2. Contains
8-Dec-17 2
Meeting to Author
Causes of Present Environmental Crisis
Criticism of Economics
Economics of Scale
Solution by Schumacher
Development Management Environment
3. Meeting to Author
8-Dec-17 3Development Management Environment
E. F. Schumacher
• Internationally influential economic
thinker, statistician and economist in
Britain
• Known for his critique of Western
economies
• His proposals for human-scale,
• Decentralized and
• Appropriate technologies
4. 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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5. Criticism of Economics
Normative and Ethical aspects are neglected. Economics gives
importance to:
1. Profits: Large scale production. Higher profits, with lower
Avg Cost of production. But large scale production leads to
Gigantism – with massive Natural Resource 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
8-Dec-17 5
Cont’d…
Development Management Environment
6. Cont’d…
4. All items are considered to be homogeneous: ₹5 of iron (non-
renewable resource) = ₹5 of wheat (renewable resources) =
₹5 of spoons (produced resource) = ₹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.
8-Dec-17 Development Management Environment 6
Cont’d…
7. 8-Dec-17 Development Management Environment 7
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.
Cont’d…
8. 8-Dec-17 Development Management Environment 8
Economies of scale
₹
0
Q
P
AR=MR
LRA
C
LMA
C
a
c1
q1
c2
q2
Increase in scale of
production lowers
LRAC
But large scale
requires large
inputs of natural
resources, and
creates large
amount of
pollution.
Good
economically,
but not for the
environment.
9. 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.”
3. Human approach: Technology should be non-violent and
creative. “Technology with a Human Face.”
8-Dec-17 Development Management Environment 9
Cont’d…
10. Cont’d…
4. Environmental responsibility: All stake holders should show
responsibility towards environmental protection.
5. 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.”
8-Dec-17 Development Management Environment 10
Cont’d…
11. Cont’d…
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.
8-Dec-17 Development Management Environment 11
