Hirschmanian Themes of Social Learning and Change

David Ellerman
World Bank
Year of publication: 

While "central planning" is now held in ill-repute, similar social engineering techniques are still promoted in a number of different guises. Indeed, the basic default model of central government-imposed reforms and change, often backed by conditionalities imposed by aid agencies, suffers from many of the same problems as central planning. Ironically as countries moved away from centralized planning to the decentralized system of economy known as the "market," they still cling to centralized models of social learning, policy reform, and institutional change. Yet the virtues of systems of decentralized initiatives with centralized regulation are broader than just market activities–which Hayek considered more broadly as a spontaneous process of forming order through mutual adjustment and the use of local knowledge for problem solving. I will focus on a broader range of decentralized systems (still with some centralized regulation, coordination, and facilitation) that address some problems of development.

One of the oldest and strongest challenges to the planning approach to development comes from the seminal work of Albert Hirschman. He responded to the balanced growth, big push, and development planning models with an alternative framework of "unbalanced growth." The limited powers of cognition and implementation of central authorities in the face of the complexity of organizational, institutional, and social realities do not give much hope for social engineering approaches–even if the latter did not also contradict the normative goals of development as the exercise of freedom and autonomy [Sen 1999]. Hirschman as a keen observer of the development process saw successes as taking place in a rather different way and he recommended that development projects attend to those "hidden rationalities" more that the dreams of technocratic rationality entertained by social engineers. Projects need to awaken and enlist local energies and knowledge for trial-and-error problem solving. But each problem solved brings to the foreground other problems and opportunities (forward and backward linkages). Change unfolds because "one thing leads to another"–not because a given rational plan can be implemented step by step.

Consider the analogy with the way an entrepreneur might develop a business. Success in an initial effort will create bottlenecks and pressures upstream or downstream that need to be resolved–as well as opportunities that can be captured. One thing leads to another in an evolutionary process of groping, adaptive learning, and experimentation. Each step is driven by the local needs to relieve pressures or grab opportunities. It is rather different from following the imposed performance incentives to move step by step through an engineering plan to construct a building or build a bridge. By studying the successful development of a complex multi-faceted business, would-be entrepreneurs might gain much insight into the process but they should beware of thinking that the entrepreneurial process can be reduced to a checklist, business plan, or blueprint.

If entrepreneurial business development is too fraught with uncertainties, complexities, instabilities, and incomplete knowledge to submit to technocratic planning, then one might well expect the same to hold for the processes of social reform, change, and development. For those broader processes, Hirschman referred to the "entrepreneurs" as reformmongers and described that vision of growth and development as "unbalanced growth."

Learning, experimentation, and a one-size-does-not-fit-all pragmatism are basic to any alternative to the planning, command, and controls models of development. A number of related theories developed in recent decades will also be surveyed:

  • Herbert Simon's notion of bounded rationality and its multifarious implications,
  • Charles Lindblom's theory of incrementalism and muddling-through,
  • Donald Schön's theory of decentralized social learning,
  • Everett Roger's model of decentralized innovation and diffusion,
  • Japanese management techniques of just-in-time inventories, local problem solving, benchmarking, and continuous improvement, and
  • Charles Sabel's theory of learning by monitoring.

Finally some half-baked ideas will be broached for designing decentralized programs for the World Bank or other development agencies.