Peter Thomas

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Peter Thomas Bauer

Peter Thomas Bauer, Baron Bauer (1915 - May 2, 2002) was a world-famous developmental economist. Bauer is best remembered for his opposition to the widely-held notion that the most effective manner to help developing countries advance is through state-controlled foreign aid.

Life

Bauer was born Péter Tamás Bauer in Budapest, Hungary in 1915. He studied Law in Budapest before embarking for England in 1934 to study Economics at Gonville and Caius College, Cambridge, from which he graduated in 1937. After a brief period in the private sector working for Guthrie & Co., a London-based merchant house that conducted business in the Far East, Bauer spent most of his long career at the London School of Economics. He retired from there in 1983 as Emeritus Professor of Economics. In 1983, with the support of his friend and admirer Prime Minister Margaret Thatcher, he was indeed made a life peer as Baron Bauer of Market Ward in the City of Cambridge. Lord Bauer was also a fellow of the British Academy and a member of the Mont Pelerin Society, which was founded by his friend Friedrich Hayek. He died in London, England on May 2, 2002.

Contributions to economics

Nearly all of Lord Bauer's greatest contributions concerned development economics, international development and foreign aid. Bauer sought to convince other development experts that central planning, foreign aid, price controls, and protectionism perpetuate poverty rather than eliminate it, and that the growth of government intervention politicizes economic life and reduces individual freedom.

Bauer revolutionised thinking about the determinants of economic advance. Indeed, the World Bank, in its 1997 World Development Report, stated that the notion that "good advisers and technical experts would formulate good policies, which good governments would then implement for the good of society" was outdated: "the institutional assumptions implicit in this world view were, as we all realize today, too simplistic... Governments embarked on fanciful schemes. Private investors, lacking confidence in public policies or in the steadfastness of leaders, held back. Powerful rulers acted arbitrarily. Corruption became endemic. Development faltered, and poverty endured." This reflected the sort of arguments Bauer had been advocating for years.

For Bauer, the essence of development was the expansion of individual choices, and the role of the state to protect life, liberty, and property so that individuals can pursue their own goals and desires. Limited government, not central planning, was his mantra.

Bauer placed himself firmly in the tradition of the great classical liberals.

In his many articles and books, including Dissent on Development, Bauer overturned many of the commonly held beliefs of development economics. He refuted the idea that poverty is self-perpetuating and showed that central planning and large-scale public investment are not preconditions for growth.

He criticized the idea that the disadvantaged could not and would not save for the future, or that they had no motivation to improve their condition. He opposed "compulsory saving," which he preferred to call "special taxation," and, like modern supply-side economists, stressed the detrimental effects of high taxes on economic activity. Bauer also saw that government-directed investment funded by "special taxation" would increase "inequality in the distribution of power."

Bauer's experiences in Malaya (now West Malaysia) in the late 1940s and in West Africa influenced his views on the importance of individual effort by small landowners and traders in moving from subsistence to a higher standard of living. Bauer was perhaps the first economist to recognize the importance of the informal sector and advocated the "dynamic gains" from international trade - that is, the net gains that result from exposure to new ideas, new methods of production, new products, and new people. He demonstrated that trade barriers and restrictive immigration and population policies deprive countries of those gains.

For Bauer, government-to-government aid was neither necessary nor sufficient for development, and may actually hinder it. The danger of aid, according to Bauer, is that it increases the power of government, leads to corruption, misallocates resources, and erodes civil society.

Major works

Peter Thomas Bauer (1946). "The Working of Rubber Regulation". the Economic Journal 56 391–414.
Peter Thomas Bauer; Basil S. Yamey (1951). "Economic Progress and Occupational Distribution". the Economic Journal 61 741–755.
Peter Thomas Bauer (1948). The Rubber Industry: A Study in Competition and Monopoly. Longmans, Green & Co..
Peter Thomas Bauer; F. W. Paish (1952). "Reduction in the Fluctuations of Incomes of Primary Producers". the Economic Journal 62 750–780.
Peter Thomas Bauer (1954). West African Trade: A Study of Competition, Oligopoly and Monopoly in a Changing Economy. Cambridge University Press.
Peter Thomas Bauer; Basil S. Yamey (1957). The Economics of Under-developed Countries. Cambridge University Press.
Peter Thomas Bauer (1957). Economic Analysis and Policy in Under-developed Countries. Cambridge University Press. ISBN 0-415-31297-3.
Peter Thomas Bauer (1959). United States Aid and Indian Economic Development. American Enterprise Association. ISBN 0-297-78335-1.
Peter Thomas Bauer (1961). Indian Economic Policy and Development. Allen & Unwin.
Peter Thomas Bauer (1971). "Economic History as Theory". Economica 38 163–179.
Peter Thomas Bauer (1991). The Development Frontier: Essays in Applied Economics. Harvester Wheatsheaf. ISBN 0-7450-1038-5 (Paperback), ISBN 0-7450-1038-5 (Hardback).

References

Blundell, John et al. (2002). A Tribute to Peter Bauer. The Institute of Economic Affairs. ISBN 0-255-36531-4.
1997 World Development Report
Peter Thomas Bauer (1957). Economic Analysis and Policy in Under-developed Countries. Cambridge University Press. ISBN 0-415-31297-3.

Peter Thomas Bauer (1991). The Development Frontier: Essays in Applied Economics. Harvester Wheatsheaf. ISBN 0-7450-1038-5 (Paperback), ISBN 0-7450-1038-5 (Hardback).