170 The Political Economy of Resource Use 



economics and into that of political economy. The problems really 

 have to do with the nature of the economic setting within which the 

 price and income fluctuations occur and the political-administrative 

 characteristics of the agencies that propose to intervene. 



It can be shown, I believe, that, given competitive materials mar- 

 kets and adequate access to a well-developed capital market on the 

 part of people who understand the elementary facts of economic life, 

 producers and consumers can protect themselves from serious difficul- 

 ties attendant on raw material surpluses or shortages. Even in so- 

 called one-crop countries, elementary precautions with respect to the 

 size of exchange reserves, and public and private behavior permitting 

 access to international capital markets, could permit a substantial 

 stabilization of producers' incomes. Furthermore, the long history of 

 government intervention in this area is not conducive to confidence 

 in the superiority of public action. A recent judgment, with which I 

 largely agree, holds ". , . there is every reason to believe that on bal- 

 ance the effects of government efforts to reduce fluctuations in pro- 

 ducers' incomes by operating on prices have been to reduce both out- 

 put and consumption, and thereby to reduce the world's standard of 

 living." 14 



On the other hand, it does not follow that all intervention to pro- 

 mote stability is in all circumstances misguided. It depends, among 

 other things, on how developed is the capital market, how informed 

 the population, how free from special interest pressures is the govern- 

 ment and how effective is the administrative machinery. Given the 

 instability of raw material prices and incomes and the political charac- 

 teristics of democratic government in both underdeveloped and devel- 

 oped countries, it is clear that stabilization schemes will continue to be 

 attempted. Under these circumstances there is a legitimate task for 

 economic analysis in helping distinguish the better means from the 

 worse. This may be considered by some to be a relatively low type of 

 economic employment. But it remains a fact that the particular char- 



1^ P. T. Bauer and F. W. Paish, "The Reduction of Fluctuations in the In- 

 comes of Primary Producers," Economic Journal, December 1952, p. 765. 

 This paper was the first in a series of papers and comments on stabilization 

 schemes published in the Economic Journal, 1952-54. As a whole, the series 

 constitutes as good a presentation of the economic, political, and administra- 

 tive issues involved in such schemes as I have seen in the literature. 



