The following points highlight the top ten economic ideas of J.K. Mehta. The economic ideas are: 1. Scope and Definition of Economics 2. State of Wantlessness 3. Nature of Economic Generalisations 4. Static and Dynamic Economics 5. Consumer’s Surplus 6. Theories of Interest 7. Welfare Economics 8. Economics of Fasting 9. Growth and Investment 10. Macro-Economic Growth.
Economic Idea # 1. Scope and Definition of Economics:
Mehta has defined Economics, “as a science which studies human behaviour as a means to the end of want lessness”. Human behaviour is the subject matter of the science of Economics. It is generally the result of a state of disequilibrium of human mind. Disequilibrium is due to more pain than pleasure. Pleasure means the removal of pain. To him, want and pain are concurrent phenomena.
Perfect equilibrium can never be attained, because there is continuously increasing pain. The real relief from pain consists not only in removing present wants but also not creating new wants in future.
Economic Idea # 2. State of Wantlessness:
Wantlessness consists neither in not eating and drinking, nor in not earning income. All that is required is to do all such things with a selfless motive; to earn not for our own use but for the use of all those whom our conscience would like to be served. Such a want less attitude to life would secure, therefore not only our own happiness but would enable us to contribute to social welfare.
Economic Idea # 3. Nature of Economic Generalisations:
Economic theory teaches to arrange facts in proper order of their magnitude or in the order of their place in time. Economic generalisations, again, make us realise that isolated single experiences have no meaning; they have to be related to one another. One relation is mathematical and the other philosophical. They do not give us a vocational training, they give us general education, liberal education.
Economic Idea # 4. Static and Dynamic Economics:
According to Mehta dynamics is not a positive concept, it is the negation of statics. By introducing time element, as a variable in statics then it is dynamic. Static economics refers to the economic system which is in equilibrium. But dynamic economics is to determine the temporary points of equilibrium within a short period at successive moments of time.
It changes from time to time and is not concerned with the end results; its concern is to show the path, an economy takes to arrive at the final result. It shows the position of an economy an intermediate points of time. Dynamics will consider loss in the production during short period. Static economics has nothing to do with trade cycles. He feels that his developmental economics corresponds to Tinbergen’s economic dynamics involving endogenous processes.
Economic Idea # 5. Consumer’s Surplus:
To Professor Mehta, Marshall’s consumer surplus, is merely a buyer’s surplus. It is the difference between the utility that he expects to derive from the consumption of the commodity and the cost of buying it. The greater our want for commodities now as compared to future wants, the greater the consumer’s surplus. To him, it is due to the possibility of putting one’s resources to multiple uses which are not equally beneficial to the consumer.
Economic Idea # 6. Theories of Interest:
According to Mehta that both from theoretically and practically the theories of interest in economics are most important. He has defined interest as the earning of capital which is determined by it marginal productivity.
Interest can be explained by:
(1) Marginal productivity of capital,
(2) Abstinence of effort,
(3) Price of waiting and
(4) Interest is the tangible expression of time preference.
It means that the present day enjoyment is preferred to an equal enjoyment in the future. The earning of capital is determined by the productivity of the last unit of capital in use, the amount of capital by the available supply, the available supply by the cost of creating capital or by the cost of waiting and the cost of abstinence by the time preference. In the opinion of Mehta, the two theories, classical and Keynesian, as a matter of fact are one and the same.
Economic Idea # 7. Welfare Economics:
Mehta stated that a man’s welfare at any given time is measured by the amount of satisfaction that he enjoys at that time, Welfare is an ethical concept. Social Welfare is a kind of welfare which is located in the mind of a particular man.
It is difficult to measure social welfare because only a super man is competent to measure them. To him, the concept of superman serves a useful purpose; it makes us realise that social welfare is the sum total of satisfactions in the mind of a man.
He feels that every study of economics has been a welfare study in some sense. In order to maximise social welfare we must introduce all those changes which make the gainers gain more than the losers lose. Later on, compensations should be allowed as stated by Hicks, Kaldor and Scitovsky.
Economic Idea # 8. Economics of Fasting:
Fasting means not eating and not drinking, but if a man has to fast, his body and mind both must be fasting. Mind fasting means stop thinking which is impossible for ordinary people and body fasting refers to removing the poisonous matters from the body. It will improve the quality of action and ultimately the future condition of living. It will be instrumental in removing undesirable thoughts.
Likewise a firm should undertake two kinds of fast—firstly bodily fast, i.e., it should not add to its building, plant, machinery, stock of goods etc. Secondly, mental fast, i.e., the organizer should think piously; he should not think of capturing the markets of other producers of improving technical efficiency which will increase unemployment. In other words, he should be non-violent. Owing to violence and selfishness some business are diseased. They should be persuaded to undertake a fast.
Economic Idea # 9. Growth and Investment:
Growth, according to Professor Mehta, means the growth of population, wealth, and per capita income. When income grows, the economy is growing but morally it might be declining. He concluded that there is an inverse relationship between growth and moral progress.
In the same way development leads to material prosperity, but it need not lead to moral progress. He feels that quantitative or qualitative improvement of human factors is more important than increase in either capital goods or the production of wealth. He has laid great emphasis on the efficiency of organisation.
Mehta has stressed innovations and increased investment which are needed for economic growth. The first condition is that capital should be more productive. The second condition is the period of production. There is a time lag between investment and final production.
If the gestation period is small more investment will be needed. Thus lower the rate of time preference, the greater the investment. Time preference is a psychological phenomenon; so there is an element of uncertainty in investment also.
Economic Idea # 10. Macro-Economic Growth:
According to Professor Mehta, the development of a backward economy requires a change of social, cultural and economic infra-structure or structural constants. It needs banking system, a good system of transport and communications, an efficient organisation and capital formation.
But the problem in developed country is not insufficient income but insufficient consumption. Professor Mehta believes that profitable investment would increase if the purchasing power in the hands of labourers increases.