Social Scientist. v 29, no. 340-341 (Sept-Oct 2001) p. 48.

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Alternative Paradigms of Economic Decentralisation

The issue of centralised versus decentralised economic regimes has been traditionally discussed in the context of a world of production units. And in this discussion progressive opinion has generally opposed unfettered decentralisation, that is, an economic regime where individual production units have autonomy in decision-making and supposedly maximise some objective function within a market environment.

The question thus arises: if a decentralised regime, consisting of autonomous production units, constitutes an inoptimal regime from a social point of view, then how can we approve of decentralised planning? To be sure, the two kinds of decentralisation are different:

one is decentralisation involving production units, or what one might call "firm-level decentralisation", while the decentralisation we are concerned with in this conference is decentralisation of decision-making and of command over resources from the upper to the lower layers of elected government, or what one might call "government-level decentralisation". But then what is the analytical difference between the two situations which makes us critical of the one and appreciative of the other? The present paper is devoted to this question. To answer it let us begin with some brief comments on the traditional decentralisation discussion, which concerns "firm-level decentralisation".

Two kinds of arguments have been advanced to underscore the inadequacy of economic regimes, where there is decentralisation among production units. From this inadequacy the need for central intervention has been deduced, though the form of such intervention, which can range from fiscal measures to central planning, has been a matter of separate, and often fierce, debate.

These two arguments, which are not mutually exclusive, are

* Professor, Centre for the Economic Studies and Planning, Jawaharlal Nehru University, New Delhi

Social Scientist, Vol. 29, Nos. 9 - 10, Sept - Oct 2001

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