THE PAKISTAN DEVELOPMENT REVIEW
Allocative Efficiency in Economic Development by Pan A. Yotopoulos. Centre for Planning and Economic Research, Athens, Gx’eece, 1967.
The traditional explanation for the poverty of farming communities in underdeveloped areas is the inefficient method of farming. It is argued that the farmers are poor because they are inefficient. They are inefficient because they employ factors of production without any consideration of their opportunity costs. In technical language, the marginal productivities of the factors of production employed by farmers differ widely from their opportunity costs. Professor Yotopoulos, however, refutes the traditional explanation for the poverty of farmers in underdeveloped areas. He shows that the farmers of underdeveloped regions may be poor but not inefficient. They do try to equate the marginal productivities of the factors of production with their opportunity costs. Even then, however, they are poor. Their poverty must, therefore, be explained by factors other than inefficient allocation of factors of production. This is what Professor Yotopoulos tries to explain.