Schumacher pointed out that Large scale production leads to large s

1. SMALL IS BEAUTIFUL:
The study of Economics as if People mattered.
E.F. SCHUMACHER
Prof. Prabha Panth,
Osmania University

2. Causes of present
environmental crisis
According to Schumacher:
1. Modern technology: inhuman, excessive
mechanisation, kills creativity.
2. Impact on environment: Producers and
consumers do not care about the
environment.
3. Depletion of Non-renewable resources:
Natural resources are finite, so economic
growth cannot be infinite.
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Prabha Panth
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3. Criticism of Economics
Normative and Ethical aspects are
neglected. Economics gives importance to:
1.Profits: Large scale production. Higher
profits, with lower AC of production. But large
scale production leads to Giantism – with
massive NR depletion and more pollution.
2.Economic growth is important, but it does not
matter how the economy grows,
3.Dominance of large scale monopolies and
oligopolies, not perfect competition.
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Prabha Panth
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4. 4. All items are considered to be
homogeneous: Rs.5 of iron (non-renewable
resource) = Rs.5 of wheat (renewable
resources) = Rs.5 of spoons (produced
resource) = Rs.5 doctor’s fees (service).
• Whichever gives higher profit, Investment
goes into that sector.
• But all 4 items are heterogeneous.
• Spoons cannot be produced without iron,
• Production cannot shift from wheat to doctor
if medical field is more profitable.
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Prabha Panth
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5. 5. Economies of scale: To reduce costs,
large scale production is taken up.
Efficiency is where LRAC is at minimum.
But large scale production
large scale
natural resources depletion
large
scale pollution.
6. Inhuman Technology: modern
technology is inhuman and destructive.
Destroys the environment, and creativity
of labour. Labour also becomes
mechanical and dull.
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Prabha Panth
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6. Economies of scale
But large
Rs
scale
requires large
inputs of
natural
resources,
and creates
large amount
of pollution.
Good
P
economically,
but not for the
environment.
0
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Increase in scale of
production lowers
LRAC
LRAC
LMAC
c1
c2
AR=MR
a
q1
q2
Prabha Panth
Q
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7. Solution by Schumacher
1. Small scale production: Large scale production
is the cause of all environmental and social
problems. Small scale is manageable and
human. Therefore “Small is Beautiful”.
2. Ethical: and Normative. Use of ethical
principles in production and consumption. “The
study of Economics as if People Mattered.”
4. Human approach: Technology should be nonviolent and creative. “Technology with a
Human Face.”
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8. 5. Environmental responsibility: All stake
holders should show responsibility towards
environmental protection.
6. Intermediate Technology: based on
renewable resources technology, labour
intensive, and creative.
Schumacher says: Man is small, and so should
produce on a small scale. “Small is Beautiful”.
Gandhi said, “the poor of the world can be helped
not by mass production, but by production by
the masses.”
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9. Intermediate technology provides:
• Local employment,
• Lower capital requirements,
• More creative,
• Cheaper,
• Based on local resources, not imported
resources,
• No foreign dependence.
• Local people are interested in protecting their
own environment.
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Prabha Panth
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