If Keynes gave a concept of involuntary unemployment, it is to Bertil Ohlin that we owe the concept of over-full employment. Both Keynes and Ohlin are interested in maintaining a high level of employment which, for brevity’s sake, they call ‘full employment’.
But Keynes, writing in the mid-thirties, was oppressed by chronic unemployment and the fear of stagnation resulting from a deficiency of effective demand; whereas Ohlin, writing in the late forties, was concerned with the contrary possibility of excessive demand leading an economy off the stage of full employment. The difference in emphasis is explained by the difference in the contemporary situations; the former is a reflection of the depression of the thirties and the latter a reflection of the post-war boom.
While, however, the concept of involuntary unemployment has found its legitimate place in the corpus of economic theory and policy, over-full employment, in spite of its relevance to present-day conditions, has not had an impact on our thinking and policy-making to the extent that it deserves. The reason is not perhaps difficult to find. As an
analytical tool, the concept of over-full employment does not have the sharpness that the concept of involuntary unemployment has. It is not at all difficult to see how, in a wage economy, a labourer may not get employment even though he is willing to work at the current rate of wages. But since, in a democratic society at any rate, you do not force a labourer to work, he can surely refuse employment if he chooses. While, therefore, unemployment is not only a possibility but an observed phenomenon, over-full employment appears to be a contradiction in terms.
From the policy point of view, too, the former tends to assume greater importance than the latter; we feel more embarrassed at the sight of unemployment than at the sight of labour shortage. The phenomenon of over-full employment thus tends to get merged into one of inflation. And when this latter is associated with a developing economy, we just resign ourselves complacently to what is ‘inevitable’. For, are not so we argue inflation and resulting bottle necks a kind of price that we must pay for rapid economic development? So economic sector is important to develop us.
Yet the waste due to over-employment, even though concealed, is no less sure and no less significant than the waste due to unemployment. Nor should over-employment be identified with inflation as such; for the two are not the same, even though one accompanies the other. Inflation leads to misdirection of resources and thereby impairs the over-all productive efficiency of the economy. Overemployment does more than that; it tends to reduce the efficiency of the labourer by weakening his urge to work. It is with this latter phenomenon that I shall concern myself.
For I feel that we in this country are having a state of over-full employment in certain sectors, though not in the economy as a whole. Indeed while our economy still presents a spectacle of serious unemployment and underemployment, one may pick out individual sectors where overemployment seems to have reached a danger-point. So economic sector is important to develop us.
Nowhere perhaps is this phenomenon more conspicuous than in the market for technicians and economists. Whereas, however, the association of technicians with development planning is of a tangible character and the need for their services is more or less determinate, the economists’ contribution is not so. There is thus a risk of the demand for economists being exaggerated, particularly when account is taken of the greater political influence of economists vis-a-vis the technicians and of the generous grants that ‘economic research’ has been receiving in recent years from various agencies, internal and external.
Let me not be misunderstood by my fellow-economists. Let them not think that I am a deserter; for I am not. I would not belittle my own profession and, like the proverbial fool, cut off just that branch of the tree on which I am standing.- Far from that. I would surely rejoice at the improved position that economics, as a branch of knowledge, has assumed in the country and would surely welcome the boom in the market for our services, provided I were convinced that it did genuine good to the study of economics.
It is there that I have my misgivings. For I believe that over-full employment, whether it is global or sectoral, tends to spoil the quality of output, even if it does not reduce its quantity. So economic sector is most important to develop us.