agriculture, cottage industries and small industries are the main occupations of this sector.2) Different techniques and combinations are used in this sector.It has variable technical coefficients of production. As technical coefficients are variable the products can be produced with a wide range of techniques and combinations of labour and capital.
3) As it is a traditional sector and factor endowment
Factor endowment
In economics a country's factor endowment is commonly understood as the amount of land, labor, capital, and entrepreneurship that a country possesses and can exploit for manufacturing. Countries with a large endowment of resources tend to be more prosperous than those with a small endowment, all...
is such that labour intensive technique is dominating in this sector as compared to capital intensive technique of production.
Modern Sector
1) Large scale industries, plantation,transport, oil fields are the main occupation in this sector.2) As it is the modern Sector hence capital intensive production is prevalant.
3) Different techniques and combination are not used.The technical coefficents in this sector is fixed due to this different techniques or combination cannot be used.
4) There is a limited degree of technical substitutability of factors and the production is characterized by fixed technical coefficients.
Production Function In Industrial/ Modern Sector
Two factors of production (labour and capital) and two goods is the assumption taken to show the technological dualism in the two sectors.The production function in the industrial sector is shown.The X-axis or the horizontal axis is depicted by Labour and the vertical axis or the Y-axis is Capital.The curve which is an isoquant
Isoquant
In economics, an isoquant is a contour line drawn through the set of points at which the same quantity of output is produced while changing the quantities of two or more inputs...
shows the combination of labour and capital at the same level of output. The higher the curve the higher the levels of output i.e. O1 level of output is least and as you go to O2,O3,O4 the output level increases. The dotted line Ti shows the expansion path of the modern sector. From the figure 1 we can see that the production process is capital intensive.For instance to get an output of O2 then OC1 amount of capital will be used and OL1 units of labour will be employed. If OL2 units are available the excess supply of labour would not have any effect on production techniques and L1L2 (excess labour) will remain unemployed or will try to seek employment in the traditional sector.This proves that only when the capital increases more labour will be taken in and output will be expanded. In this case the labour and capital have to be used in fixed proportion to get any output. As we know the production process is capital intensive. Figure 1 shows that OC1 units of capital is used and OL1 units of labour is employed to get Q1 units of output. if the availability of capital increases the producer would shift to the higher isoquant curve showing higher level of output. Huggins argues that the technical coefficents are not as rigidly fixed and therefore the small slanting dotted lines where two isoquants meet in the figure above show that they are somewhat flexible.f there are very large differences in the factor endowments such as given by CoLn the entrepreneurs would probably think of using more labour intensive technique. The slope of the expansion path
Expansion path
In economics, an expansion path is a line connecting optimal input combinations as the scale of production expands...
(ti) shows that despite the increase in capital and output there is no significant improvement in the employment.
Production Function In Traditional/Agriculture Sector
The technical coefficients in the Traditional Sector is variable. The unemployed labour in the industrial sector will have no option but to look for employment n the traditional sector. As traditional sector is labour intensive therefore the inflow in labour can be absorbed in this sector as the technical coefficients are variable.Initially this absorption takes place by getting more land under cultivation so as to keep the ratio of labour to land constant. For sometime the capital and labour combination remain constant as the output rises from O1 to O3 as given in Figure 2. As resources are not unlimited the good land tends to become scarce and due to inflow of labour the ratio of labour to capital in the sector rises and hence the techniques tend to become increasingly labour intensive. When the point On is reached all the available land has already been cultivated due to the high intensive labour techniques used and the marginal productivity of labour falls below zero. Disguised unemployment starts making an appearence at this point.Under these condition there is no incentive for farmers to or small industries to make an investment in this sector even if they have the money to invest. Nor wll they be interested in introducing labour saving innovations even if they knew about them. Since labour supply is in excess therefore labour as a group is not interested in increasing their efforts.Thus methods of production remain labour intensiva and economic and social welfare remain low.
