BIG PUSH Theory

                                                    What is the Big Push?

                                                                     

Big Push is one of the earliest ideas in development economics, which is coined by Rosenstein-Rodan in 1943. It is the model of how the presence of market failures can lead to a need for a concerted economy wide and probably public-policy-led afford to get the long process of economic development under way or to accelerate it. Complementarities are present when an action taken by one agent increases the incentives for other agents to take similar actions. However, coordination failures occur when agents’ inability to coordinate their actions leads to an outcome that makes all agents worse off.

 A poor country can be caught in a low-equilibrium “poverty trap”; government intervention can potentially solve the coordination problem, and push the economic into the better equilibrium allowing a “take-off” into sustained growth. Coordination failure models highlight the fact that in order to get sustainable development underway, several things must work well enough simultaneously. For example, many wireless phone providers have calling plans in which calling someone with the same wireless plan or on the same network is costless to the consumer. It would be beneficial to an individual wireless consumer if all of his friends and relatives were on the same network. It means that the larger number of people on the network, the larger savings. It would be socially improving if everyone could find a way to coordinate their wireless provider decisions. In order to make investment to be more profitable for an individual agent, a significant number of other agents must undertake investment. Whether we are in advanced capitalist economies or in traditional subsistence developing economies. The inability to coordinate investment efforts can leave an economy stuck in a bad equilibrium. Often coordination problems are exacerbated by other market failures such as those affecting capital markets.

In 1989 this idea is more clearer by the description in the publication by Kevin Murphy, Andrei Shleifer and Robert Vishny. The approach of these authors was a turn simplified and popularized by Pual Krugman in his 1995 monograph development, Geography, and economic theory and became the classic model of the new development theories of coordination failure of the 1990s.