Higgins notes that the problem of disguised unemployment has become more and more serious in the rural sector during the last two centuries. This happened as technological progress took a form of capital intensive sector and not technological progress took place n agriculture, handicrafts. The technological progress has been rapid in modern sector. Particularly after the second world war both he trade union activity and direct government intervention has led to increase in the industrial wage rates in certain countries but these policies have had no effect on the rural wage rate. As a result the tendency towards technological dualism has increased.
Factor Proportion Problem
As mentioned earlier in this topic we will discuss the factor proportion problem as incorporated by Prof Higgins in his theory. This problem was discussed by Prof Eckaus in detail in his study.Prof Eckaus begns wth a simple case where one one good is produced in the economy, national product, with two factors of production labour and capital. It is assumed by him that the factors gven are used in fixed proportions.Eckaus finds out that the relatively abundant factor i.e. labour faces structural unemployment. This happens even if the technique used is labour intensive. So from his studty it showed that structural unemployment of labour exists even when labour intensive technique is used.
In the next step the national product is divided into two goods-one is output of local enterprises which are relatively more labour intensive and output of western enterprises which are relatively more capital intensive. Again the result is the same very high capital-labour ratio results in structural unemployment of labour. This cannot be removed even if prce is adjusted, or by creation of increased effective demand.
This conclusion remains unchanged even if variable coefficients replace the fixed coefficients in the more labour intensive field of employment.
Some of the reasons for aggravation of these structural employment is
1) If the technological progress takes a form of capital intensive sector.
2) If the rate of population growth is higher than the rate of capital accumulation in the labour sector.
3) If government polices or the trade union are able to increase the wages to a higher level.
Conclusion
Higgins in his theory of technological dualism shows us that technological dualism in underdeveloped countries is the cause of unemployment and disguised unemployment. He thinks that the development in the modern sector can take place if foreign capital is present in the economy. As a result of this industrialization in these economies do not cause capital formation instead they are associated with ever increase in population. This is the reason for unemployment in these under developed economies.Critical Evaluation
Prof Higgns Theory is more realistic as compared to the Boeke theory of social dualism. His theory clearly explains the reasons for unemployment in the underdeveloped countries. Higgins theory is not free of criticism, some of the criticism are given below1) Prof Higgins fails to offer an explanation of nature and growth of unemployment in the traditional sector in the dual society
2) It is also questionable to assume that development of the industrial sector is dependent entirely on the imported technology.
3) He gives importance to only technical factors affecting labour and capital whereas social and psychological factors are completely ignored.
4) His theory is based on the assumption that the technical coefficients are fixed in the modern sector a little degree of elasticity cannot be ruled out completely.This makes his assumption questionable.
5) The theory explains the under employment in the traditional sector but it never gives any solution.
External links
- http://www.professor-frithjof-kuhnen.de/publications/causes-of-underdevelopment/1-1.htm
- http://www.scribd.com/doc/47449015/TECHNOLOGICAL-DUALISM-AGRICULTURE-AND-THE-UNEMPLOYMENT-PROBLEM-OF-DEVELOPING-ECONOMIES-Egbe-B-E-1-Ogar-A-M-2-Ibrahim-M-K-3-and-Albert-A-T
- http://ietd.inflibnet.ac.in/bitstream/10603/2719/6/06_abstract.pdf
- http://ietd.inflibnet.ac.in/bitstream/10603/2719/17/17_chapter%2010.pdf
- http://books.google.co.in/books?id=l6WfYYhvrC4C&pg=PA123&lpg=PA123&dq=technological+dualism+Professor+Higgins&source=bl&ots=Q-aEqJARDE&sig=5JfeKV0Cqyori7-jcK30XoWvaus&hl=en&ei=20-UTpu5LaqOmQW14KXlBg&sa=X&oi=book_result&ct=result&resnum=3&ved=0CCAQ6AEwAg#v=onepage&q&f=false
- http://ietd.inflibnet.ac.in/bitstream/10603/2719/17/17_chapter%2010.pdf